Definitive Guide to Financial Planning

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INTRODUCTION Everything you need to know about financial planning. This guide allows you to dive into all the details of financial planning, starting with the definition. It goes on to highlight the differences between financial planning and financial advisory, which includes robo-investments, financial planning, investment management, and advanced planning. As financial planning is carried out by a planner or advisor, we then get into the qualifications, characteristics and soft skills required to be a great financial planner. Learn about the difference between a broker and an independent advisor, what questions to ask when hiring a financial planner, how financial planners charge their clients and which is best for you. As if that's not enough, we explain retirement planning, college planning, estate planning, and more!


The idea of a financial plan is not only to show a person(s) where they currently stand and what they need to do to optimize or improve their situation, but it will explore recommendations or changes that need to be made to their current situation in order to effectively make progress and move towards their goals.

The Certified Financial Planner Board has created practice standards that look to create a process for financial planners to follow. They include establishing and defining the relationship with the client, gathering client data, analyzing and evaluating the client’s financial status, developing and presenting the financial planning recommendations, implementing the financial planning recommendations, and monitoring the plan.


THE DIFFERENCE BETWEEN FINANCIAL PLANNING & F I N A N C I A L A D V I S O RY ? Financial advisory is often a term used to describe an array of services that a financial planner offers. However, it is also used incorrectly at times. Having an understanding of what it truly means, will help you to assess whether a financial planner is providing you with the services you require in a manner in which you deserve.

Financial Planners offer 4 broad services:


Robo-investments A robo-investor manages your portfolio using mathematical algorithms. There is minimal human interaction and therefore little to no personalization. Financial Planning A review of your overall financial situation, building a roadmap for achieving your goals. This includes budgeting, insurance and retirement planning, investment help, and goal achievement like buying a house or saving for education. Investment Management Your planner will oversee the implementation of your investments. This includes asset allocation, rebalancing, alternative investing and tax-loss harvesting. Advanced Planning Advanced planning involves more complex, intricate financial elements such as trust planning, business succession, legacy planning and philanthropy.


W H AT Q U A L I F I C AT I O N S D O Y O U NEED TO BE A FINANCIAL PLANNER? This is a tricky question. As we discussed in our blog, Financial Advisors, The Tell All Series: Brokers vs. Advisors, a Financial Planner only needs to pass a fairly easy state test to be able to be able to call themselves Financial Planners or Financial Advisors. However, in addition to this test, well educated, qualified, great planners and advisors will be true fiduciaries and have one (or many) of the following designations: – Certified Financial Planner (CFP ®) – Chartered Financial Analyst (CFA) – Certified Public Accountant (CPA) – Chartered Financial Consultant


There are many more designations that are nice to have, like the Certified Fund Specialist (CFS), Certified Investment Management Analyst (CIMA), Registered Health Underwriter (RHU), Chartered Property Casualty Underwriter (CPCU), Certified Employee Benefit Specialist (CEBC), but we believe that the core CFP, CFA, CPA are the most difficult to attain and therefore raise the bar for experts as high as it can go.

For instance, when someone is a qualified CFP, it means that they “have met rigorous professional standards and have agreed to adhere to the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence when dealing with clients”.

The CFP designation is awarded by the CFP Board to those that have completed the following:

– A bachelor’s degree (or higher) from a regionally accredited college or university. – Pass the CFP® Certification Examination. – 4,000 to 6,000 hours of work experience. – Completion of the CFP® Certification Application, which assesses your ethical background.



By its definition, a fiduciary is someone that holds a level of trust with their clients or those with whom they work professionally. Ultimately, it means that they have a legal obligation to act in the best interest of the client. One needs to be a fiduciary in the true sense of the word in order to practice as a Registered Independent Advisor (RIA) and is the essence of the CFP designation Zoe exclusively works with fiduciaries. For more detail on what a fiduciary is, check out our FAQs.


W H AT I S T H E D I F F E R E N C E BETWEEN A BROKER AND A FINANCIAL PLANNER? This is a great question, so great in fact that we wrote an entire blog on it as part of our Financial Advisor, Tell All Series. Check it out here Part 2: Brokers vs. Advisors. Essentially the difference between these two professionals lies in the word independent. Broker A broker makes their money by earning a commission i.e. they provide their clients with product options as well as advice. These products can include anything from life insurance to retirement annuities, and they earn a % for every product that they sell. Although this may sound fine, it often creates a conflict of interest. A broker may be inclined to suggest products on which they earn a higher commission, regardless of whether the product is right for the client.

Registered Independent Advisor Independent advisors do not earn commission from products. That means that regardless of which products their client ends up purchasing, they do not get a financial reward. Therefore they are unbiased about which products they recommend and can recommend the best product for their client.


