Financial planning helps people determine, prioritize and achieve their financial goals. But there’s more to it than just number crunching to see which strategies have the best probability of success. As part of your financial plan, do you have a legacy statement?
A legacy statement (or legacy will) is a document you would leave for your heirs to read. It can provide a perspective on your life; give insight into why you did what you did; share your values and beliefs.Creating a legacy statement can facilitate communications with other family members that might never have taken place. It can have an impact on your family for generations to come; a part of your ongoing family history; either as a written document, a video file, or an audio file.
So what is a financial plan? Actually, it’s a multi step process that helps you clarify and achieve your goals .
1. Establish and define the client-planner relationship.
Your financial planner should clearly explain and document the services to be provided to you and define both of your responsibilities in a Letter of Agreement for Services document. The planner should explain fully how he or she will be paid and by whom. You and the planner should agree on how long the professional relationship should last and on how decisions will be made.
2. Determine your current financial situation, define your financial goals.
The financial planner will ask for information about your financial situation including all relevant documents such as investment statements, retirement plans, tax return, debts and loans, etc. You and your planner should mutually define your short-term, medium-term and long-term personal and financial goals, as well as understand your time frame for results and discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary documents before giving you the advice you need. If a planner recommends a product before getting even this far in your discussions, consider ending the agreement.
3. Analyze and evaluate your current financial status.
Your financial planner will analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
4. Develop and present recommendations and alternatives.
Your financial planner should offer financial planning recommendations that address your goals, based on the information you provide. The planner should review the recommendations with you to help you understand them so that you can make appropriate and informed decisions. The planner should also listen to your concerns and revise the recommendations if appropriate.
5. Implement the plan’s recommendations.
Your Letter of Agreement for Services will indicate how the recommendations will be implemented. The planner may carry out the recommendations or coordinate the whole process with you and other professionals such as attorneys or stockbrokers.
6. Monitor, reevaluate and revise your financial plan.
You and the planner should agree on who will monitor your progress towards your goals. This was agreed on in your Letter of Agreement for Services. If the planner is in charge of the process, he or she should regularly report to you and review your situation and adjust the recommendations, if needed, as your life situation or the economic landscape changes. Financial planning is a dynamic process that doesn’t end when you take a particular action. You should regularly review your financial decisions because changing personal, social, and economic factors may require more frequent assessments. When life events affect your financial needs, the financial plan will provide a framework for adapting to those changes.
But you’ll notice that this generally accepted six-step financial planning process is all about numbers – not about your philosophy, views, and feelings about your life, the decisions you made, your family history, etc. That’s why I add an additional step for the legacy statement.
Look beyond the numbers when putting together your financial and estate plan – it can make all the difference to your family.