“What do I need a financial planner for?” is likely a better question to ask.
To answer that question, we need to first explore what is financial planning?
For some people, financial planning refers to tax planning, for others it involves estate planning and for many it is a combination of those with the addition of insurance planning, business planning and retirement planning. Each of these specialized categories requires a financial planner with expertise in custom tailoring plans to meet the individual needs of the clients.
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A good place to start is to find a “generalist” or someone who can look at your overall objective and work with you to set goals for you, your family, or your business. Look at this person as the quarterback or even coach of your team, they will have the best overall view and be able to work with you to implement your plan and help you reach your goals.
A good financial planner will start with a process of identifying goals, both necessary expenses and dreams. They will work with you to identify these and put together a comprehensive financial plan. This plan will serve as a playbook or roadmap for your financial objectives. It will likely outline where you are and provide a comprehensive plan for steps to take to get to where you want to be. For a family this may include estate planning; for a professional this may include leaving a legacy; or for a business owner this may include succession planning including the valuation and sale of the business.
A good financial advisor will start with a conversation to better understand their clients. While many people feel their goals are very common but would be surprised to learn how unique each situation can be. The advisor will likely ask some simple questions at first such as “What do you want to accomplish?” This will leave as much latitude for the clients to answer as possible. For some, a simple retirement with basic needs met and a family trip every few years is their end goal while others are looking to sell multiple businesses and properties and perhaps even start a second career in retirement.
After the general discussion, the financial planner will likely take a “snapshot” of the clients’ financial situation looking at assets, liabilities, expenses, funding and savings. They will also quantify the timeline, flexibility, and level of desire to achieve each goal.
For example: Husband and wife age 55 would like to retire at age 67 and purchase a vacation home in Florida. They will begin to sell their family business at 62 to a child. The advisor would look at the methods of funding the sale to their child as well as their retirement savings plans to fund the home purchase in Florida and take care of their other expenses. They might employ the skills of a specialist in small business valuation to get an idea of the value of the business for this familial sale as well as specialists in buy-sell agreements and funding. If there are other children not involved in the business, it will also be important to look at legacy and estate planning so each of the children feel engaged in the process.
This example may look nothing like you, or it might be exactly something you’re thinking about for your family and business. Therefore, it is all but impossible to get great financial advice without the help of an advisor. You can read countless books (like this one), online articles or even attend classes or seminars on the topic but without a professional or team of professionals you are not going to receive the custom fit solution your life, your family or your business deserves.