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Full Transcript:

Benjamin Haas  00:00

At the Haas Financial Group, we philosophically believe that everyone needs a financial plan and when to start that planning is something we want to talk about today. When would someone or couples be ready? What questions should they be asking? And then how can a financial planner or financial planners, like those at the Haas Financial Group help? So while every client has unique circumstances, they're going to be different. Hence, our advice is a little more personalized and unique. We certainly know that we hear similar questions and the blueprint for starting one's financial plan is absolutely similar from person to person and couple to couple. We'd like to share today how we would help someone start the financial planning process through an example, the Rosen family. Adam, join me in this. Let's share who they are in this example. What are their typical goals? What are their typical pain points? And certainly, then, how can we help them?

Adam Werner  00:56

We would refer to the Rosens as our accumulators.  They are a younger family, but it could be someone who now is starting to have more resources, feel more secure in their earning power, have some excess cash flow beyond just paying the bills, and now they're trying to figure out how do I efficiently allocate these resources to my several goals that are competing for resources all at the same time. Whether that's upgrading the home to something bigger to fit the family or it's saving for kids education, meanwhile, trying to save for my own retirement at some point here in the future. Maybe there's still student loan debt that also feels like it needs to get paid off as a priority. It's all of these competing goals, that we want to help them allocate their resources in an efficient way.

Benjamin Haas  01:45

I think from a pain point standpoint, the one that we hear most often is just not knowing where to start. So sometimes the default is to push off getting certain things done or like you said, if it's a lot of competing goals, it's wanting to make sure that they're taking that best next step and they may not know what they don't know. They're looking for expertise to help with those strategies and ideas because they really do want to efficiently allocate their resources and an understanding that even if, like you said, they're earning a little bit more or they're feeling a little bit more secure. A lot of these goals may be competing so that pain point, again, is wanting to make sure that they're doing the best they can depending on how they may prioritize that. We'd also say that they may be getting fractured advice, as they're starting to do more research or rubbing elbows in different circles, whether that's friends, families, other professionals they associate with. They may not know what is the best next step for themselves so that is the goals, the pain points that are typical when someone comes to us for the first time wanting to start financial planning.

Adam Werner  02:54

It's the prioritization of those specific goals and some people may not know what they should prioritize. That's where we help play that role of helping to frame the conversation on what they should be focusing on and what can get shifted lower on that to do list. Let's shift gears a little bit, then and talk about the process. How do we actually help people through that?

Benjamin Haas  03:19

Well, you kind of alluded to it, we as financial planners have a process because where it really does start before we get into the nuts and bolts of the finances is those conversations of what truly does matter most to them. Also understanding depending on when they grew up or the lessons they would have learned and who they would have learned it from, it's really getting their perspective, how do they think and feel about money? Why is money important to them? It's answers to those questions that are going to help us dig deeper into your key point: how do they prioritize things if resources are finite and competing? We really do need to do a deeper dive into looking at in a perfect world, we can do all this. But if we can't, where are we getting started? I'd also say part of that process on the front end of getting to understand them and what they value is also figuring out how they need to be led. What kind of education they need, are they delegators? Or are they fine to do it on their own? They just need us to hold their hand from time to time. In the Google age are they information gatherers or are they more on the camp of just tell me what to do so I can do it. We need to learn how they best make decisions and that's a big part of our process before then getting into the financials. That's where I'd maybe turn it back to you. Let's talk about the financials, the specific example of how we'd go about gathering data or collaborating with them through technology to make sure that we can then take everything we know about them, their financial situation, and start that planning process.

Adam Werner  04:54

Clearly one job is to make sure that we understand them and where they're coming from. From that personal perspective, we're going to lean on some technology to help gather all of the financial data, beyond the personal, emotional side of things. We use a financial planning tool called eMoney. There is a client portal that we can share with clients, they can log in, and they can start to link outside bank accounts, 401k, credit cards, mortgage, all of those things that can get housed into one, nice, clean spot. It really helps to streamline that initial data gathering process and it's not to say that we strictly only use that technology. If either someone's not comfortable using the tool or just doesn't feel like they're tech savvy enough, we certainly can deal with copies of statements, papers, and unopened mail as that's not a problem. We do like to lean on technology when we can because it does make things a little bit smoother.

Benjamin Haas  05:58

I think this tool, as you said, helps us gather the whole picture, especially because a young accumulator or somebody that's still working, it's more than likely that there are a lot of different moving parts and a bunch of different accounts in different areas. It becomes that one spot where we can really come together and interactively use in a meeting, then be able to make sure that we're up to date with information as life throws us many curveballs and situations change to make sure that we always have that up-to-date data. It's also an interactive tool for us to help them consider new ideas, prioritize goals, and we can interactively do some of that through different scenario planning. We'll talk about that maybe when we get into the goals but let's before we jump into the goals, when we say financial planning, and really have a couple or a person that's really charged up about focusing on their goals and feeling in a good spot, we really think the first step in this process is to make sure that their fundamentals are covered. What do we mean by fundamentals and what would that entail?

Adam Werner  06:58

It's clearly the fun part of thinking about goals in general, right? It's what can I do to upgrade to a bigger house with more yard and the woods, my retirement in the future, saving for kids education, or buying the next toy? Those are all the more fun conversations but before we get to that, we want to make sure that they have all of their building blocks in place. Do they have an adequate cash reserve that covers three to six months of their expenses that God forbid, something happens and they're out of income, that they can still continue to live the life they want to live? It's making sure that they have the right amounts and the right types of insurance again, same situation, something bad happens, are you going to be okay? Then, kind of it's all in the same vein of if something goes awry, do I have things set up? It's estate documents, if you have young children, making sure that you have guardians clearly named for them in your wills. It's simple checkboxes that we wouldn't just want to make sure are covered before you start to move on to allocating additional resources to those bigger goals moving forward.

