Financial Planning 101

After I had been a Certified Financial Planner^™ professional for about ten years, my mom asked me, “If you are not the one investing and managing the money, what exactly is it that you do?” Evidently to her I had chosen a somewhat foggy and mysterious career.

There are different levels, approaches and areas of expertise in financial planning. It’s true that just about anyone who sells any financial or investment product can call himself a planner. Some charge a flat fee for a consultation; others, including Bragg Financial, offer ongoing services and charge an investment advisory fee. The Certified Financial Planner Board of Standards, which promotes professional and ethical standards for the industry and oversees of the CFP^® certification, defines financial planning as “the process of determining whether and how an individual can meet life goals through the proper management of financial resources.” This can be achieved through planning a client’s investments, taxes, retirement, estate, insurance and more.

At Bragg Financial we have two primary objectives when working with our clients:

• To manage each client’s portfolio individually according to a written Investment Policy Statement developed at the beginning of the relationship and modified as needed. This personalized guideline specifies investment allocations that reflect the client’s tolerance for risk, tax circumstances and liquidity needs.
• To assist our clients in all aspects of their financial planning on an ongoing basis, including any areas where they would like our help.

There are many interconnected aspects to everyone’s financial life. For example, if you ask us how much you should be saving in your retirement plan, we will ask you a lot of questions before responding—What are the options offered by your employer? When do you plan to retire? How much can you spare from your budget? How much would you like to spend in retirement? What other assets do you have? Who else depends on you?

When you come to meet with us at Bragg, we’ll have many queries like these. You may think we are just nosy, but the reality is that for Bragg to serve as a great resource for you, it is important that we are able to see the full picture of your financial situation. We find it difficult to offer specific advice on a particular subject without knowing the larger context. It takes time to establish a relationship; it doesn’t happen in one meeting, or even one year. We consider financial planning the ongoing process of learning more about you and your finances, evaluating and analyzing your goals, evaluating investment options, factoring in tax laws, making suggestions and helping you to make appropriate changes.

As financial planners (eight team members at Bragg Financial have attained the CFP^® certification), our relationships with our clients are ongoing and dynamic. Lives change—work status, health, family needs are constantly evolving. In addition, tax laws and financial regulations change frequently, and investment strategies also evolve. A friend recently asked me if there is an annual financial checklist. Below is a list of items that we will explore with you when you come to see us at Bragg. Just as with building a home, your financial well-being takes time, planning, decision-making, and maintenance.

• Building a Balance Sheet
  • How are my assets and liabilities titled?
  • What types of assets and liabilities do I own?
  • What is my net worth?
  • Does Bragg or someone else have a comprehensive list of my assets? If something happens to me, will this consolidated list save my loved ones time, investigation, and questions?
  • Is my credit healthy? Am I monitoring it for fraud?
• Basic Cash Flow/Spending Plan
  • If you are in the “accumulation” phase of life, questions may include:
    • How much am I saving pre-tax and after-tax on an annual basis?
    • Will this amount of savings allow me to retire with the lifestyle I desire at some point?
    • How much debt is appropriate for me and how should it be structured?
    • What is my plan to pay off my liabilities?
    • How do I plan for the next big expense?  (e.g. home renovation, car purchase, wedding, etc.)
    • Am I saving enough for college and utilizing the best vehicle for my situation?
  • If you have retired or slowed down, you may be asking, what draw on my savings is wise considering my assets, allocation, spending, and life expectancy?
• Insurance Planning and Risk Management (Bragg’s role is to advise on insurance. We prefer not to serve as your agent but are happy to coordinate with your existing agent or to refer an agent if you need one).
  • If something were to happen to me before my planned retirement date, do I have enough life insurance to replace my lost earnings?  (This applies if a spouse, children, or anyone else is dependent upon you and your earnings.)
  • Is the ownership of my business structured so that it can continue successfully in the right hands upon my death?
  • If I become disabled before retirement, do I have adequate disability insurance to provide for my needs and those dependent upon me?
  • Should I purchase Long Term Care insurance?
  • If I may have a taxable estate, will my heirs have enough liquid funds available to pay an estate tax?
  • Do I own the right type and amount of life insurance and are my life insurance policies performing as expected?
  • Have I checked on my property and casualty insurance coverage lately? Is my homeowner, auto and liability coverage coordinated and appropriate?
• Employee Benefits Planning
  • Do I understand and know the benefit plans available to me through my employer?
  • How much should I contribute to employee deferral plans such as the 401(k), Roth 401(k), after-tax 401(k), other retirement plans, and deferred compensation?
  • Does my pension plan have various payment options? Which is best for me?
  • How should I exercise my employee stock options? Should I sell or keep company stock I have received via restricted share plans?
• Investment Planning
  • Is my investment allocation appropriate, given my need for liquidity and my need for return? Will my portfolio provide growth after the effects of inflation? Is my portfolio structured such that it will support my planned spending even when the market is down?
  • What can I expect from my portfolio with regard to investment returns? How much should I expect to earn from bonds or from stocks? Given my portfolio allocation, how much can I expect to lose in a down market? How much will I make when the market performs well?
  • Do I understand the overall cost of my portfolio including the advisory fee and the cost of the underlying securities?
  • How will my portfolio affect my tax situation and can this be improved?
• Income Tax Planning (Bragg’s role is to provide tax planning and strategy. We prefer not to complete your tax returns but are happy to coordinate with your existing CPA or to refer a CPA if you need one.)
  • Should I withhold tax from my IRA distribution?
  • How can I best maximize tax savings with my charitable contributions and other itemized deductions?
  • Should I contribute to an IRA, Roth IRA, SEP IRA, or non-deductible IRA?
  • Should I consider a Roth Conversion?
  • If I am age 70.5 or older, can I direct part of my IRA Required Minimum Distribution to charity?
• Retirement Planning
  • When will I be in a financial position to retire?
  • How much can I spend in retirement and not outlive my assets?
  • I no longer have a paycheck; which accounts should I draw down first?
  • What are my options for when and how to draw social security?
  • How will I secure health care if I retire before I’m 65 and eligible for Medicare?
  • Should I downsize?
  • What would a move to a continuing care retirement community look like for me?
• Estate Planning (We are happy to partner with your attorney, as we do not practice law or draft legal documents.)
  • Do I have an updated Health Care Power of Attorney and Living Will, Power of Attorney, HIPAA form, and last will and testament?
  • Are my assets titled in a way that coordinate with my estate plan?
  • Are my beneficiary designations structured such that they coordinate with my estate plan?
  • Am I content with my estate plan and how assets will pass at my death?
  • Have I considered estate tax planning? (From 2018-2025, an individual may leave $11.18 million in assets to non-spouse beneficiaries without paying estate tax.)
  • Am I keeping track of the plans I have put in place already?  (i.e. maintaining necessary minutes, filings, and records for gifts, trusts, foundations, LLCs, notes, partnerships, etc.)

We are grateful and excited to be able to help you with these questions at Bragg.  Please reach out to us if you would like to learn more about how we approach financial planning or if you would like to explore or revisit a specific aspect of your plan. Our Financial Planning Commentary archive has many articles on various subjects in case you would like to read about one area in more detail.

Disclaimer: We are happy to share these ideas with you. Please know we do not practice law and we are not attorneys. We are happy to partner with you and your attorneys to help you accomplish your goals.