Is Wealth Management different than Financial Planning?

 October is Financial Planning Month and Center Partner Tim Wyman takes this opportunity to bring us back to the basics. In this blog 5-part series he clarifies some general questions about financial planning and the financial planning process. 

The financial planning profession is still a relatively new profession and continues to develop and mature. In the last ten years or so, some firms have begun using the phrase “Wealth Management” to describe their services.  Essentially, some firms wanted to differentiate themselves to higher income and higher net worth clients.  In many cases, Wealth Management and Financial Planning are synonyms.  There are many fine financial planners and firms in the country, unfortunately financial planning to many companies in the financial services industry is not a process; rather it is a tactic used to sell financial products.  From my perspective, the use of other names such as “wealth management” is for marketing and positioning reasons. 

In the end, financial success, like anything worthwhile, takes patience and persistence. Financial planning or wealth management done right is the process of assessing your financial goals and then developing appropriate strategies to accomplish those goals without taking unnecessary risks.  Simply stated, the purpose of financial planning is to efficiently allocate your current and future financial resources. Proper financial planning requires an ongoing series of decisions made on your part, based on interaction between you and all your advisors.  Lastly, regular updates and reviews are necessary to keep you on course and to provide you with the opportunity to make any necessary adjustments as financial conditions change. 

In my next blog, we’ll discuss who needs a financial plan and in the final installment of this series find out how to prepare your financial plan and how much it will cost. 

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.  Clients should evaluate if an asset-based fee is appropriate in servicing their needs.  A list of additional considerations, as well as the fee schedule, is available in the firm’s Form ADV Part II as well as in the client agreement.

You're Invited: Medicare Obamacare Seminar

 

What is Financial Planning?

October is Financial Planning Month and Center Partner Tim Wyman takes this opportunity to bring us back to the basics. In this blog 5-part series he clarifies some general questions about financial planning and the financial planning process.

Ok, figuring out financial planning may not be as deep as asking “what is the meaning of life”, but I would assert that pondering both can potentially be life changing. According to the Financial Planning Association®: Financial planning is the long-term process of wisely managing your finances so you can achieve your goals and dreams, while at the same time negotiating the financial barriers that inevitably arise in every stage of life. Remember, financial planning is a process, not a product.  Before we get too far, let’s be sure to acknowledge that financial planning is not about get-rich schemes or simply betting on the latest stock tip. 

Funding Life’s Goals

As an early leader in the financial planning profession, we at Center for Financial Planning view and practice financial planning in a different manner than many.  Financial planning is all about you – your goals – your family – your financial independence.  For most, money is not the end but merely the means.  Many of life’s goals [sending kids and grandkids to college, funding retirement, starting a business, passing values and asset values to the next generation, etc.] do indeed have a money or financial aspect. So it is critical that you make good financial decisions.  Financial planning provides direction, discipline and structure to improve financial decision-making and, dare I suggest, has the power to improve lives.  

A Coordinated & Comprehensive Approach

Years ago I was an adjunct professor at Oakland University. On the first day of class, I always started with the assertion, “Financial Planning provides a coordinated and comprehensive approach to achieving your goals,” (it was always question one on the first quiz, by the way). If a coordinated and comprehensive approach is not taken, you are simply left with a junk drawer of decisions and purchases. Without a comprehensive and coordinated strategy, people buy some insurance … put it in the drawer, buy a mutual fund or stock … put it in the drawer … have a living trust drafted … put it in the drawer.  Over the years, the individual pieces don’t actually fit together and all that is left is a drawer of stuff (that’s usually impossible to sort through as well). 

Integrating Goals with Approach

The financial planning process integrates or coordinates your resources (assets and income) with your goals and objectives. As you do this, here are some key points you should cover: 

• Goal identification and clarification

• Developing your Net Worth Statement

• Preparing cash flow estimates

• Analysis of income tax returns and strategies designed to help decrease tax liability

• Review of risk management areas such as life insurance, disability, long term care, and property & casualty insurance.

• College funding goals for children or grandchildren.

• Comprehensive investment management and ongoing monitoring of investments

• Financial independence and retirement income analysis

• Estate and charitable giving strategies

In my next blog, we’ll delve into the difference between wealth management and financial planning. Then we’ll take a closer look at a financial plan, who needs one, and how much you can expect to pay for it. 

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.  Clients should evaluate if an asset-based fee is appropriate in servicing their needs.  A list of additional considerations, as well as the fee schedule, is available in the firm’s Form ADV Part II as well as in the client agreement.

Shutdown Showdown

Americans seemed to be more interested in television’s Breaking Bad finale than Washington proceedings last weekend, but we turned the calendar to October only to welcome the first government shutdown since 1996. With negotiations tied to blockage of new insurance exchanges, it is difficult to see how Republicans and Democrats will ultimately come to agreement and open up America for business as usual.