Benjamin Haas  08:06

I think you said that really well. That is that safety net that then allows us to kind of focus on prioritizing, as they would have told us at this point in the process on where their discretionary cash flow should go. We call it the pecking order of savings and there's a lot that goes into that but that's where we can focus on the individual components of the individual goals. If it's saving more for retirement, where are they saving? Is it into a company employer plan? Is it into their own IRA plan? Should it be Roth? Do they qualify? If they don't, where else can we put it? When it comes to maybe upgrading the house, we do want to think about debt-to-income ratios, other obligations that they may have. We have formulas that we would follow for affordability. When it comes to kids’ college, let's talk about what that really means to them. Is that a portion of it? Is it several years of it? Is it public? Is it private? You know, is the money in the kid's name or is it more just earmarked for them? We'd go through calculations on what's called the expected family contribution so that you can really start to understand what you're going to be obligated to versus what would be your goals. I also think when it comes to paying off something like student loan debt, there's some of those trade-offs of, is it better to save and just allow those loans to continue to pay down slowly over time or is the interest rate really something that's not good for your bigger financial plan and therefore paying it off is really a good idea before you save in other spots. I really think this goal section is where we would really want to do some interactive planning, making sure we prioritize things, but really get them to see the different scenarios. When I say seeing the different scenarios, what would that relationship be or how would that service really look like for them?

Adam Werner  09:54

In that scenario using eMoney, our planning tool, to really look at those different scenarios in real time, interactively, start to click on and off those different scenarios. What if Lily went to Penn State? What if she went to a private university? Seeing those Domino effects in real time, we can actually see how it starts to affect the overall plan moving forward and allows someone to make an informed decision with all of the details in front of them. Beyond that, our services then the role that we play, the initial processes, those meetings on the front end, getting to learn more about them, what they're looking to accomplish with their specific goals, and just helping to prioritize that. Then, we can kind of step in and actually do all of this planning work on the back end, and it's those interactive conversations of here's what we found with the information you provided us. Let's go through these different scenarios, let's find a few that feel like they fit and then actually start to document that specific advice for those specific scenarios and actually build that to do list with who is going to do what and by when, so that there's accountability both on their end and on our end so that once we come up with these tasks, they're going to get done. One of the worst things for us is doing all this work, all this time involved, not just on our end but their end too, and then feeling like we have this to do list and then we check in a little bit down the line and nothing actually got accomplished. That is one of the worst feelings for us as planners to feel like we're not actually impacting their lives so that accountability is huge for us. It's having that document and making sure that they can reference it over time. When we're looking at planning for accumulators or younger individuals, we view this in a much shorter scale; it's three to five years out of that planning runway rather than retirement is typically a much longer time horizon that we're looking to cover. We know that there's going to have to be a adaptability on the fly and adjustments come maybe more frequently at this stage of life.

Benjamin Haas  12:10

Somebody like the Rosen's than let's lay it on the line here, we're talking about a very comprehensive financial planning process that we really want to walk them through. We will often get the question - how are we compensated and we can't be too specific at this point. We'd want to make sure that we would give somebody like the Rosen's a proposal on the front end that was very specific to their case. But what is a comprehensive financial planning fee? What would that look like for somebody like the Rosen's?

Adam Werner  12:38

You just said it, it's once we go through that initial meeting process, we start to dig through some of the data, we'll give a proposal on what we think that's going to cost and that's really just based off of time. How much time do we think we're going to put into the meetings, the analysis, the documentation, all of that, and we'll give a clear, flat fee up front. We don't bill like attorneys and we don't bill like certain CPAs. We're not hitting the button that starts the clock every time we start talking to somebody. We want that fee to be clear and transparent and then if through that process, there are investment accounts or assets that they also want us to manage. That is a separate service and the separate fee. There's no commissions, there's no transaction costs. It is strictly an advisory based fee, an asset management fee that is a percentage of the account moving forward. So that we feel like we're sitting on the same side of the table that if they're making money, so are we. If the markets going down, they're losing money and so are we.

Benjamin Haas  13:37

That is certainly it and you said it well. There are a lot of different pieces of technology out there, we really do feel like asset allocation advice, especially for younger individuals, should be fundamental. If part of the questions of should I work with a financial planner because they'll tell me whether to buy this stock or that stock, we’ll be that rather frank, that's not us. We do believe in asset allocation and where we get those models or where you choose to invest is completely up to you. For those that really do want the comprehensive financial planning, we are happy to make sure that the investments align with that, then we certainly are a good fit. I think in summary we would say that planning is really important for younger accumulators or those that are really getting into a phase of life where they have these competing goals. We would say it's an ongoing relationship. It's not a transaction, especially when there's longer runways, we think it can actually be to our detriment sometimes to think too far down the road. It's good to see what's out on the horizon but we're really looking to work with a young couple like the Rosen's on what are the next three to five years look like acknowledging that especially that phase of life, many things will change. It's going to mean checking in multiple times a year, sharing updates with each other, reviewing parts of the plan to make sure they still fit and are relevant, and of course, making adjustment when life throws us curveballs. For the Rosen's, let’s set a course for those next few years. It's a great next step and then we're going to be there to help them navigate the ever evolving phase of life, whatever that brings for them.