I talk to a lot of people. One, because I am chatty and two, because I love to talk about the importance of planning – planning for your finances, planning for college, planning for life, and making contingency plans for the “what if’s”. Many times, when sitting with a client for the first time, I never even ask about his or her investments outside of “Are you taking full advantage of your employer’s retirement plan?”. No questions about their investment research, share class, or buy/hold philosophy. And why don’t I ask about investments? Because there is a difference between financial planning and asset management.
“Is there a difference between Financial Planning and Asset Management?” is a question I am asked often. In fact, many people get Financial Planning and Asset Management confused, but I assure you they are quite different. Today I am going to break down the difference for you.
What is financial planning?
Financial planning is more of a picture of your current financial situation, a picture of your financial future based on your goals, and a “plan” of how to get where you want to go. For a better understanding of how we make this happen for you, I’d like to share the seven steps to the financial planning process:
#1 Understanding the client’s personal and financial circumstances.
- Am I a fit for you? Your relationship with your planner is very important. Your comfort level is important because we will most likely be working together throughout the rest of your life.
- Are you a fit for my practice? Our relationship is important to me as well. Making sure that my practice is a good fit comes down to identifying your vision for your future and if my practice can provide you with the proper guidance.
#2 Identifying and selecting short-term and long-term goals for the client and their family.
- We do this through intimate conversations about what makes you tick. What motivates you? What do you want for your future? If you could close your eyes and imagine, where would you be in 1 year, 5 years, or 20 years?
- Do you want to save enough to send your kids to college, retire and live on a yacht, or buy a villa in the South of France and one in Italy? Do you want to leave a large inheritance to your kids or spend it all? What do you dream about?
#3 Analyzing the client’s current course of action and potential for alternative courses of action in the future.
- This is a snapshot of where you are now, where your ability to save is, and what options you have available to you right now.
#4 Develop one or more recommendations to maximize a client’s ability to meet their goals.
- It’s not rocket science. There are three things you can do to meet your goals. 1. Save More, 2. Work Longer, 3. Spend Less. A recommendation that incorporates all three is a recipe for success.
#5 Present recommendations to the client.
- Recommendations should be clear, concise, client-specific, and relatable, avoiding jargon or for defining it in a way that clients understand is imperative to a successful outcome.
#6 Implement the financial plan, get that plan in motion!
- This is where I start to “Mommy” my clients. There are action steps, your homework, and it’s all very manageable. We group our action plans and get a checkbox list going. It is human nature, if you have too much on your plate you might avoid it altogether, so we chunk it down!
#7 Monitor progress and update plan.
- Where are we in our action plan? During our semi-annual check-in, we revisit your goals and where you are in life. Was there a job change, new bonus structure, scholarship for little Jimmy? Life changes and your plan should too. Planning is not an 85-page report neatly placed in a binder. It is a living, breathing document and your financial professional should have technology in place so any given time of day you can grab your trusty laptop, log in, and physically see a complete picture of the progress you are making toward your goals!
What is Asset Management?
The official definition of asset management is the management of someone’s money, stocks, shares, etc.
Asset management is where a financial professional helps you invest your money. They help you determine: Type of account that best suits your plan while reviewing the tax considerations and diversification between asset classes. They review and recommend portfolio managers with strategies in investing that match with your planning recommendations, your risk tolerance, and the length of time you plan to invest.
Together with our research partners, Advisor Intelligence, we manage your assets with core investment beliefs:
- Global Perspective – We invest across a globally diverse set of asset classes in order to uncover the most attractive investment opportunities
- Long-term approach – A long-term approach allows us to take advantage of temporarily mispriced investments and helps ensure that fundamentals, rather than fear or greed, dictate investment decisions.
- Forward Looking Approach – History provides a valuable frame of reference but does not always apply to the current environment. We seek to learn how the world is evolving and incorporate our opinions about the changes into our assessment of risk and investment allocations.
- Discipline and Conviction – We set the bar high in assessing investment opportunities, and we have the discipline and conviction to act on an opportunity we find compelling.
- Innovative Thinking – Our willingness to think outside the box allows us to identify unusually compelling investment opportunities.
At Sephton Financial, our relationship with Advisory Intelligence provides us with unique access to investment talent from outside firms via mutual funds and private investment vehicles, allowing us to incorporate a high level of expertise in a variety of asset classes that would otherwise not be available from a single firm. Our relationship with Advisory Intelligence ensures our clients are benefiting from the best talent available.
At Sephton Financial, my clients get what they need. Financial Planning AND Asset Management are provided at Sephton Financial.
As a CFP, I have a fiduciary responsibility to clients. That means I am required and committed to making recommendations that are in the best interest of my clients. Every one of my clients has a financial plan that is reviewed regularly.
A financial plan is the very first step in our relationship. If I don’t know what is going on in my client’s life or if I don’t understand their goals and decision-making, how am I going to help make recommendations on their investments? Financial planning and Asset management go hand in hand here at Sephton Financial.
Once we have a deep understanding of our client’s goals, we are then able to make recommendations for their future that take them where they want to go. Asset management options play a significant role in the recommendations we provide for clients.
Financial planning, asset management work together. Through the seven steps of financial planning, we get to know you, where you are right now, where you want to be and how you are going to get there. Asset management helps you manage your funds as you seek to fulfill the financial goals within your plan.” Your financial plan is like a roadmap to where you want to go. Asset management is the fuel in the car that takes you where you want to go, even if you take a few detours along the way.
For great resources, guides, and reference tools about the financial profession and to learn more about the integrity of the Certified Financial Planning designation visit the CFP website www.cfp.net.
Think Sephton Financial might be the perfect fit for you? Schedule a discovery session to learn more or email me at [email protected].
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