When I began practicing financial planning in the mid-80s, the firm that I worked for, which was on the forefront of the financial planning industry at the time, would prepare a financial plan for my clients using a detailed questionnaire that I completed.
I would complete the questionnaire after meeting with each client once or twice to discuss and prioritize their financial goals and gather investment statements, income tax returns, estate planning documents, insurance policies, and other important information relevant to their financial situation. My firm charged a flat fee for each plan, with three different levels of charges depending upon each client’s needs.
The financial plan that my firm produced was impressive. In addition to a leather-like cover that included the client’s name embossed in gold, it typically consisted of 100 to 300 pages, depending upon the complexity of the client’s financial situation. The plan was comprehensive and customized, covering every aspect of my client’s financial life. It included information and planning recommendations pertaining to insurance, investments, income tax, education, retirement, estate, and cash flow as applicable that were designed to help my clients achieve their financial goals.
It was always a proud moment when I met with each client to give them their leather binder. This was a big deal for planners and clients alike since less than 5% of all individuals and families had a written financial plan at the time. Clients were excited and receptive to my presentations as evidenced by the fact that they typically implemented the majority of my recommendations on a timely basis.
There was just one problem. After that momentous event, the work of art, i.e., my client’s financial plan, sat on a shelf in their home, never to be read, let alone updated, again in the majority of cases. While I would continue to meet with clients periodically to assist with their planning needs, the thought of gathering all of those financial documents again to prepare another financial plan was a major obstacle for most of them.
Even in the mid-80s a financial plan was never intended to be a onetime event, collecting dust on a shelf. As I have always emphasized to my clients, a financial plan is a snapshot of their financial situation at a moment in time. The underlying assumptions used in the preparation of a plan, by definition, will change beginning the day after a plan is completed. In addition, frequent changes in our lives require periodic updating of our financial plans if we want to achieve our financial goals.
Fortunately, there have been numerous technological breakthroughs in the last 30 years that make this not only possible, but practical. The field of financial planning, while it retains its basic purpose of helping us achieve our financial goals, has evolved quite a bit since the mid-80’s as a result of these advances, most notably the introduction and evolution of the World Wide Web.
One of the most exciting innovations to take advantage of this technology that I offer as a value-added service to my retirement income planning clients is account aggregation. With this system, information from bank, investment, mortgage, credit card, insurance, and other financial institution accounts is automatically consolidated in one virtual location that can be accessed 24/7 from anywhere in the world. In addition to being able to access an up-to-date net worth statement and other financial reports on demand, the need for periodic gathering of paper documents to update a financial plan is eliminated.
A major non-technological change that we have recently witnessed is the evolution of retirement planning with the distinction between retirement asset versus retirement income planning playing a key and important role.
As evidence of this, The American College in Bryn Mawr, Pennsylvania, a leading provider of professional financial programs of study and designations, introduced the Retirement Income Certified Professional® (RICP®) designation less than two years ago, which is its fastest-growing credential.
If you’re retired and you had a retirement plan prepared 10 or more years ago, your plan probably didn’t address sustainable income planning, management, and protection issues. This, combined with changes in your financial situation, undoubtedly warrants revisiting and updating your retirement plan. Just because your plan got you to retirement doesn’t mean it will get you through retirement.
Retirement planning, like all financial planning, was never meant to be a onetime exercise. If you’re retired and you haven’t had a retirement income planning checkup lately, it’s probably time to dust off your retirement plan.
Robert Klein, CPA, PFS, CFP®, RICP®, CLTC® is the founder and president of Retirement Income Center in Newport Beach, California. Bob is also the sole proprietor of Robert Klein, CPA. Bob applies his unique background, experience, expertise, and specialization in tax-sensitive retirement income planning strategies to optimize the longevity of his clients’ after-tax retirement income and assets. He does this as an independent financial advisor using customized holistic planning solutions based on each client’s needs and personality.