New Format for Presenting a Financial Plan

This is an Example of an Introduction to a Financial Plan when I was Practising

Hopefully this will provide you with some good ideas that you can incorporate into your practice. I first used in “The Benefits of Your Financial Plan” as something that I cited at the end of presenting a plan. After further development, I put it at the beginning of my financial plans and referred to it as necessary when quoting a fee. I always used to tell people, “Good advice never costs it pays.”

The Benefits of Your Financial Plan

We have developed this financial plan for you with four primary benefits in mind, peace of mind, saving your time, assurance of making the right decisions, and tangible economic benefits. Before going through the details of your plan we would first like you to understand a bit more about how you will derive these four benefits.

Peace of Mind

It is our hope that you develop peace of mind as a result of a number of different factors:

  • Peace of mind in knowing that you have a detailed plan to achieve financial independence

  • Peace of mind in knowing that once you have met the targets that are outlined in the plan you can feel absolutely free to spend or give away everything else that you have

  • Peace of mind in knowing that in the event of either parties’ premature death or disability that a plan has been made I have of time

  • Peace of mind in knowing that you have a plan to educate your children

  • Peace of mind in knowing that whatever circumstances you should find yourself in, you can pick up the phone and call us. Because we are familiar with your overall situation we will be able to render advice promptly and efficiently.

  • The longer that we work together the more real your peace of mind will become.

Saving Time

There are a number of ways in which we should be able to save you valuable time that you can devote to more important matters. Some of the things that come to mind are:

  • We will provide you with a simple system for you to keep organized with respect to being prepared to file your annual income tax return. Each year the time savings will be greater.

  • You will no longer have to shop around for the best rates for term deposits or a mortgage, as we will do that for you.

  • While most new clients find it a bit hard to adjust to this, you won’t have to exert very much effort to keep up-to-date on your overall financial situation. We consider it our privilege to do most of that for you. You can call us anytime for details, or simply login to your personal website.

  • You won’t need to be concerned about what’s in the latest budget that will affect your taxes. It’s our responsibility to keep you up-to-date. The same would hold true for any legislation which could impact your estate.

Assurance of Making the Right Decision

Every decision that you make from now on will not be perfect. There will be both big decisions and little decisions. By working closely with us we can greatly enhance the probability of getting it right. That is simply because two heads are better than one, and our head should be better informed because that’s what we do. Here are some examples of decisions that we have helped other clients make successfully:

  • Deciding to take a short-term rate, or lock-in for a longer period

  • Deciding whether to lease or buy

  • Helping you get the facts so you could better decide to remodel or sell

  • Determining how much longer you would have to work if you buy a condo in Florida

  • Deciding if it’s prudent to make major gifts during your lifetime

  • Deciding what you will do now that you have been laid off for an extended period of time

  • Deciding whether or not you should take the retirement offer

  • Deciding how much more a prospective employer would have to pay you to make up for the loss of your existing benefits

  • Deciding whether or not it would be prudent for you to invest $250,000 in your brother-in-law’s new business

The longer we work with you the more valuable this service will become. The better we know you the easier it will be for us to provide this service.

Tangible Economic Benefits

It is difficult if not impossible for us to properly quantify all the tangible economic benefits that you will receive as a result of working with us. At times and new clients will ask us if the benefits that we will talk about are guaranteed. Of course the answer is no they are not guaranteed. But in most cases we will help you arrange your affairs so that you have the highest possible probability of getting it right.

Here are some of the benefits that we can foresee for you:

  • We estimated that as a result of the strategy that we have developed to pay off your mortgage early will result in saving $41,000 of interest.

  • We estimated that as a result of repositioning your non-deductible debt to make a tax-deductible it will save $32,000 in taxes.

  • We expect you to both be able to retire at the ages you have chosen on an income of $120,000 a year net after taxes indexed to 3% inflation.

  • Overall In comparison with continuing with your current behavior, our projections illustrate that following the course of action that we outline will improve your overall financial situation by $523,000 over the next 32 years. (Refer to page 12).

How We are Compensated for Helping You

We are able to help you in a number of different ways, so as you might expect we are compensated in several different ways.

Planning Fee – $2,400 to draft your initial plan. Rather than bill you for time on a regular basis, we have established a monthly retainer of 1/12 of your initial fee. We will start collecting at the beginning of the 4th month.

This is based on the time and complexity of your situation. We will not bill you any more regardless of what amount of time is involved – that is because we always want you to feel free to call us.

Note that because our retainer is monthly some people think that the amount of work we do for you each month is about the same. That is never the case. There are always peaks and valleys, but that is no reason that we cannot provide you with a flat amount – which in fact we do.

After providing service to you for a year, we will review your situation to see that we are able to continue to serve you for the same amount. Typically fees go up by 5% every few years, until you reach a point in which our primary job is to maintain the status quo (typically 3-4 years into retirement for most people). Then your fee will typically gradually go down by up to 50%.

Management of Assets – we are paid a fee of 60 bps on the first 1,000,000 reducing down to 30 bps for assets over 3,000,000.

Insurance Commissions – we would prefer to be compensated by fee but the insurance companies have not yet implemented such a system, as a result we receive a commission which would be the same as any insurance broker.

You will note that the lion’s share of our compensation is derived from management of assets, verses planning fees. That is because that if we do a good job for you, it will at least partially be reflected in the amount of assets that you accumulate. This gives us a chance to share the rewards of doing a good job.

Joint Responsibility

We think of ourselves as having a joint responsibility with you to help you achieve all of your objectives. For that reason, we want you to feel more than free to discuss our compensation for what we do at any time.