Here are our economic and investment thoughts on the shutdown:

• Where only chaos sparks results: You have to wonder if Congress was looking for a very bad reaction to the shutdown in order to spark an incentive to start negotiating with each other. Crisis policy seems to have had the most reliable results when it comes to any semblance of political leadership in the past five years. Our leaders didn’t get such a crisis as US stock markets opened higher on the first day of shutdown (Tuesday, October 1st).
• Unpopular politics: Voter frustration can be measured in poll results which show that the health care law is unpopular but the government shutdown is even less desirable. Bloomberg reported Tuesday that 72% of American’s opposed a shutdown tied to ObamaCare in a Quinnipiac University poll.
• The hit to GDP: Growth numbers in the US have already been stymied by fiscal austerity in the form of higher taxes and less spending this year. The biggest impact to those who don’t cash a paycheck from the government or have a trip to a national park planned may be a hit to the US GDP. The 800,000 employees who were sent home represent a workforce larger than Target, Exxon Mobil, General Motors, and Google combined (Tom Keane, Bloomberg Radio, 10/2/13). We should note that the hit might have been higher in past shutdowns as US employment in government jobs has been falling. I tried to pull the exact numbers by accessing the US Census Bureau, but the site was down due to the government shutdown.
• Silver lining: All the rotten tomatoes being thrown at Congress mask the surprising statistic that the US government budget deficit has been falling rapidly in the last twelve months with an even larger decline anticipated. This does not excuse a failure of governance and does not balance the books overall, but it should be noted as we mourn the loss of decorum or certainty in the function of business in Washington DC.
• Avoid at all costs: The government shutdown seems to be a prelude to another debt ceiling standoff which many market watchers consider to be much more threatening. It seems absurd that US policymakers would manufacture a crisis rather than providing the ability to pay bills. Given the beltway dysfunction, though, never say never. We’ll keep you posted with our upcoming quarterly investment commentary.

All this bad news masks a US economy whose private sector continues to grow and a growing chorus of statistics that seem to support global recovery from recessions, especially in Europe. Our advice for investors right now is not to let the political tail wag your investment dog. Excepting short-term cash-flow needs, focusing on the long-term may benefit reward investors by using dips as buying opportunities rather than selling to duck and cover.

Melissa Joy, CFP®is Partner and Director of Investments at Center for Financial Planning, Inc. In 2011 and 2012, Melissa was honored by Financial Advisor magazine in the inaugural Research All Star List. In addition to her frequent contributions to Money Centered blogs, she writes frequent investment updates at The Center and is regularly quoted in national media publications including The Chicago Tribune, Investment News, and Morningstar Advisor.

Financial Advisor magazine's inaugural Research All Star List is based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations are independently conducted by Financial Advisor Magazine.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Melissa Joy and not necessarily those of Raymond James.

Helping those that help others

 In October the Center will be furthering our vision to help those who help others.  Our financial planners will be spending time with the employees at Community Housing Network in Troy, Michigan.  This is one way we give back to some of the great folks in the area that spend their time helping others make our community a better place to live for all. We will be answering the employees’ personal financial questions pro bono and help them get their financial “houses” in order so that they can be focused on helping those in need.

The Community Housing Network is a passionate advocate, devoted to providing homes for people in need. They give people access to resources to create sustainable communities. This is achieved with proven strategies of homelessness prevention, housing assistance and development, community education and referral, advocacy, and additional services.

Risk vs. Reward: Finding the Right Asset Balance for You

There are inherent risks in investing (you can’t control the market) but there are potential payoffs that help people tolerate that risk (like funding retirement). To better understand your own tolerance for risk, you need to first get the gist of asset allocation.  Asset allocation is a technique used to spread your investment dollars across different asset classes.  Stocks, bonds, and cash or cash alternatives, among others, are generally the most common components of an asset allocation strategy. 

Determining risk tolerance

Deciding on an appropriate allocation is an important exercise because it may be the most important investment decision you make due to the impact it can have on your overall return.  Your financial goals, time frame and personal resources all contribute to the equation. A risk profile questionnaire is a widely accepted method to help advisors and investors make asset allocation decisions.  

However, there are two significant limitations to relying solely on a risk questionnaire to make the asset allocation decision.  First, the way people think about risk is not stable and very often varies with market conditions.  Behavioral science research tells us that when the market goes up, the pain of past plunges typically fades as investors feel they can accept more risk.  The dynamic reverses when markets correct or go down.  Suddenly, the market elicits fear in the hearts of investors and tolerance for risk diminishes.

The second limitation with risk questionnaires is they don’t measure an individual’s need to take risk.  The purpose of an investment portfolio is to support the financial planning objectives or desired lifestyle. The plan will articulate the why as well as the how.  It helps answer questions like, “So, can I retire?” or, “Do I have enough to feel confident?”  The specific goals and time frames are the determinants of how much risk to take, even if there is a willingness to take on additional risk.

