The Smart Financial Planning Process

The most common question a new client will ask when we begin the financial planning process is, “What kind of returns can I expect from your portfolio management?” The answer depends on your risk tolerance, age, financial planning needs and investment objectives.

In general, those that are under the age of fifty with medium risk tolerance will achieve between 9% to 11% per year.  For those over fifty-five or in retirement this can range from 7% to 9% depending on your specific financial planning needs and risk tolerance. The recommended minimum investment planning time frame is 8 years.
Financial Planning Process Diagram

Step 1: Determine your risk profile and financial planning objectives.

The amount of risk or variability of return you are willing to accept is a major determinant of your portfolio composition.  Every investor is an individual with different needs and different financial planning objectives. Whether your objective is wealth preservation, asset growth or current income, it is critical to discuss them in detail with a knowledgeable financial planner. I will help you determine whether you need investments that produce income, growth or a combination of both.  It is also important to understand your attitude towards financial planning and investment planning.

Another critical aspect of your risk profile is your investment planning time horizon—which focuses on retirement financial planning. This is determined by when you will need to access your investments. It will seriously affect your financial planning portfolio strategy. An investor with a longer time horizon can afford to assume greater short-term financial planning risk in exchange for potentially greater long-term returns.

Stocks historically have experienced greater short-term volatility, but over the longer term, they have outperformed bonds and other fixed income financial planning investments. If you have a longer time horizon, you may want to take advantage of the opportunities provided by investing in stocks, In addition, regardless of the type of assets held in your portfolio, time is on your side. The longer you hold any particular asset class, the less the variation in your financial planning return.

Step 2: Set your asset allocation policy.

Research has shown that the asset allocation decision – how your investments are spread among asset classes such as Stocks, Bonds, Reits, Commodities and Cash – has by far the most significant impact on overall performance.  This is why determining the right asset allocation is critical to your investment planning and success. The world economy is ever changing, so your investment allocation cannot be stagnate.  This is one of the common downfalls I see with other investment managers and individuals who manage their own investments.
Step 3: Diversify across asset classes and financial planning investment styles.

As a knowledgeable portfolio manager, I diversify your investments across several asset classes by using multiple mutual funds, etf’s, stocks and bonds. I use the best performing mutual funds out of the 5,000 funds available to you. I chose the best managed funds in their asset class. The funds are evaluated among their respective peers in their asset class based on a variety of qualitative and quantitative factors including: management, experience, adherence to their stated class, long term performance, low management fees, tax efficiency and other relevant factors.

Step 4: Rebalance your portfolio.

As your investment manager, I monitor your portfolio as well as the underlying securities and the financial markets on a continuous basis to assure your desired financial planning goals are being met. I rebalance your portfolio periodically instead of being static with the same funds or stocks over the years. Keeping in mind your asset allocation and risk tolerance, your portfolio will be flexible in order to take advantage of which asset class might outperform over the next six to twelve months.

Step 5: Report the results.

As your financial planner I will provide you with a brokerage statement on a monthly basis detailing the market value of securities and transactions affecting your portfolio. You will receive an annual summary report on the performance and investment outlook for the following year. Your performance and asset allocation will be summarized. Tracking your financial planning results allows you to measure the progress against your stated investment planning objectives.