Posted By: CFP&WM On: Mar 19th, 2010 In: In the news Money Matters

Fundamentals of Financial Planning for the Over-50 Crowd

Senior Spectrum – February 23, 2010

The field of financial planning is relatively new and has existed for just the past generation. As a result there’s many uncertainties, mysteries and confusion about what it is, where’s the best place to go for it and why financial planning is important.

Financial planning is not an event but rather the process. Financial planning is often said to be similar to preparing for a journey. You need to first ASSESS where you are to start, establish GOALS as to where you want to go, ANALYZE what will be needed for the trip, get RECOMMENDATIONS as to the best way to get there, MITIGATE any risks along the way, INITIATE the trip and MONITOR your progress along the way. Financial planning helps you make better financial decisions, to improve the quality of your life now and in the future. 

The trouble that many people have is balancing current needs (what is currently being spent) with future needs (saving enough to have a good life later).

Unfortunately, anyone can call themselves a financial planner. Some mortgage brokers, insurance salesman, stockbrokers, Registered Investment Advisors, money managers, CPA’s even some Attorneys use the term. 

The field of financial planning is made up of several focused areas including: estate planning (legal), taxes and general finance (CPA/accounting), risk management (insurance) and investment (securities/real estate/banking). Historically most planners have evolved out of one of these four areas.

In recent years, a number of colleges and Universities have developed programs specifically in financial planning. A graduate from such a course will have a good understanding of all the areas of financial planning rather then a more narrow view of someone with experience in just one field. 

Asking a planner about their education and experience is important but perhaps the more important concern is their objectivity.

All too often someone will purport themselves to be a “financial planner” but in reality they are trying to sell you something. The concern is that if the salesman (financial planner) does not have the best solution for your situation, you might be sold a product anyway. The other problem in a commission situation is the lack of transparency. You do not know what you are paying your financial planner because the commission is a hidden fee.

The alternative to a “salesman” approach is the “fee for service” concept. Pay the planner by the hour or for a specific project or service. Some planners work on a retainer basis, a set fee for the year. Some, mostly money managers, are paid on a percentage of the assets they manage for the client. Any planner should be very willing and comfortable discussing the cost of their service. 

You would be confident that your interests always come first when dealing with an advisor who is a fiduciary. Registered Investment Advisors are required by State and/or federal law to act in your best interests at all times and to fully disclose compensation arrangements prior to service. This is not the case with a sales oriented adviser.

When you seek a planner, look for one who has the formal education, is unbiased in his or her recommendations (does not sell you products,) and has had a good amount of experience.

Many members of the public do not really understand how a financial planner helps clients so here are some real life examples:

Couple in their mid-50s
Their primary concern was whether they would have the retirement that they envisioned. As a result of working with a planner, they decreased their insurance costs, obtained the proper type of insurance coverage, established a revocable living trust as well as Powers of Attorney and other documents, recommended changes in their investments to decrease risk, provided recommendations to change the allocation within his retirement plan, established that they would have a successful retirement based on current projections, provided recommendations around buying, selling and renting a residence.

Lady in her late 60’s
Her primary concern was determining if she could retire comfortably at age 70. As a result of working with a planner, she decreased her property and casualty insurance costs, started collecting $600 a month from her ex-husband’s Social Security benefits without impacting her own benefits which she will start taking at age 70, established that she could retire comfortably at 70 and in fact even earlier.  Other recommendations were, converting some IRA to Roth IRA, increased her retirement plan contribution to decrease current income taxes, recommended changes to her estate planning documents to improve the likelihood that her wishes would be carried out.

Couple in their late 70s
These folks were concerned about the best way to leave assets to their family, make sure they had enough to live on comfortably the rest of their life, make sure they were invested properly and were adequately protected if they got sued. The financial planning recommendations included modifications of their asset allocation in their various accounts, recommending they go back to their attorney for some clarification within their trust and get updated HIPAA release, transfer all assets to the trust and use an estate-planning letter as a way of distributing personal items. It was also confirmed that there was a 92% chance that they would not outlive their assets.

If you want to improve the quality of your life, consider using the services of a financial planner. When interviewing planners look for one that is a Certified Financial Planner ® and does not sell insurance and investments. To find such a planner in your area consult the website of the Garrett Planning Network or the National Association of Personal Financial Advisors. If you do not have web access call 800-347-1340 and ask for a referral.

Michael Chamberlain CFP®

Send your questions to or call 800-347-1340
This article is for informational purposes and should not be taken as legal, tax or investment advice.

0 Responses to Fundamentals of Financial Planning for the Over-50 Crowd