What are the steps involved in creating an effective financial plan?
In short, an effective financial plan motivates a client to action. For some individuals, that takes pages of projections and numbers to prove the recommended course of action, and for others, it is a simple summary that lists out the recommendations with a brief explanation of the “why.” It is the art of the financial advisor to find the best way to communicate recommendations in a way that resonates with each client. To create a plan that meets this criterion, it takes time to understand how an individual thinks. The more time you take to learn about the unique goals of each individual and the more questions you ask, the better you will be at communicating the important pieces of the financial plan. It is hard to gather all that information in one or two introductory consultations, which is why I believe that you need multiple meetings and touchpoints to create an effective financial plan. My process starts with gathering data and asking the right questions early on so that I know what to ask for and I don’t have to send pages of fact-finding questions for the client to fill out.
After I have the documents I’ve requested from the client, I set up a meeting with the individual or family where I don’t provide any recommendations, but the purpose is to ensure I fully understand their complete financial picture and review the goals for the engagement. You’d be surprised by how much often gets left out of documents and the prospect meetings that are uncovered after starting the financial planning process. After we have ironed out the finer details, I’m setting up additional meetings with the client to review each core area of their financial plan. We review these in person, and they also receive a written report of the analysis and recommendations. After the initial plan has been laid out, there are likely a dozen action items that need to be done to make sure the plan that has been laid out comes to fruition. At this point, the client has an expensive piece of paper.
If I haven’t done my job to motivate the client to act, they have a detailed roadmap of what they can achieve financially. That roadmap still needs to be implemented and the course corrected as life happens. Our firm is in the minority in that we allow clients to stop at this point in the process and take a “do-it-yourself” approach with the recommendations. If a client sees the value that we provide in this initial planning process, then we can often partner with them to implement the recommendations that are within our scope and provide accountability for the action items that we can’t handle directly. At this step of the relationship, as the advisor, I would transition from being the map-maker to the guide and provide the most value by ensuring each step of the plan is implemented and the client is on track to meet their goals.
What are the key legal and technical aspects that must be considered
during this process?
Financial advisors are asked to cover many different disciplines, and our work often crosses over into areas including tax, insurance, and estate planning. Each of those professions and certain types of advice in those fields requires specific licenses that a financial planner may not have. It is important to know what your limitations are. If you aren’t qualified to do something, it’s important to work with quality referral sources in those professions. Financial advisors should have a comprehensive view of the client’s financial outlook. It often makes sense for them to coordinate when multiple professionals need to work with the client.
How does the process differ when the subject of the plan is a family or
The process of financial planning itself does not change all that much. Sometimes you find that two individuals in a family may have a list of goals that do not necessarily align. A lot of financial planning has to do with scarce resources. Even with high-net-worth clientele, you’re never working with an unlimited income or asset base, and trade-offs need to be made. If not everyone in a family has the same priorities or values, then there can be some tension.
In the case of multigenerational planning, it is still all too common for only the benefactors to be involved in that process. This also can become a problem when doing multigenerational planning, where the divergence in life stages, goals, and values can vary much more. Despite these potential conflicts, I think going through the process of financial planning and working on identifying the goals and understanding what is realistic can be very helpful for the family dynamic. By bringing in younger generations and creating transparency, it allows the older generation to explain why they are structuring things the way that they are, which can be very helpful when that person passes and avoid conflict between beneficiaries.
What other factors can complicate the creation of a financial plan?
Involvement from the family or individual. The numbers are objective, but a lot of financial planning is subjective and requires feedback from the client. I can create what I think is an amazing financial plan for a client, but they are the ones that must live it, and the plan needs to reflect their preferences. I will do most of the heavy lifting, but a good financial plan requires collaboration and involvement from the client to create a quality finished product.
How has your approach to financial planning developed during your years
I first entered the industry right after college. I was focused on getting my licensing, CFP® marks and trying to learn all the theory and technical aspects of financial planning and investments. I wanted to know what my colleagues who had more experience than me did and how to recommend and implement complex strategies for clients. I also thought that managing investments was primarily what a financial advisor did and that to provide value, I had to outperform markets. In my earlier years, this led to lengthy spreadsheets and more complexity around investments, and while being technically sound, I feel that they may not have resonated with all my clientele.
As I have matured in my practice, I still stay on top of all the changes to financial planning theory and the various investments available, but my focus is more on being a good communicator and coach. While investments play an important role in what I do ongoing for clients, there is a lot in financial markets that nobody can control, and I’ve realized that as an advisor, I should focus my expertise on the factors of financial planning that we can change and that will create a larger impact for my client. As I mentioned earlier, I think the most valuable piece of a financial plan is that it is actionable. If I provide the most complex recommendation with tens of thousands of dollars in tax savings or a better investment structure, it means nothing if I can’t communicate it in a way that not only informs my client but motivates them to act on it.
Chris Siraganian – https://firstfinancial.is/chris-siraganian/
Chris Siraganian is a Financial Advisor at First Financial Consulting. Chris works with individuals and families to help them make sense of their financial landscape and assist them in pursuing their own unique financial goals. He would tell you that the relationships he cultivates with his clients are the most important part of what he does, and he believes it is an integral part of giving tailored financial advice.
Chris Siraganian has been with First Financial Consulting since 2012 and sits on the firm’s Investment Committee. He obtained his Bachelor of Science in Business Economics from Azusa Pacific University and then completed his CERTIFIED FINANCIAL PLANNER™ education through the UCLA Extension. He is also an active member of the San Gabriel Valley Financial Planning Association and is always looking to better the financial planning profession.
About First Financial Consulting – https://firstfinancial.is/
At First Financial Consulting, we believe in fully empowering people to achieve their financial goals by providing totally objective financial advice. Accordingly, we work on a “fee-only” basis to remain free from any potential conflict of interest. Simply put, our success is measured by the success of our clients in achieving their financial goals.