DLP 028- What to Expect in a Financial Plan?

Many of us rely on a financial advisor to develop a financial plan to get us to our goals. So what exactly should we expect from a financial advisor?

Justin Nabity is back for this episode of The Doctor’s Life Podcast to let us know what to look for when an advisor develops our financial plan. All episodes of The Doctor’s Life Podcast are available on iTunes, Android, and on SoundCloud. Make sure to subscribe and you will be the first to get new episodes of The Doctor’s Life Podcast.
What is a financial plan and what should you expect from having one developed? This question comes up all of the time because doctors receive all kinds of financial advice. As we work with them in all 50 states we hear more are having bad experiences rather than good ones and much of this stems from the advisor making recommendations for financial products without actually having a comprehensive plan developed. When we say comprehensive we mean a plan that is designed specifically to address income and cash flow planning, debt management, college savings, employment benefits, risk management, tax reduction, investments, retirement and estate planning.

A financial plan is simply a road map or blue print for how to reach your financial goals and takes into account many forms of risk such as economic, political, income tax, and also should include educated assumptions for inflation, health, life expectancy, credit history, insurance, your risk tolerance, and sustainability of assets.

Unless a doctor is going to dedicate him or herself to rigorous training, research and commit to regularly monitoring financial markets, it is recommended to utilize a financial planner or wealth advisor to develop the financial plan. The best practice is to use an advisor who is a fiduciary, a professional who puts your interests above their own and has the licensing, credentialing and track record to support their claims for serving their clients in this manner.

When developing a financial plan, there are six main steps:

The first is establishing the relationship between you and the advisor. A thorough understanding of your goals and objectives, the scope of the engagement and the compensation for the financial advice is necessary before any work is completed on your behalf. When an advisor is working with you in this capacity there should and must be an advisory agreement which must be signed by you before the advisor begins any billable services. This is required when working with an advisor who is part of a Registered Investment Advisor.

The second step is gathering all of the necessary documents to get a clear picture of your current financial status. Common items are things like cash flow and income statements, net worth statement, investment account statements, insurance policies, wills and trusts, and tax returns.

Once all of this information is gathered, the third step is to analyze your current financial status. Key areas of focus are to identify any problems with your risk management strategy, review investment performance, and overall check to see how you are progressing toward your goals.

At this point, your advisor will have a sense of where you are, where you want to go and what it will take for you to get there. In the fourth step your advisor is going to develop recommendations to address gaps in your plan, find ways to strengthen it and design an efficient strategy to accumulate your assets.

After the recommendations are prepared, your advisor will present them to you and explain any and all implications of initiating them. It is at this time where you and the advisor decide which route you want to take to address all of your goals and objectives.

The fifth step is to implement the agreed upon recommendations. You’ll utilize the advisor, his or her advisory team and any additional specialists that are needed.

Once all of the recommendations are implemented, your plan will go into the final step which is to monitor it and make sure it stays on track. As you progress throughout your career, changes in your personal or family situation along with any financial developments will trigger the need to periodically make adjustments to the plan in order to ensure sufficient progress is taking place every year.

When your plan is fully developed you should have a clear picture of your goals and objectives, all of the recommendations necessary to achieve them, what assumptions were used to forecast potential outcomes and an implementation schedule which details what, when, who and additional aspects needed to execute your plan.

If you are ready to explore what a financial plan can do for you or want to speak with us about the status of your financial plan, please don’t hesitate to contact any of us.

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