The Strategy Map Vol. 2: “What is the value of financial planning?”
April 01, 2024
Did you know just about anyone can call themself a financial advisor? In an otherwise highly regulated industry, the bar is shockingly low – unlike medicine.
Advisors at Heartland Bank Wealth Management are educated, credentialed, and experienced. All team members are fiduciaries – looking out for client’s BEST interests. The team education and credentials include, but are not limited to MBA, JD, Certified Trust and Fiduciary Advisor, Chartered Financial Analyst, Accredited Fiduciary Investment Manager, and CERTIFIED FINANCIAL PLANNER™.
A CERTIFIED FINANCIAL PLANNER™ professional is certified through the CFP® Board and has met rigorous qualifications. Only those who have met the CFP® Board’s education, examination, and ethical requirements can call themselves a CERTIFIED FINANCIAL PLANNER™ professional and use the CFP® marks. To stay well-versed in comprehensive financial planning, CFP® professionals are also required to complete significant ongoing continuing education.
What is financial planning anyway and how could partnering with our team of Wealth Advisors and planners add value? According to the CFP® Board, financial planning is defined as, “…a collaborative process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the Client’s personal and financial circumstances.” In essence, financial planning involves looking at an individual’s or family’s entire situation and creating personalized strategies to manage resources in alignment with goal attainment – financial or non-financial.
Exhibit 1 illustrates the financial planning process CFP® professionals are required to follow. This process begins with gaining a clear understanding of your current personal and financial situation and then moves on to identifying and selecting goals. Next comes analyzing your current course of action, any alternative potential courses of action, and developing personalized recommendations. Finally, recommendations are presented and implemented, with ongoing monitoring and updates.
At Heartland Bank, the result of this collaborative process is what we refer to as a “strategy map” – a lighthouse of sorts shining a light on your pathway forward. Do you know what your next steps are? Working with an educated, experienced advisory team can help identify key blind spots completely off your radar.
Financial planning involves many topic areas (Exhibit 2). Financial planners often start with creating and understanding the financial net worth statement of each client. Cash flow is the next topic area which involves evaluating tradeoffs. How much can you afford to spend each year without running out of money? To what extent is your spending reliant on portfolio withdrawals versus “guaranteed” income sources like a pension or Social Security? Portfolio management is about designing a cohesive investment strategy – one that is optimally diversified and seeks to minimize taxes through thoughtful asset allocation and asset location. Are you confident your investments are working together to achieve your goals and consistent with your time horizon?
An often-overlooked topic area is risk management (insurance). Risk management aims to protect you and your family from unacceptable outcomes. This isn’t just stock market risk associated with your liquid financial portfolio, but the risk of outliving your money (longevity risk), the impact of inflation (purchasing power risk), the possibility of needing nursing home care, etc.
Do you wish to leave a legacy? Estate planning involves not only helping you design who will inherit your assets when you pass, but when and how. It’s also a topic area that looks at who can make medical and financial decisions on your behalf when you are unable to do so, but still living. Look to bring a seasoned estate planning attorney onto your team – someone with the knowledge and ability to properly draft your estate planning documents.
If you’re like many folks we help, you probably hate paying any more in taxes than is required by law. Often, the single largest expense during retirement is income taxes. What is your strategy for mitigating this expense? We specialize in applying technology to monitor ongoing potential tax savings as each year changes. Tax and estate planning often overlap. If you are charitably inclined, it’s important to review gifting strategies to minimize taxes during your lifetime and at your passing.
Life events will inevitably happen and change your situation. The true value of financial planning lies in the ongoing process.
The purpose of this series is to introduce financial planning strategies spanning the different topic areas shown above. Whether you are working age, nearing retirement, or already retired, consider working with our team to ensure a solid foundation is built for achieving the vision of your best life.
Contact Us Today!
Patrick V. Masso, CFA®, CFP®
Senior Vice President
Director of Portfolio Management & Financial Planning
309-664-4504
This content is for informational purposes only. Readers should under no circumstances rely upon this information as a substitute for their own research or for obtaining specific advice from their own counsel.
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