Why Comprehensive Financial Planning Should Include an Annual Review

When I work with a client, I look at comprehensive financial planning as a roadmap to achieving their financial goals. I lay out the client’s financial and retirement goals in one place, the obstacles and needs they will encounter along the way and then a route that my client can follow to get to where they want to be – retirement.

Like with any good road trip, I believe it’s important to review the map on a regular basis – make sure you’re still on the right path; still headed toward the accomplishment of your life goals and objectives, whatever those might be. 

And that is why we at Financial Freedom believe that a once-a-year financial review is important.

An annual review gives you and your financial advisor a chance to evaluate the progress toward the achievement of your life goals and objectives.

Financial Freedom’s annual reviews include discussion and evaluation in two primary areas:

• Comprehensive financial planning
• Investment management, asset allocation and portfolio diversification

Comprehensive Financial Planning

Comprehensive financial planning is designed to take a holistic view of your financial life. This approach combines consideration for both financial and life implications. While each review is client specific, the subject areas for review and discussion may include:

• Financial and non-financial goal setting and the achievement of goals
• Retirement planning
• Estate planning
• Cash flow and savings
• Insurance and risk analysis
• Tax planning and effective tax reduction strategies
• College funding
• Investment (wealth) management and asset allocation
• Family and charitable gifting and legacy planning
• Getting the most from executive compensation and stock options

During our annual review, we discuss quality of work, sense of urgency and progress toward the achievement of your overall life goals that have been established. In addition to the specific areas above, we also like to discuss how we have done on all of the many ongoing issues regarding our analysis and advice on everyday money matters.

Investment Management, Asset Allocation and Portfolio Diversification

Investment (wealth) management is an integral part of the holistic financial planning process. Our objective at Financial Freedom is to help clients successfully accumulate, preserve and manage the wealth necessary to achieve their life goals and objectives. Our ongoing asset management services are focused on providing proactive and ongoing asset allocation and portfolio diversification that is responsive to changing investment opportunities and client circumstances.

At least annually, and more often if needed, we will perform specific analysis and evaluation of portfolio investment returns.

Financial Freedom has been helping families achieve their retirement dreams for more than 30 years, and many of our client relationships span generations. Contact us to see how we can help you too.

Methodology Used in a Portfolio Evaluation

At Financial Freedom, once we have established a client’s updated asset allocation and portfolio diversification, we compare the specific investment returns to an appropriate industry benchmark. Those evaluation benchmarks may include consideration for the S&P 500 results, the Bloomberg Barclays U.S. Aggregate Bond Index results, a relevant international benchmark and other relevant benchmarks that would be appropriate based on the composition of the portfolio.

The Overall Evaluation or Appraisal of Performance

We believe that once Financial Freedom has reviewed with our client the achievements in both comprehensive financial planning and investment management, asset allocation and portfolio diversification, a judgement can be made regarding our fees and the overall value that Financial Freedom adds to each client’s net-worth and life-worth goals and objectives.

This is true for any advisor-client relationship. Monitoring your financial plan is the only way to stay abreast of what is going on and hold an advisor accountable for what you’re paying them to do. Any advisor who does not offer regular reviews should create a red flag for an investor.

The Results

At Financial Freedom, when we do a review, we start with a summary of our client’s portfolio performance for the calendar year. This information comes from year-end statements. We don’t believe that the calculated performance number by itself is particularly meaningful because it needs to be compared to some common relevant industry benchmarks to determine how a client’s portfolio did against the benchmarks.

Our summary of results will include:

• The portfolio value at the beginning of the year
• Additions
• A revised starting value
• The portfolio value at the end of the year
• Adjustments because of withdrawals
• The adjusted portfolio value
• Investment returns (net of transaction costs)
• The potential return utilizing benchmarks
• The difference between the actual return vs. the benchmark return

We calculate the potential return utilizing the benchmarks based on the asset allocation of the portfolio. The benchmarks will be fully defined and include common industry benchmarks.

The Subjective Results

In addition to the objective portfolio, we at Financial Freedom believe that it’s also important to consider the subjective results of providing comprehensive financial planning assistance in each of the areas that impact a client and his or her family. In order to do that, we also summarize the significant financial planning and wealth management projects we completed during the year.

For example, we may have provided:

• Updated Monte Carlo Retirement Income Planning Cash Flow projections and analysis
• Portfolio Data Base Updates in February and August to allow us to analyze equity and fixed income diversification vs. our guidelines and analyze each specific investment to ensure that investment performance is competitive
• Ongoing analysis, communication and recommendations with regard to the unusual marketing volatility that existed
• Stock mutual fund, exchange traded fund and investment idea analysis as required/requested
• Help with managing restricted accounts as a result of security concerns
• Assistance with kids’ accounts and Roth funding
• An annual wealth management performance package presentation
• Client meetings, discussions and other communication as needed
• Focus on the integration of the ongoing financial and investment return considerations with the “softer side” of financial planning (emotions, life dreams and future visions) toward the objective of helping the client achieve his or her life goals and objectives
• Assistance with the funding plan and purchase of a shore home
• Discussions and assistance with a client’s parents regarding estate planning and family gifting
• Assistance with college financial aid and funding strategies
• Analysis regarding the potential conversion of IRA accounts to Roth accounts
• Income tax analysis to consider the benefits of pulling forward potential income prior to IRA required minimum distributions starting at age 70-½

I am happy to talk further regarding our annual performance review process and share a more detailed example during an initial no-obligation meeting. Contact us to schedule a meeting.