What is a Financial Plan & Why Do You Need One?

by Kristina on September 14, 2011 · 0 comments

Good Morning DINKS.  If you deal with a Certified Financial Planner at your Financial Institution then you may have been solicited for a Personal Financial Plan.  This is a service which is usually offered to clients who are planning to achieve specific financial goals such as the purchase of their+ new home, or who are planning for their retirement.

Some independent brokers also offer Personal Financial Plans to their clients but there is a cost involved. Wealth Management Firms also offer Personal Financial Plans to their clients which may or may not be included in their quarterly or annual fees.

A Financial Institution aka Your Bank is the only place that offers Free Financial Plans to their clients.  The reason is because banks earn revenue on a variety of products such as bank accounts and credit products; they also earn their yearly revenue as a national institution.  Unfortunately Brokers and Private Wealth Management Firms do not have this luxury.  They are micro managed and their revenues are based solely on their fees charged to clients.

If you have never had a Personal Financial Plan prepared for you, I suggest that you visit your local bank and ask your Financial Planner to prepare a Personal Financial Plan.  There are benefits for both clients and banks when presenting a Personal Financial Plan.  The client gets to see if they are on the right track towards achieving their short term and long term financial goals, and the bank gets to present a professional image to their clients.

Banks usually offer Personal Financial Plans as a deal closer to clients who are considering investing with their financial institution.  A professional and knowledgeable Financial Planner can be the deciding factor when clients are choosing to invest with one financial institution over another.

There is approximately 5-8 hours of work involved in the preparing a Financial Plan which includes meeting the clients and gaining their trust, gathering the clients information, inputting the information into the software, making the necessary financial calculations, finding presentable solutions, as well as presenting the final Financial Plan to clients.  Therefore Personal Financial Plans are only offered to a specific clientele.

The Features and Benefits of a Financial Plan

  • It shows clients their current personal financial situation compared to where they want to be
  • A Financial Plan clearly defines personal financial goals and the steps needed to take in order to achieve them
  • The Financial Plan can be updated yearly to make sure that we (as clients) stay on track
  • We can change, add, and delete goals as needed
  • Certified Financial Planners can give us advice on all of our products including insurance, savings, retirement accounts, mutual fund accounts, and estate planning, real estate investments, and our own business for entrepreneurs
  • A Financial Plan determines if our goals are achievable or if we have to make adjustments to our dates, timelines, and objectives
  • Financial Plans determine the most tax efficient sources of income during retirement.  They show us where our income will come from during retirement

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