What is Financial Planning?
What is Financial Planning? Video transcript:
0:01 Hey everyone, thanks for stopping by. This is Phil with Foundation Wealth Planning and today I got a good one.
0:08 We're going to talk about what in the world is financial planning? So first of all before we get started, please if you like the video, give it a thumbs up, like the video you know, follow the channel.
0:21 We'd love to have you, you know keep coming back for more. I like to do these little short, you know, four to seven minute clips about different topics whether they be personal finance, education, tips for, for, you know, money management, and then of course in biblical finance mixed in there as well.
0:38 So we'd love to help you up and I hope you find value in this video. This one's just simply going over what is financial planning.
0:44 You probably have heard of that. Is it the same as you know, investments and financial advisor and all these different terms that I think we use in the industry to get a little bit confusing?
0:56 So financial planning is you know, different than just investment management. It is included in there. So what I want to do is pull up the CFP board website.
1:08 That is the CERTIFIED FINANCIAL PLANNER™ board website. Of which I am a member. I am, I'm a CERTIFIED FINANCIAL PLANNER™.
1:17 And so I want to talk a little bit about what is entailed in that. And so here's their definition of what is financial planning.
1:22 “Financial planning involves looking into a client's entire financial picture, advising them on how to achieve their short and long-term financial goals from saving for education and planning for retirement to effectively managing taxes and insurance.
1:44 Financial players develop valuable relationships with their clients, provide them with confidence today and a more secure tomorrow.” Well, that is quite a paragraph, but I think it really does drive home a lot of what that means.
1:58 So they actually have a pretty nice little visual down here. You know, we certainly will talk a lot about the basics of financial planning, right?
2:08 So talking about, you know, your cashflow and debt management, various economic concepts. I mean, there's a lot of stuff going on with the Federal Reserve raising rates and, you know, what does that mean and all that we're talking about, you know, that kind of stuff.
2:22 You will see over here that investment planning is a part of financial planning.
2:29 Most people, when they think about financial advisor or financial planner, they think purely of investments. And that's because, you know, this industry evolved out of the old stockbroker.
2:41 So back a long time ago, you know, in the early 1900s. And even through, well gosh, probably through the 70s or 80s, the only way you could really get any sort of investment product was through a stockbroker.
2:56 You had to call them up, say, I want to buy X stock. Or they would call you up and say, hey, there's a new stock coming out, do you want to buy it?
3:04 And that was the only way to really get your money invested in the markets. Obviously, today there are, many different ways to invest your money.
3:13 You don't necessarily have to go through a financial advisor or a stockbroker to get your investments. So we provide value with, say, here's how we should allocate the money.
3:23 We can even do the investment management for you. But that is not the whole picture, right? It is expanded out and we can provide a lot of value.
3:30 When you do financial planning beyond just the investments, we're going to talk about some of the basics of financial management and various concepts.
3:39 Of course, everyone also thinks that it's retirement. That's the other piece that is often tied in is, hey, am I saving enough for retirement?
3:48 When can I retire? Those are the two biggest questions you get outside of, “what should I be investing in?”
3:55 And so we do talk about that. We help run projections and say, hey, here's what we should be saving. Here's what your retirement is going to look like.
4:04 And a lot of that's just tied into your goals. So when we're talking about your situation, it's different than somebody else's, right?
4:11 You're going to make different amount of money. You'll have different values. You're going to want to work a different amount of time.
4:17 Maybe work part-time, maybe not. So we really need to tie in all of that. And there is no one size fits all plan, right?
4:26 And so we will go through all of that while talking about how do we save for retirement and how are we investing our money.
4:34 We do take into account various tax and estate concepts. Now, some advisors will go deeper on that than others, depending on their experience and comfortability with various things.
4:45 But there are certain tax pieces that we need to be aware of as financial planners. Sometimes we'll bring in more of a tax expert if we need some help on certain things.
4:54 And then of course doing tax returns. Most advisors don't do that. You need to talk to a tax preparer to do that.
4:59 But we can help provide some guidance and have some knowledge about how the taxes will work in your financial picture.
5:05 As well as you know, estates, right? So when you're thinking about what's going to happen to you when you pass away, do you need a trust?
5:15 What kind of trust? We again, most advisors are not lawyers and we can't execute the documents and we would not be as knowledgeable about some of those things as, as a lawyer would be.
5:25 But when you're talking about financial planning, we do have a pretty good general idea of the various types of things out there that could work and can work with your lawyer to help draft up something that's going to mesh with your specific situation.
5:39 And so we do want to make sure we're talking about that. And of course, insurance, you probably talked to advisors that sell insurance, but not all of them are going to be evaluating all of your insurance.
5:51 You know, some people would just say, Hey, just buy this insurance product. That may or may not be appropriate, but if you're doing a true financial plan, you need to be able to evaluate, say, where are the risks?
6:02 Where does it make sense to get insurance? Where does it make sense to self-insure? Where does it make sense to just simply try to avoid that risk the best you can?
6:10 You know, that's certainly a risk management strategy. So we want to make sure that we're taking all that into account.
6:17 Make sure you've got those bases covered. And then the ups and downs of life, the stock market, that's a big part of our jobs, is having a relationship, being able to talk through the struggles of what's going on.
6:33 So we're talking about the psychology of financial planning. Money is emotional, right? There's a lot that happens day to day, year to year.
6:41 That changes. And so having that relationship with someone that you trust and you can talk to about what's going on in your life and helping get some guidance and how that affects your finances and how to proceed is a huge value.
6:53 And I think it's often overlooked, but it's pretty massive. So I hope that helps. I hope that gives you an idea of what is financial planning.
7:02 A lot of people would benefit greatly from true financial planning. Some people maybe don't need it, but everybody needs at least some sort of basic financial plan.
7:13 But as life gets a little more complicated, you got a few more things going on. It makes sense to really get a more comprehensive plan.
7:19 And you know, you can find advisors that will create a one-time financial plan for a set fee. Others will build that based on an hourly rate or maybe say, Hey, if we want to just talk about these certain topics, we can build up a plan on those specific items for this amount hourly.
7:40 Others will manage your investments. And while they manage their investments, they might provide financial planning in addition to investment management.
7:50 So there are various different ways that an advisor would charge for this, depending on what their model is and how they want to try to provide value.
7:59 So find someone that works for you that provides the services that you're looking for. And you know, go get some help and guidance on this stuff.
8:05 It can really be beneficial and your future self, I'm sure we'll thank you. So thanks again for stopping by and I look forward to seeing you in the next one.
8:13 God bless.
Phil Francois, CFP®
Foundation Wealth Planning
phil@foundationwealthplanning.com
https://www.foundationwealthplanning.com/