The Three Phases Of Value In Financial Planning

The Three Phases Of Value In Financial Planning

Though it is easy to forget or appreciate the value received from financial planning service, the financial planning relationship can be broken down into key phases of value to appreciate the value of financial planning, notes a report from

Play Quizzes 4, owned and operated by Barnett Ravenscroft Wealth Management, in its report titled: “The hidden value of great financial planning” notes delivering peace of mind would be the value of great financial planning.

What is financial planning?

The Sensibleinvesting report points out that good financial planning would help resolve some key questions relating to lifestyle worries, money worries and money and life challenges. Financial planning would help people feel confident that they have the financial flexibility to survive whatever life and the markets may throw at them. It will be comforting for the clients that they have a trusted finance professional on hand to monitor their finances over time and facilitate them in making the tough decisions that they will inevitably face along the way.

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In order to appreciate the value of great financial planning, the Sensibleinvesting report breaks the financial planning relationship into three key phases of value.

During the Value Phase 1, the report notes new clients often arrive with a proverbial suitcase of bits and pieces collected over the years, across a host of financial products such as pension plans, endowment policies, IFA managed portfolio. The report notes during this phase, some of the clients do not have a clear vision of what they want their future to look like. Hence, the financial planner should help clients to set out their vision for the future, both in terms of lifestyle goals and the money needed to fund them.

The planner can subsequently take up the analytical work using cash flow modeling tools to measure the magnitude of gap between the client’s vision and the financial reality. Based on the joint effort between client and planner in developing the ‘plan for the future’, the planner can reposition the affairs of the client across a broad range of areas including asset allocation, investments, tax, wills and contingency planning.

The report notes once the client is back in control of their future and their finances, they will able to perceive the value received easily. This could relate to the measurable benefits of restructuring to reduce inheritance tax liabilities, other taxes or just reducing costs.

Value Phase 2 and 3

According to the Sensibleinvesting report, since financial planning is not a ‘set-and-forget’ process, during regular review meetings, client can raise issues or discuss changes to their circumstances. There could be some momentous events either in the client’s life or in the planner’s world. For instance, client could face events such as divorce, ill-health, an unexpected inheritance or triplets, while the planner could witness precipitous fall in markets. During such events, the planner should understand the issues faced, find a sensible solution, facilitate decisions that need to be made and have the fortitude to execute under pressure.

During the Value Phase 3, the report notes client longevity comes with attendant health problems. During these stressful times, a financial planner is well placed to offer advice, support and facilitate the financial consequences of the new change in the circumstances. The financial planner can also play an important role in facilitating clients in making decisions surrounding lasting legacy, philanthropic works, passing on wealth from one generation to the next.

The report concludes that proper financial planning should facilitate clients in meeting their goals, feeling confident in the future and having the time to enjoy the opportunities that money can provide. Thus, delivering ‘peace of mind’ should be the goal, consequence and value of a great financial planning.

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports
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