By Ian Calvert on March 2, 2022
One of the core principles at HighView is to understand the purpose of the portfolio. To assist in discovering this purpose, a comprehensive wealth plan or financial plan is created. The wealth plan can then become one of the most important documents for the family. In one single document, the family’s cash flows, net worth, retirement, estate, and total financial goals can be observed, quantified, and projected into the future. Once this type of comprehensive wealth plan has been built, the purpose of the money becomes more transparent and financial goals can become clearer and manageable to monitor.
Financial Planning
The term financial planning is now used quite frequently, and financial plans are now delivered in many different forms. Some financial plans can provide very specific details on income, different assets classes, retirement, risk management and estate planning, while others provide a generic graph that can make it difficult to interpret the financial goals of the client. To add to this point, as the fees in the investment advisory business are starting to become more transparent, there has been a push (or even rush) to attempt to increase financial planning services across the industry and get more of these mass-produced financial plans in front of clients.
Although financial plans from different firms can look very different, they all have some common characteristics – they are based on current information and assumptions. Every financial plan is based on the information that is known today and assumptions on inputs such as investable assets, interest rates, real estate, taxes, expenses and many others. Another characteristic that is shared across all financial plans is that these inputs and assumptions will change over time.
Imagine a financial plan that is presented to you at the start of the year. Now imagine one of the critical inputs change later in the year. For instance, if your income changes or you decide to take a different job, that financial plan very quickly becomes stale and outdated. If the same wealth plan never gets updated with the new income information, it then then becomes irrelevant. I’ve always thought it’s interesting to see a financial plan delivered in a laminated binder. The very form of delivery implies this is a permanent document that is less likely to receive future updates as life changes.
What Makes HighView Different
At HighView, our wealth planning process is very different from the industry. One of our key planning principles is that a wealth plan is a living document that requires constant maintenance and updates. A truly effective financial plan should be updated at least once a year or whenever a material change takes place. Even for a family with no significant changes from the following year, the wealth plan should still be updated to capture how the portfolio performed, what were the total withdrawals and contributions, and address the important question am I still on track to meeting my financial goals tying back in the purpose of the money. Not updating a wealth plan every year would be no different than a company not updating their business forecast, it just doesn’t make sense.
When a wealth plan is done correctly, it should be an effective tool to track financial progress, makes informed financial planning decisions and bring greater transparency to the long run financial position of the family. When the financial planning process is completed once, filed away and never updated, you might have received more of a marketing/sales document rather than a true family wealth plan.
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