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Who seems to prefer an as-needed hourly approach to financial planning?
§ Middle Americans from all walks of life
§ Self-directed investors who want an occasional second opinion
§ Busy families with competing demands for their time and money
§ Professionals and executives who want to stay in control of their own affairs but to delegate the analytical work
§ Folks with most of their assets tied up in their house and 401(k) who might not meet the minimum requirements of many planning firms and brokerage houses
§ Business owners looking for a low-cost retirement plan and employee education
§ People who prefer not to enter into a long-term commitment
§ Anyone facing a major “life change” such as the death of a spouse or divorce, marriage or the birth of a child, or the major threshold of retirement
Hourly planning is for anyone who wants an evaluation of their finances to make sure they are on track for their goals and not overlooking anything important, without being presented with a particular investment account or insurance policy as the solution.
Here are some examples:
Recently married young urban professionals had each owned a condo. They wondered whether it was better to sell the extra unit and pay off student loans or keep it as an investment. They were in a high tax bracket and had no other passive income. The assignment: evaluate the condo as an investment on its own merits and advise on debt management.
A couple in their early 30’s with four children were earning attractive incomes, but large medical expenses for one of the children had left them with substantial credit card debt and almost no accumulated assets. On the verge of buying large life insurance policies at the urging of a former co-worker, they wondered if this was the best strategy. The assignment: assess life insurance needs and suggest appropriate coverage, develop a debt reduction plan, and project necessary savings for college for the children and eventual retirement for them. This case required sketching out several phases of debt repayment and saving over the years while balancing priorities.
A corporate executive had substantial assets in company retirement plans and even more wealth vested in executive deferred compensation plans. Ten years from retirement and with two college educations still to be funded, he and his wife wondered if they were properly positioned to address these competing goals. The assignment: project the likelihood of achievement of major financial objectives, evaluate the current savings patterns and asset allocation, and make recommendations to optimize their situation given their time horizon and risk tolerance.
A successful young technology company sought an hourly financial planner to complement its “Online 401(k)” with seminars and individual planning for the staff. All six employees were under 35 and had modest assets. At the same time, they all enjoyed solid educations, good salaries, a willingness to save for such goals as buying a first home, marriage, and contributing to their 401(k). The assignment: make sure that the pattern of saving inside and outside of qualified accounts was projected to meet near- and long-term goals.
An 84-year old retired professional was paying $10,000 in annual premiums on nine whole life policies with over $300,000 in accumulated cash value. He wondered if he still needed these policies, whether he should cash them in, how to manage loans he’d taken on some, and whether they were providing a reasonable return. He also sought advice on his investment portfolio. He had moved it all to a money market account in 2002. The assignment: evaluate the overall financial situation to determine the need for life insurance, appropriateness of the current policies, and how assets, more broadly, should be allocated.
In choosing hourly planning, these clients realized:
§ Analysis of a problem is different when there is no sales motivation behind the work.
§ Financial planning can be separated from product selection.
§ It is possible to obtain appropriate products without paying twice: once to the planner and again to the person who helps implement the plan.
§ It is better to know exactly what you are paying for financial advice.
§ The cost of advice should be linked to the time spent working on your case.
§ Objective solutions don’t necessarily cost more.
§ You should decide when and how much planning you need and pay for.
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