Comprehensive financial planning is a term used to describe the analysis of multiple financial concerns together at the same time. Typically, an advisor will consult with a family to discuss retirement, taxes, college funding, estate planning, debt management, and insurance. The result is a strategy for accomplishing the family’s goals that is implemented and monitored overtime.
Companies like Ameriprise and Lincoln Financial Advisors, have provided comprehensive financial planning for decades. These types of Financial Advisors charge a fee to consult with clients and produce a recommended course of action to meet multiple financial objectives. Critics question the need to pay a fee for a one-time evaluation of circumstances that often fluctuate. The Certified Financial Planner Board of Standards created a curriculum and exam designed to bestow a professional designation on those who perform this comprehensive financial planning. Recipients receive the title Certified Financial Planner (CFP) and must complete annual continuing education requirements. The Board provides information to both the public and financial professionals on how to conduct a thorough analysis and make informed financial decisions. Brokerage firms, insurance agents, and independent advisors may offer some aspects of comprehensive financial planning as a by-product of selling other products and services such as investments.
Families often consult with multiple professionals: insurance agents, investment brokers, loan consultants, attorneys and tax advisors. Decisions made in one area may impact another. Gathering all these experts in one room to discuss a family’s financial situation reduces the possibility of conflicting advice.
Comprehensive financial planning considers multiple aspects of an individual or family’s financial situation. Topics include: taxes, debt, retirement, college savings, estate planning, and insurance. The comprehensive financial planning process begins with an initial interview. The financial advisor inquires about the family’s objectives, their risk tolerance, and overall financial knowledge. This could include anything from sending children to college, buying a 2nd home, or starting a new business, to traveling the world during retirement. The current financial status is determined by reviewing bank statements, mortgage documents, insurance policies, tax returns, etc. The advisor reviews all of the information, often consulting with existing professionals such as accountants or attorneys. The advisor analyzes all information to determine how close the family is to meeting its goals and creates strategies for accomplishing them. The next step is to implement the plan, which could include reallocating assets, opening new retirement accounts, drawing up trust documents, etc. Once the plan is implemented, the advisor monitors it, maintaining contact with the family to identify any needed changes.
Clients sometimes question the need for financial advisor to know ALL of their financial information. Just like a doctor may collect information about you and your family’s medical history and other lifestyle habits because those issues impact his diagnosis of your physical health, financial advisors use many types of information to manage your finances.
Financial advisors are required to ask many questions on multiple different topics to know as much about clients as possible before recommendations. The objective is to know the client well enough to assess suitability of products and services.