So how do they make money, you may ask. Good question.

Independent advisors will charge their clients a fixed fee for their advice and, if they manage your wealth, i.e. invest your money on your behalf, they will charge you a percentage of the total value of that which they invest. This way their interests are aligned with yours – the more money you make and the happier you are, the longer you will use their services, and the more money they will make. Win-win. Have a look at our first blog in the Financial Advisor Tell All Series. Part 1: How do advisors get paid? to get a detailed explanation of how advisors get paid.


FINDING A GOOD FINANCIAL PLANNER – W H AT T O A S K W H E N H I R I N G Y O U R PLANNER Deciding on the right Financial Planner can be a tough task. And that’s exactly why Zoe exists. We know what questions to ask to make sure that we work with the best of the best. Below is a sample of the questions we ask advisors that apply to be on our network. Investment Planning Knowledge How many years of investment experience do you have? What is your investment philosophy? How do you assess risk in the market? How do you measure investment success? What average returns do you expect for an ivester with a 10 year time horizon? How do you get that number? Investment Planning Process How do you assess the risk of each client? What benchmarks do you use to measure performance? How do you determine a client’s correct asset allocations? How often do you rebalance a client’s portfolio? (What is rebalancing a portfolio? Click here) If the market dropped 20% today, how would you react? 11

Financial Planning Knowledge How long have you done financial planning? In what areas of financial planning do you specialize? Which areas of financial planning do you feel you need to improve – personally and as a firm? What do you do when you don’t have the answer to a client’s questions? How do you figure out how much life insurance a client needs? They are given scenario based questions as well.

Financial Planning Process How do you gather information from the client before the first meeting? How do you follow up with a client after the first meeting? How often do you check in with the client? How do you help the client to prioritize their goals? What ongoing communication do you have with your clients? Technology Do you use any financial planning or investment software? If so, what and do you find it useful? Do you use a customer relationship management software? Describe your digital presence.


B E S I D E S Q U A L I F I C AT I O N S , D E S I G N AT I O N S & B E I N G A F I D U C I A RY, W H AT M A K E S F O R A G R E AT FINANCIAL PLANNER? It’s all well and good to make the decision to use a Financial Planner, but how do you know who to use? With so many planners and advisors out there, and so much product pushing and mistrust, it can be exceptionally difficult to know who to hire.

The best place to start is to know what makes for a great Financial Planner. That way, you know exactly what it is you are looking for from the get-go.

Traditionally, a Financial Planner’s role has been perceived by most people as someone that manages your money. They invest your savings and manage the portfolio, from which you see a return every year. Essentially, they were considered to be good if they could beat the market or get you good returns. Now don’t get us wrong, a Financial Planner that can invest your money wisely and provide you with your required returns is great! And that should not be overlooked. However, as it is impossible to beat the market and it is now possible to invest your money directly without using a professional, their roles have developed somewhat and as a client, you should expect more. 13

What should you expect? Well, we’ve compiled have a shortlist of the characteristics and skills that make for a great Financial Planner:

  1. Financial Planning Expertise A great Financial Planner should manage your financial life holistically, meaning that they should assess your current situation and plan for the future by incorporating risk management, taxation planning, investment management, budgeting and estate planning. They should be judged on their ability to assist you in achieving your financial goals and getting you the returns that you require to live the life you want to live.
  2. Behavioral Coach Let’s face it, we all have a strong emotional connection to our hard-earned cash, and we sometimes need objectivity when it comes to managing it. A great Financial Planner should be able to guide your decision-making with facts and data and remove the emotion from the decision.
  3. Accountability Just as we all often pay a personal trainer to get us to the gym more than anything else, we use a Financial Planner to keep us from diverging from our goals. Time passes very quickly, and its really great to have someone checking in with you on how you’re getting on and whether you’re still on track to reach your short, medium and long-term goals.


4. They Should Empower You A truly great Financial Planner will not be afraid to share their knowledge. The more you know about personal finance, the more control you will have over what they do. Therefore, if they are really good, they will be happy for you to challenge them and to empower you with knowledge and education. Poor planners and advisors will see knowledge as threatening.

  1. Transparency A great Financial Planner will be totally transparent when it comes to how much money they earn and charge, with no hidden fees. Again, when you are good at what you do you are comfortable with charging what you do as you are confident with the service you provide and the value that you add.

  2. Client-Centric You should be the center of your Financial Planner’s universe. Nothing should be too much trouble when it comes to knowledge transfer, money management, or client service. Money is such a personal thing and it is very important that you feel valued and respected as a client. For a more detailed explanation of a great financial planner and advisor, check out our blog, Financial Advisors the tell-all series, part 3: what makes for a great advisor?


