- Describe the financial planning process
- What information is supplied by the client?
- Who can benefit from our services?
- What is “Fee-only” financial planning and why should that be important to me?
- I understand “Fee-only” financial planners do not sell products but what if your recommendation requires the purchase of products?
- We do not have significant wealth; will you still accept us as clients?
- What should you look for when selection a financial planner?
- What is your investment philosophy?
- What is the cost for your services?
- Are fees tax deductible?
- How can I get started?
- Why do I recommend Vanguard Mutual and Exchange Traded Funds?
Financial planning is a process – the integrated, coordinated, ongoing management of an individual’s financial concerns. The financial planning process consists of six logical, identifiable steps as set forth by the practice standards of the CFP Board of Standards:
- Establishing and Defining the Client-Planner Relationship
Mutually define the scope of the engagement.
- Gathering Client Data, Including Goals
Financial Goals define what the client expects to achieve through financial planning. The planner assists the client in establishing realistic goals and quantifying them in terms of measurable objectives. The client and the planner need to mutually define the client’s personal and financial goal, needs and priorities. Client need to prioritize their goals.
The gathering of quantitative and qualitative data is accomplished through the use of a data survey form or questionnaire including the construction of financial statements (statement of financial position and cash flow). Copies of all pertinent documents will be gathered as required (wills, tax returns, insurance policies, bank statements, investment statements, budgets, pay stubs).
- Analyzing and Evaluating the Client’s Financial Status
The planner analyzes information supplied to identify strengths and weaknesses in client’s total financial planning situation with respect to the achievement of stated goals. When available resources are compared to the client’s objectives, it may be necessary to modify the priority of objective or the client’s attitude about his or her current lifestyle and/or available resources.
- Developing and Presenting Financial Planning Recommendations and/or
The planner evaluates alternative solutions and develops an integrated set of recommendations to meet clients’ requirements.
- Implementing the Financial Planning Recommendations
The client and the planner implement the plan, using the assistance of other professionals as needed. Without implementation, the plan has no value.
- Monitoring the Financial Planning Recommendations
The client’s objectives, health status, income or other personal circumstance may have changed or changes to the economy, tax laws or other issues take place that affect client’s financial situation. If this is the case the planner returns to the early stages of the process, reevaluating goals and gathering additional data to make recommendations that meet the new requirements.
As described in step two of the financial planning process, gathering client data, requires the clients to retrieve extensive information about them including:
- Quantitative Data:
- Family profile
- Assets and Liabilities
- Cash inflows and outflows
- Credit card statements
- Checking and saving account statements
- Insurance policy information
- Employee benefits and pension plan information
- Tax returns
- Wills and Trusts
- Life time gifting programs
- Investment statements
- Retirement statements
- Qualitative Data:
- Goals and objectives (dreams and desires)
- Health status
- Interests and hobbies
- Retirement expectations
- Risk tolerance
- Lifestyle changes
Some of this information is compiled through the completion of the confidential financial planning questionnaire. It will take significant effort on the client’s part to accurately complete the planning questionnaire. Without accurate information the planner will not be able to see an accurate financial picture of the client.
One section of the questionnaire requires the client to complete a personal expense statement (cash outflow). This statement will indicate how and where money is spent by the client. If the client does not have a financial recordkeeping system it could be a time consuming but important process to recreate the personal expenditures over a specified period of time (annually). This can be done by reviewing credit card and checking account statements. The planner can help the client in this process if there is a need. Without accurate information it will be difficult to make certain planning recommendations especially related to retirement projections.
From this financial information the client will be able to construct a statement of net worth (Assets minus Liabilities).
The overall process of gathering financial information will be invaluable. It will provide a clear financial picture to the client and planner plus information will be readily available in one place. Your beneficiaries will definitely appreciate this.
