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Three Approaches to Financial Planning

Posted by Larry Jones on Jul 2, 2020 9:30:00 AM
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What do you expect from your financial planner?

I can't tell you how many times I've heard something like, "I've got $75,000 from selling a house. What should I do with it?" Many times the person who will ask me that kind of question is a relative stranger.

Financial planning is a process. Some would say it's more of an art than a science, but it's still a defined process. The question above does not contain enough information for me to give a reasonable ethical answer. As a Fiduciary, I need to know what your financial situation looks like now, what your goals are for the future, your tolerance for risk, where you are in life, and more. Only then can I make any sort of recommendation. That's why it's important to provide your planner with accurate information. The financial plan that I come up with is only as good as the information you give me. You tell your doctor what is bothering, don't you? Why would you withold information from the person who is formulating your financial plan?


3 Approaches

A true planner will use a defined process to determine the basis for any recommendations. Inside that process, however, there are still three main ways to look at how the customer-planner relationship will evolve.

1. The Single-Purpose Approach

If the planner sells the client a single product, having used the financial planning process to arrive at his decision, and being approved by the client, then he has utilized the single-purpose approach. Some examples might be the banker who opens a trust account for the benefit of a handicapped child, or a stockbroker who advises a client to buy shares of a particular company. This approach solves a single problem for a client.

2. The Multiple-Purpose Approach

Many times a client will have concerns and/or needs in a particular area, such as risk management, or income tax planning. It's not uncommon for a planner to take a multiple-purpose approach in solving the problems. A good example might be a tax attorney who assists clients with estate, income, and tax planning, or an investment advisor who is registered with the SEC who assits clients in setting up a complete portfolio to reach defined goals. Even though the advisor is helping the client, he or she may still not know the overall financial situation of the client.

3. The Comprehensive Approach

Comprehensive planners consider all aspects of a client's financial position. Since this type of planning must encompass such areas as tax planning, and legal issues, a team is usually required, consisting of the planner, an attorney, and a CPA. This type of plan will integrate different areas of expertise to effectively solve the client's problems.

How much expertise do you need?

If you are concerned about your spouse should you die unexpectedly, and you just want life insurance, then the services of an insurance agent, with a single-purpose approach is probably sufficient. If you have a $30 million estate and 12 ex-wives, probably not. The important thing is that the financial planning process is used in every case, even the simple ones.

At NavStar we're pleased to be able to offer all levels of planning, and implementation. We have a team assembled, if needed. We can formulate a complex plan, then monitor results and make adjustments as necessary. Give us a shout when you need help with any level of your finances. We'll be happy to serve you.

Until next time,


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Topics: Financial Services

What you don't know can hurt you!

As a fiduciary I am required to always act in your best interests, and as a professional planner, it's my job to be familiar with all types of possible solutions and financial vehicles. In short, I have no interest in selling any particular product or any affiliation with a particular company. I work for my clients.

Are you:

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