Committing to an asset allocation

Picking an asset allocation is important, but committing to it is even more important; especially in light of our changing attitudes about risk and reward.  Don't hesitate to get professional help if you need it. And be sure to periodically review your portfolio to ensure that your chosen mix of investments continues to serve your investment needs as your circumstances change over time.

Laurie Renchik, CFP®, MBA is a Lead Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment.  Prior to making an investment decision, please consult with your financial advisor about your individual situation.  Asset allocation does not ensure a profit or guarantee against a loss.

Happy Centerversary

 

Join with us as we celebrate two Centerversaries in the month of September.  Our Operations Manager Gregg Bloomfield is celebrating 6 years with The Center.  Gregg says, “My six years at The Center has flown by!   There have been a number of changes in that time, but what has not changed is our strong commitment to helping our clients live their best possible lives.”

Angela Palacios, CFP® Portfolio Manager has been a part of our team for 5 years.  Angie commented, “It is wonderful to come to work each day with such a great group of energized and engaged people!”

Time flies when you are having fun and we are happy to honor both Gregg and Angela on their “Centerversary.”  Not only do we value their experience and commitment ..... quite frankly, we just like having Gregg and Angela around!  

Three Skills to Help Women Become More Confident Investors

Many of my time-stressed female friends, colleagues and clients want to know how to create higher quality work/life balance. Launching meaningful careers, enjoying our families and creating financial confidence are outcomes we work hard to achieve.  At a time when women make up about half of the workforce, and control more than 50% of the wealth in the United States, research shows the financially savvy women have not achieved a level of investing confidence that goes hand in hand with greater wealth.

As a financial planner I work with women who are pioneers in their given career, possess personal confidence in creating wealth, and have strong savings values. However, these characteristics don’t necessarily translate from the office to their personal lives. But personal financial confidence is what gives you the opportunity to grow your savings and to build a solid foundation in retirement.

How to be a Confident Investor

Are you a confident investor?  If you are less than confident, it doesn’t mean you are stuck on that path.  Nothing could be further from the truth.  The reality is that your confidence can be strengthened with a few fundamental moves.

1. Create a financial plan.  This plan should not be viewed as a one-time event; rather a flexible and adaptive vision that you aspire to much like forging a career path that works for you throughout the different phases of your life.

2. Although it may seem counterintuitive, pay less attention to the markets and more to yourself and your financial goals.  Emotional reactions to things we can’t control often cause us the most trouble.  Refer back to your financial plan if your confidence in your investing ability begins to wane in light of current events.

3. Re-prioritize when necessary.   Changes can happen to take us off course in all aspects of life.  When change happens remember that cookie cutter advice doesn’t apply.  Look at your own life and evaluate what you need now and down the road.  Much like a mentor provides objectivity and perspective that can lead to good career decisions, share your current financial challenges with an advisor and address the worries proactively and with confidence.  

Why not leverage what you already have to create a financial plan and investing confidence that keeps you in the driver’s seat through all phases of your life?

Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  Investing involves risk and investors may incur a profit or a loss.  Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making an investment.  Please consult with your financial advisor about your individual situation.

The Center is Presenting Sponsor of 2013 Vine & Dine

Streetside Seafood, one of the participating restaurants of Vine & Dine 2013, does a cooking segment on Fox 2 News. Learn how to make Rockefeller Oysters from the chef of Birmingham's Streetside Seafood. Center for Financial Planning, Inc. is the presenting sponsor of the Birmingham Bloomfield Chamber's Vine & Dine 2013 Gala benefiting Gleaner's Community Food Bank of Southeast Michigan.

Rockefeller Filling - Yield 16 Coated Oysters

Ingredients: 

• .5 # Bacon
• .5 C Spanish onion, fine dice
• 1 ounce Sambuca or Pernod
• 1 C Heavy Cream
• .25 # Spinach (rough chop)
• .5 C Shredded parmesan cheese
• .25 C Italian breadcrumbs
• 1 tsp. Kosher Salt
• .5 tsp Fresh Black Pepper

Directions:

1. In a medium sauce pot, render bacon until slightly crisp. About 5 minutes on medium heat. Add onion and saute until translucent. Flambe with Sambuca. Cook until alcohol burns off.
2. Add heavy cream and bring to a boil.
3. Add chopped spinach, cheese, and breadcrumbs and reduce until slightly thick. About 3-4 minutes. 
4. Place filling on a sheet tray and refrigerate. Once cooled, generously coat each shucked oyster to cover. Top with a little of the parmesan cheese.
5. Place oysters on a baking sheet with topping and cheese and bake in a preheated 400° oven for 5-7 minutes. Place oysters on a serving platter and garnish with a lemon wedge and cocktail fork.

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