Any individual seeking financial peace of mind can benefit from our services. We service people at all income levels, from all walks of life. Clients have the flexibility to work with us on either a one-time, as-needed basis or an ongoing basis. We welcome clients who simply need a one-time financial consultation or a second opinion, as well as those who need comprehensive financial planning, retirement planning and/or possible ongoing investment consulting services.
Because we are Fee-Only financial planners, all conflicts of interest regarding compensation are removed. We do not accept sales commissions; we work solely for our clients. Because we do not sell financial products such as investments and insurance, there are no third-party relations or outside influences to affect our thinking and financial recommendations. We are not limited in what we do by what we can or cannot sell.
In addition Revelation Financial Planning LLC is a Registered Investment Advisor (RIA) through the State of Washington; as such, we must comply with a host of regulations designed to protect the consumer. One important question you should always ask when considering a financial planner’s services; “May I please have a copy of your ADV Part II?”. This document contains important information about the planner’s qualifications, fiduciary duties, investment policies, fee schedules, history of any past violation, etc. Click on this link to see a copy of current ADV Part II.
- I understand “Fee-only” financial planners do not sell products but what if your recommendation requires the purchase of products?
While we do not sell financial products, we will offer specific recommendations and opinions regarding the purchase of various financial products that may be appropriate for the client to meet their goals. Many of the recommendations the planner will educate the client on how to purchase product on their own using the Internet (investments and life insurance). In other instances the planner will help one find other professionals (estate planning attorney, tax accountant, life insurance sales person) that will help obtain the desired products and services.
Please refer back to our mission statement; Our Mission is to help people that need financial planning advice but did not think they could afford it or thought a planner would not entertain their business.
Wealth is not a consideration with prospective clients. We don’t manage people’s wealth but help them with life’s financial issues no matter what their income levels are.
Here is a recent quote1 from the current president of the CFP Board of Standards, Sarah Ball Teslik, which reflects our attitudes as a financial planning firm.
Americans, by and large, do not manage their financial lives as well as they could. Most Americans could benefit from financial planning. Yet few Americans understand what that is. Many of those who are familiar with financial planning as a term think of it as something only the wealthy need. One of CFP Board's important purposes is to help all people understand that they can benefit from financial planning.”
1 – CFP Board Report December 2005 electronic newsletter
Finding the Right Planner
Begin by asking your friends, work associates and relatives if they use a financial planner. Speak with your other professional advisors such as your attorney or accountant and ask whom they would recommend. Contact professional organizations such as the CFP Board of Standard or the Financial Planning Association.
Next, interview several planners before you decide to become a client. Many planners offer a free introductory consultation (we do at Revelation Financial Planning). Take advantage of this opportunity to find out about the planner and the firm. Don't be afraid to ask tough questions (see below) Remember, this is your money.
How Financial Planners are compensated
It is important to understand how the financial planner will be compensated for his or her services. Planners generally charge using one of these four methods:
This can be an hourly fee, a flat fee for a comprehensive plan or an annual retainer amount. Fee-only planners do not earn any compensation from the investments they recommend; they may not be able to charge on a commission basis because they may not be licensed to sell financial products. RFP is fee only and will not sell products and gain a commission.
A commission-only planner earns his or her compensation when one actually purchase an insurance or financial product, such as a mutual fund, from him or her. When dealing with commission-only planners, exercise caution because their only source of income is the revenues generated from selling.
- Fee and commission:
Also known as fee-based planning, this is the most popular form of financial planning compensation. The planner earns an hourly fee for meeting with client and providing advice as well as commissions on financial products one may purchase.
- Money management:
Some planners manage your investments for you and charge you a percentage of the assets under management as their fee (usually around 1%). Again, exercise caution when choosing a money manager especially if you are giving someone discretionary power over your money.
What to Expect from a Planner
A good financial planner will:
- assess your existing financial situation (review your tax returns, income sources, assets, debts, savings and investments, wills, insurance policies, estate and retirement planning documents).
- identify your personal and financial needs and goals in order to develop a plan that's right for you.