HOW DO FINANCIAL PLANNERS CHARGE? As mentioned previously, transparency is paramount when hiring a Financial Planner. Transparency not only applies to how they manage your money, but to how they charge as well. A planner or advisor who is providing you with a great service, that is adding substantial value to your life, will happily explain how they make money. Remember, that all unbiased, independent planners and advisors (the ones that we work with here at Zoe) don’t earn commission on product sales. So how do they make money?

Fixed Fee Another option when it comes to paying your Financial Planner is to opt for a flat fee. This means that you pay a predetermined fee for their services. This fee can be in the form of an upfront fee, a once-off fee, a monthly fee or an annual fee, depending on how the planner or advisor works. Again, this payment method maintains the incentive alignment mentioned above as you are being charged for the planner’s expertise. They are not making any money by selling you products that you may not need.

Hourly Fee Some planners charge their clients an hourly fee for their services. Similar to how you would pay a lawyer, you can opt to pay your planner or advisor per hour that they spend on your account.


Assets Under Management If a Financial Planner is managing your money i.e. overseeing the investment of your money, they will charge you a percentage (%) of the total value of the assets that they invest. The advantage of this type of fee is that your incentives are totally aligned. As the planner or advisor manages to increase the value of your assets, their percentage is worth more, as are your assets. That’s the type of relationship you want with your planner – they make money when you make money. As you can see in the image below, the average percentage charged in the United States is between 0.6% and 1.25% depending on the value of the assets. Although all these payment methods exist, it does not necessarily mean that all Financial Planners offer them as options. It is important to have a frank conversation with your planner or advisor before hiring them, to make sure you are clear on how they charge so that you can choose the best option for your situation.


W H AT I S E S TAT E P L A N N I N G ? Estate planning is the term used to describe the process of organizing one’s estate i.e. what you own (assets and interests). It includes managing the ownership of these assets both during the lifetime of the client and after they’re no longer living. It can involve the creation of trusts, management of beneficiaries, creation of last will and testaments, among other documents. The estate planning process can be started by a Financial Planner, but it needs to be drafted by an estate planning attorney. A Financial Planner can provide you with general recommendations around estate planning in the hopes of potentially lowering estate taxes, but all documents must be written up and implemented by an estate attorney. For more information, download our free Guide to Estate Planning 101.


W H AT I S R E T I R E M E N T PLANNING? Retirement planning is the term used to describe the process of managing one’s income in such a way that there remains income on which to live after you stop working. It is intended to be used to replace the salary or regular income received during one’s years of employment.

There are a number of common retirement saving vehicles like a 401(k), 403(b), IRA, Simple IRA, Roth IRA and Health Savings Account. After understanding your specific situation, a Financial Planner will be able to match your income, age, accumulated savings, retirement goals and risk tolerance with the best investment vehicle and strategy for you.

For more information, download our free Guide to Retirement Planning.


W H AT I S C O L L E G E P L A N N I N G ? Sending your child to college is a decision that involves a wide range of considerations, both financial and otherwise. Besides the emotions and personal preferences that affect where, when and how you send your child to college, financial implications and planning are paramount to making the right choice. Financial aid and scholarships can be a game changer when it comes to college fees, but for many parents, the memory (or current state) of their own student loans sends shivers down their spine, and they would like to reduce those as much as possible for their children. As such, planning financially for your child’s college is of paramount importance. Just as you save for retirement using a retirement savings vehicle, you can do the same with college. The earlier you start saving for your child’s education the more time you allow compounding to work its magic. And the rising costs of college education mean that the earlier you start, the greater chance you have of being able to choose the right school for your child, instead of the one you can afford.


Pre-high School Saving The first step in planning college is to know what your goal is. Estimating the cost of college in the years in which you wish to send your child, can go a long way in helping you decide how much you will save and what rate of return you require. There are a number of calculators that exist, try this one from FAFSA to help you get started. Savings Plan: 529 Well before your child gets to high school it’s best to open a 529 plan. If you can, opening a 529 plan when your child is born is ideal. A 529 plan is a savings vehicle for college tuition, but can also be used for books, fees, room, and board. A 529 plan is a federal plan that can have significant tax benefits. College Financial Aid When your child is in 12th grade, it is important to complete your FAFSA forms. Submitting these forms ahead of the deadline helps you stand the best chance of being accepted for federal financial aid. Check out these great websites that can help give you more information on securing financial aid for college: – Student Aid – – FinAid – Career One Stop


PLEASE NOTE: All investing is subject to risk, including the possible loss of the money you invest. The projections or other information generated by Zoe Financial, Inc. regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not a guarantees of future results. The information contained in this document should not be taken as financial advice. For professional advice please contact a registered financial professional .