The Cautious Investor

Jonathan Lapine:
The Perspective a Certified Financial Planner Can Bring

February 13, 2019

If you ask someone what he does for a living and he says he’s a dentist, there isn’t a follow up question to that. People know what dentists do: they clean teeth, fill cavities, perform root canals and remind you to floss to no avail. The same clarity does not exist for the financial planning professional.

There is often much confusion as to what financial planners do. Are they the people running around on the stock market floors of Wall Street? Do they pore over companies’ financial statements to find the next big thing? Aren’t they only used by the ultra-wealthy who have more money than they can manage? Financial planners may be as underutilized as they are misunderstood, and the questions they get usually reflect both notions.

Why do I need a financial planner?

Financial planning means much more than just investing. Your life has many moving parts and a financial planner can help you bring those together into a cohesive plan. The process to doing so is dynamic and ongoing. Whether it’s planning for retirement or answering the questions you have on your first mortgage, your planner can help navigate you through uncertainty at any stage in life.

A financial planning professional can bring you peace of mind and clarity to an uncertain future. They can make it easier to make both short- and long-term decisions while keeping you on track to meet your goals. Life can throw you a lot of curve balls but having a strong relationship with a financial planner is a safe way to navigate through your challenges.

What is a Certified Financial Planner and how are they different from other financial planners?

Just about anyone can call themselves a financial planner, but a Certified Financial Planner is held to a higher standard. A professional who has CFP behind his name has passed the extensive education and experience requirements set by the CFP board to get the certification. Additionally, they engage in ongoing education to maintain their designation. CFPs are informed on the changing financial climate and are capable of educating you on it and guiding you through it. CFP professionals must abide by strict ethical standards and operate in their client’s best interest, not their own. They will work with you to educate you on all your options and the upside and downside to each.

What is a fiduciary and why should I care?

A fiduciary is obligated to act in the client’s best interest when offering financial advice. This puts a buffer between the client and the planner’s own interest, ensuring that the client is not being taken advantage of. Teaming with a planner who is not a fiduciary opens you up to paying excessive fees and commissions and receiving substandard advice.

Seeking out and partnering with a CFP will guarantee you are choosing a financial professional who is a fiduciary, because this is one of the many standards they are held to. Choosing someone not bound to this code could result in a less than optimal outcome for you and your financial plan.

What does the financial planning process look like?

Going through the process is well worth your time and effort, but that is not to say it is a cake walk. You will be required to do some homework and hard thinking, but you’ll walk away informed and directed.

The process starts with you and your planner getting to know each other and agreeing on the terms of your engagement. Just as a doctor would not prescribe a patient medication without knowing his health issues and medical history, neither should a financial planner create a plan without understanding your financial situation, history and goals.

Your planner will then analyze this information and develop a customized, adaptable plan to help you meet your goals. This plan is a living document and will need regular attention and tweaking to remain relevant and complete.

The success of the plan requires that it be revisited and that you and your planner are in regular communication to keep him informed on your changing life and financial situation.

Your financial plan touches many aspects of your life, and certain parts will require expertise from outside professionals, from CPAs to attorneys. Your financial planner may coordinate and communicate directly with these professionals to ensure your plan is executed correctly based on your needs.

How do I know my plan will be successful?

Ultimately, the client is in charge of his finances and decisions he chooses to make. It is your life and your money. Your financial planner is there to educate you and empower you to know your options and be equipped to make the best decision possible.

There are some things you can do to increase the likelihood of executing your plan successfully.

Some may feel that they can only benefit from a financial planner later in life when they’re ready to retire, but this is not the case. Initiating a relationship with a financial planner as soon as possible is helpful for building good financial planning habits, such as saving, investing and steering toward your goals. You’ll also be able to build trust with your planner over time as this type of relationship requires a lot of it. For this reason, it is wise to find a planner who you connect with so that building that trust is easier.

Setting realistic goals may save you frustration in the planning process. That doesn’t mean you have to sacrifice your dream of traveling the world, but it may mean you’ll have to spend less on a new car. By helping you assess your goals and educate you on ways to meet them, your planner can make your money work for you.

Are you guys stock pickers?

Financial planners should not merely focus on outperforming the market and doing so could seriously put money you need at risk. Consistently outperforming the market is unsustainable, unrealistic and can often lose you significant money rather than gaining it. Your investment strategy should be tailored to your needs and be focused on your long-term goals.

In getting to know you, your financial life, and your goals, your financial planner may help strategically invest your assets to give you the growth you need while mitigating risk and volatility.

Your age and your risk tolerance should certainly play a role in your investment portfolio. Your planner will be doing you no favors by investing in ways that are too risky for your constitution or position in life.

Can you help me lower my taxes?

The short answer is maybe. Every person’s situation is unique and with that comes unique tax implications. Certified financial planners are equipped with the knowledge and wherewithal to help you organize your assets in a tax-efficient way and utilize investments that can ultimately reduce your tax burden.

They can help you strategize an optimal and tax-advantageous way to draw income from your nest egg when it comes the time to retire.

For any nuanced tax scenario you may find yourself in, your financial planner can work closely with a trusted tax professional to work toward an ideal outcome.

Who actually holds my money?

If a financial professional ever has you make a check out to his name, run as far as you can in the opposite direction and don’t look back. This is a highly unethical practice that would allow a planner to commit fraud à la Bernie Madoff. Your financial planner should never be personally holding your assets. They should only be held through a third party, such as an investment company or in a brokerage account. This creates another layer of distance between your money and someone else’s self-interest.

Financial planners don’t get as many inquiries into their profession as a famous musician or a pick-up artist instructor, but the questions we do get have serious implications in people’s lives.

Your wealth is what allows you to do the things you love with the people you love, so it is important to protect it. A certified financial planner can help you plan how to do the things you love with the people you love while providing peace of mind that your financial life is in good hands.

The opinions expressed in this article are those of author and should not be construed as specific investment advice.  All information is believed to be from reliable sources, however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Investing involves risk including the potential loss of principal.

No investment strategy can guarantee a profit or protect against loss in periods of declining values. Diversification cannot assure a profit or guarantee against a loss. Indices are unmanaged and do not incur fees. One cannot directly invest in an index. 

Fee-Based Planning offered through W3 Wealth Advisors, LLC – a State Registered Investment Advisor – Third Party Money Management offered through Valmark Advisers, Inc. a SEC Registered Investment Advisor – Securities offered through Valmark Securities, Inc. Member FINRA, SIPC – 130 Springside Drive, Suite 300 Akron, Ohio 44333-2431 * 1-800-765-5201 – W3 Wealth Management, LLC and W3 Wealth Advisors, LLC are separate entities from Valmark Securities, Inc. and Valmark Advisers, Inc. 

Published by The Business Journal, Youngstown, Ohio.