Broker Check

The Power of Financial Planning

| June 08, 2018
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Had an encounter the other day that illustrated to me the power of financial planning.  

A new client came into the office for some guidance. She has some investments invested with another advisor. She wanted me to take a look at her current investments.

She obviously was a conservative investor.  She even said she was conservative in nature.

Looking at her investments and talking to her, it was obvious that the investments may have been appropriate for a conservative investor.  But for her, they just were way too low growth to achieve her personal, financial goals.  

And when she asked me, I gave her my opinion.  I told her: “Unfortunately these investments, which are perfectly fine for certain situations and certain people, couldn’t were not appropriate for you.  They are just too conservative for you to meet your lifestyle and retirement goals.” 

To me, it amplifies the power of financial and goal planning when determining your investment allocation. The importance for why every single investor (no matter how big or small), to assess whether or not their investments can meet their personal financial goals.

I would never encourage a client to invest in a program that is outside of their character. However, she needed to be shown how the conservative investments were not going to achieve her personal financial goals.

In this case, her investments were clearly purchased by an advisor, who heard one comment, “I am conservative.” They said ok conservative investment it is.  They did all the paperwork and everything was fine. 

And the kicker is that she is stuck in these investments because they are fairly non-liquid with plenty of surrender penalties if she decides to move away from them. I empathize with her because now she has to make a decision. She is either going to have to compromise on her retirement (because the conservative investments will not meet her retirement goals), or she's going to have to pay a lot to get out of these things (a hard pill to swallow).  

That's the power of doing a financial plan before investing money.  I feel sorry for her that she had these investments for six years and didn't really understand how they impacted her long range financial situation.

Something to Think About:

Me and my friends were waiting for a bus for about an hour and a half — with an old man standing a bit away from us at the same bus stop.

Finally, we can see the bus coming, and my friend says, “Oh finally, the bus is coming,” and the old man just turns to us and says, “The bus was always coming.

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