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What is Financial Planning?

by | Jul 25, 2023

what is financial planning

Financial planning is at the core of the work we do for our clients. In contrast to pure money managers, who focus solely on investment management, comprehensive financial planning combines elements of all the services that we provide.

Financial planning allows clients to assess their current plan (or lack thereof) and look toward the future to understand where their financial trajectory may put them. Perhaps more importantly, it helps them to understand how different factors both within their control (saving rate, spending, retirement age, investment allocation, etc.) and outside their control (inflation, market performance, tax and estate laws, etc.) may impact their wealth and financial freedom many years down the line.

Financial planning may include financial projections, mathematical models of one’s financial future and the various factors that influence it most heavily. These projections are important for complex financial planning cases, but they can also be helpful for plans that seem relatively simple and straightforward.

For example, if a person is retired and able to live completely off their pension and Social Security income, they’re likely in a secure financial position that could allow their investment assets to grow without any significant withdrawal needs.

Financial projections, however, allow us to quantify the potential impact of risks that may not be on the client’s radar: what if inflation takes hold and pushes spending higher? What if tax policy changes? What if there are major healthcare expenses? What if an early death leads to financial hardship for the surviving spouse?

The questions that financial planning addresses, and maybe more importantly the questions it raises, are critical to understanding one’s financial future. Taking an isolated, one-off approach to investment management, retirement planning, estate planning, tax planning, charitable planning, risk management, or education planning may lead to unintended consequences (delayed retirement, higher taxes, etc.) and leave a lot of stones unturned. Looking at all these key areas together allows for a holistic view of one’s finances, ensuring that major financial decisions appropriately address each relevant topic.

Please be in touch if you’d like to learn more about our process and how financial planning can shed light on your future.