- explain the pros and cons of various options and products (stocks, bonds, mutual funds, IRAs).
- assist you in carrying out your plan by referring you to other professionals as necessary (investment brokers, accountants, lawyers); and periodically evaluate your plan with you to be sure that it is still in line with your current goals.
What the Letters Mean
- American Institute of Certified Public. Accountants/Personal Financial Planning Specialist. A Personal Financial Planning Specialist is a CPA who has passed a financial planning exam, has practical experience in financial planning and is a member of the AICPA.
- Chartered Financial Analyst. CFA is a designation awarded by the Institute of Chartered Financial Analysts to experienced financial analysts who have passed exams in economics, financial accounting, portfolio management, security analysis and standards of conduct.
- Certified Financial Planner. A CFP is a planner who has met
educational and experience requirements, agreed to abide by a code of ethics
and passed a national test administered by the CFP Board of Standards. The exam
covers insurance, investments, taxation, employee benefits, retirement planning
and estate planning.
Bruce Galvin of RFP has this designation.
- Chartered Financial Consultant. ChFC is a designation awarded by the American College of Bryn Mawr and is the insurance industry's financial planning designation. Consultants must meet experience requirements and pass exams covering finance and investing.
- Chartered Life Underwriter. CLU is a designation awarded by the American College of Bryn Mawr. Recipients must pass national examinations in insurance and related subjects as well as have business experience in these areas.
- Certified Public Accountant. A CPA is an experienced accountant who has met the educational, statutory and licensing requirements of the state in which they reside. CPAs perform audits and prepare tax returns-they leave the financial planning advising to the Personal Financial Planning Specialists in their field.
- Registered Investment Advisor. An RIA is an advisor or firm which has registered with the either the Securities & Exchange Commission (SEC) or with State(s) if manage less than a certain amount of investments and holds him/her or firm out to be an investment advisor. Registration is required of anyone/firm who, for compensation and as part of a business, gives advice, makes recommendations, issues reports or furnishes analysis on securities either directly or through publications. If a planner is an employee of an advisory firm such as a brokerage house, the brokerage house will have a blanket registration with the SEC for all employees. Revelation Financial Planning LLC is a registered investment advisor with the State of Washington.
- Reitrement Management Analysis. The RMA℠ designation is a rigorous educational and ethics training curriculum that teaches financial advisors the RIIA Advisory Process to provide successful retirement income solutions to clients. The RMA℠ designation is focused specifically on key concepts and practical applications of retirement income planning and management, as well as the construction of portfolios to support retirement income. Bruce Galvin of RFP has completed educational requirements for this designation.
What to Ask a Financial Planner
- Regulatory Compliance
Persons and firms who hold themselves out as providing investment advice are either registered with the Securities & Exchange Commission or the State where they operate. Individuals may be covered under blanket registration of the firms they work for.
Are you registered with the Securities & Exchange Commission (SEC)? If not, is your firm registered? Are you registered with the State where you do business such as the State of Washington? If not, is your firm registered?
- Background and Experience
Registered financial planners must file a form listing their education and experience with either SEC or State where do business (form ADV part II). Ask for a copy of this form, too. Click on the link for the current ADV part II for Revelation Financial Planning.
- What credentials have you earned?
- What is your educational background?
- How long have you been practicing financial planning?
- May I have a list of references?
- What kind of services do you offer?
- Will you prepare a complete or partial financial plan after listening to my goals?
- Do you sell financial products?
- Do you manage investments for a fee?
- Do you review a client's taxes?
- What kind of client do you generally service?
- Do you have a minimum account size?
- What continuing service will I receive after the initial plan?
- How often do you send out portfolio reports?
- What are your research methods and sources?
Both the SEC and the State where do business require that the individual or firm disclose this information.
- How is the firm paid?
- May I have a written estimate of what the fees will be?
- Do you have a printed fee schedule available?
- More Information
For more information click on the links below to the following organizations:
- Financial Planning Association (FPA)
- National Association of Personal Financial Advisors (NAPFA)
- Securities & Exchange Commission (SEC)
- Washington State Department of Financial Institutions (WSDFI)
- Certified Financial Planner Board of Standards (CFP Board)
- Retirement Industry Income Association (RIIA)
I will quote here what is said in the section 5 of ADV Part II brochure related to the investment philosophy of Revelation Financial Planning.
“RFP is engaged to provide financial planning. In the process of financial planning investment advice is a necessary component. Client’s current financial situation, needs, goals, objectives, time horizon and risk tolerance are first evaluated. Asset allocation and investment policy decisions are then made to help client achieve his/her overall financial objectives while minimizing risk exposure.
Asset allocation is a key component of investment portfolio design. RFP believes that the appropriate allocation of assets, dependent on client’s goals/objective/time horizon/risk tolerance across diverse investment categories is critical in reaching long-term success.
RFP does not provide advice on individual securities but takes a passive approach to investing either through indexed mutual funds, Exchange Traded Index Funds or Life Cycle Funds. RFP believes in the efficiency of modern portfolio theory where over time passive investing will result in consistent market returns at the lowest cost and be tax efficient ("Lazy Investing").
Inherent in passive investing is a long-term, buy-and-hold strategy. Information about passive investments through indexed mutual funds, ETF and Life Cycle Funds are obtained through publicly available reports, analysis, research materials and subscription services.”
Except for retirement planning compensation is determined at an hourly rate based on the actual time involved in meeting with you in person or over the phone, researching and analyzing your current situation and providing specific recommendations and implementation assistance (if appropriate – not required). Current hourly rates for clients are listed in section 2 of the ADV Part II brochure. Retirement planning is charged on a flat fee also described in section 2 of the brochure.
Yes, section 212 of the Internal Revenue Code permits an itemized deduction for tax and/or investment advice in the miscellaneous section of Schedule “A” of form 1040. It is subject to a 2% floor of the adjusted gross income on a personal tax return.
The first step is an initial inquiry from you. Call us at 206-783-3690 or email us by clicking here: mail to us here. We offer an initial no-cost no-obligation one hour get acquainted meeting either on the phone or at my office. Should you decide to engage us, we can discuss which of our services would be appropriate for you given your current goals and needs. We are here to help answer your questions and guide you through the financial maize. If you decide to contract with RFP an agreement and disclosure forms will be provided and signatures secured.
Vanguard was founded in 1975 by John C. Bogle, my investment hero. In August 1976 Vanguard opened the first index fund, the Vanguard 500 Index Fund. Vanguard's structure is different than any other investment company. It is owned by it's funds, which are owned by their investors. Vanguard operates on an "at-cost" basis. Vanguard essentially earns a net income of zero. There are no other parties to answer to and, therefore, no conflicting loyalties which leads to the lowest costs in the industry. Because Vanguard is the father of passive investing it has the largest number of passive index funds to offer. To find out more about Vanguard please click on these links; Vanguard Who we Are?. In the fall of 2008 during the financial markets upheaval Vanguard prepared this paper on their Strength and Diversity Help to Assure Clients. Vanguard's Stability 3-31-2009. This is the Video transcript of a presentation made by the CEO of Vanguard, Bill McNabb, on 3-31-2009 about Vanguard during these tough investment times. He shares the unique qualities of Vanguard and gives assurances to investors that their investments are safe and Vanguard is safe.
Vanguard article about indexing at 40. Indexing has changed how we look at investing and is more relevant every day. Thank you John Bogle.
Indexing at 40; Resources. Here are links to resources to help better undertand the remarkable indexing strategy with its 40 year anniversary.
Investment News (9/7/2016); 9 facts that make Vanguard the King of Mutual Funds. Vanguard, the nation's largest mutual fund company, is on a roll these days. Want to challenge your Valley Forge, Pa., overlords? You've got your work cut out for you.