Assessing the Value of a Fee-Only Financial Planner
Choosing to work with a financial planner is a decision that has the power to transform your financial wellbeing. But it’s not always an easy road to get there. Entrusting your wealth and financial future to someone is a big deal, and it’s essential to assess the real value that person brings to the table. This is especially true in a world where AI robo-advisors have many convinced that they no longer need a highly skilled financial professional.
As fee-only financial planners, the team at JLFranklin Wealth Planning takes a proactive approach to helping our clients create and protect their wealth. Advisor compensation models differ, and the words “fee-only” indicate no commissions are earned on anything you purchase or invest in; moreover, fee-only advisors are fiduciaries, legally and duty-bound to put our clients’ interests first. “Fee-based” firms receive some product commissions. This similarity in phrasing can be confusing, but the two types of firms couldn’t be more different.
Aside from our fiduciary role, below are a few other ways we add value to our clients’ financial lives.
Goal Setting
Goal setting is the foundation of our comprehensive process and it’s the first place where we add value. We help clients identify, clarify, and prioritize their financial goals, often for the very first time. Setting clear and measurable goals provides a sense of direction and keeps clients focused and motivated to stay on track, especially during challenging times.
We start by outlining each client’s goals, interests, and core values to home in on exactly what they hope to achieve with their wealth. Many of our clients see money as a tool to accomplish what’s truly important—enjoying life, providing security for their family, and giving back to causes they care about. We quantify how to reach these goals by creating a comprehensive plan.
Financial Assessment
Once we have a clear idea of what you would like to achieve, we can get to work understanding your current financial picture. Every year we evaluate our clients’ financial situation to assess strengths, weaknesses, and areas for improvement. We are always looking for opportunities to create wealth.
Our comprehensive evaluation process provides a detailed review of all aspects of your financial life, including:
- Net worth
- Cash flow
- Equity compensation planning
- Proactive tax planning and tax loss harvesting
- Asset protection via insurance coverage
- Retirement planning
- Education planning
- Estate planning
- Charitable giving
- Debt management
- Asset allocation and diversification
This deep understanding of where you are now allows us to provide personalized and detailed recommendations for how to achieve your goals.
Asset Allocation & Diversification
Though it isn’t our sole focus, investment management does play a significant role in the success of a long-term financial plan. We think of your financial plan as a car, and the investment decisions are the engine that gets you to where you want to be. Choices like saving diligently and aggressive tax loss harvesting will keep the car running, while excess withdrawals and tax-inefficient trades will depreciate your car more quickly.
Based on the goals identified and the results of your financial assessment, we develop a globally diversified investment strategy tailored to your unique objectives and risk profile. We analyze the assets that you currently own to determine the optimal mix of investments for your needs based on factors like risk-return tradeoffs, cost, and diversification.
Many of our clients receive equity compensation like stock options and restricted stock units, which can complicate the asset allocation equation when company stock becomes a large percentage of net worth. We specialize in equity compensation planning, and it is analyzed as part of our deep financial planning work.
Investment Monitoring & Trading
Managing an investment portfolio is not a one-and-done task. It requires continuous monitoring, rebalancing, and reevaluation of your goals, life circumstances, and macro factors such as the economy and tax law. We combine our detailed knowledge of each client with our detailed knowledge of long-term market fundamentals, economic conditions, and regulatory updates to ensure your portfolio remains aligned with your financial objectives. We also monitor for wealth-generating opportunities, including:
- Higher returns on cash
- Tax loss harvesting
- Open trading windows for equity comp
- Enrollment dates and requirements for 10b5-1 plans
Perhaps the biggest area where we add value is helping our clients stick to their investment plan even in the face of volatile markets or uncertainty. It’s often hard to keep a level head when your portfolio value fluctuates, but staying invested over the long term has proven to be a wealth-generating strategy.
Risk Management
When speaking of risk, many people think of the ups and downs of the stock market. But risk management involves much more than just managing your investment portfolio. We also address other material risks through a detailed analysis of your life, disability, property, and liability insurance.
Optimizing your coverage helps safeguard your financial well-being. While insurance premiums are often viewed as a hindrance to wealth, the value gained from protecting your family and your assets from financial catastrophe is priceless. As your assets increase, it becomes even more prudent to stay up to date with your insurance, as one accident or lawsuit can derail what you’ve worked so hard to accumulate.
As fee-only financial planners we don’t sell insurance products, but we have a network of brokers who can help you.
Equity Compensation Planning
We help clients maximize the value of company stock awards, including:
- Stock options
- Restricted stock units (RSUs, or GSUs as they are called by Googlers)
- Employee stock purchase plans (ESPPs)
When equity comp is part of a client’s income, several layers of analysis are conducted to ensure that cash flow needs and diversification standards are met, while taxes are minimized and surprises are avoided.
Take a look at the example below:
Imagine you have a $3 million globally diversified investment portfolio that includes your 401(k), IRA, and taxable investment accounts. A person with a long time horizon and a high tolerance for risk could afford to invest in a portfolio holding mostly stocks.
Now imagine that you have $3 million invested, but $1 million is tied up in employer stock instead. In this scenario, you have the same amount invested, but your level of risk has skyrocketed. Not only is your ongoing income tied to your employer, but one-third of your total savings are, too! What would happen if your company experienced financial instability or a change in control? What would it do to your financial life if you were laid off at the same time your company stock took a nosedive? It’s a very real possibility that could wipe out a large portion of your accumulated wealth.
This is the kind of situation we help our clients navigate on a daily basis. The value of working with a fee-only financial planner who specializes in equity compensation is knowing that these worst-case scenarios are accounted for, and your plan is designed to weather the storm.
Tax Planning
While we do not prepare tax returns, tax planning is part of every recommendation. Our founder and CEO, Joyce Franklin, holds a CPA license, having prepared tax returns for over two decades, and our team has extensive knowledge of tax law. Our planning work has two main components, both of which add value to your overall financial plan:
Tax Loss Harvesting
First, we utilize tax loss harvesting whenever possible. For clients who have accumulated a lot of company stock , there is the potential for large unrealized capital gains. Tax loss harvesting involves selling investments at a loss, maintaining the asset allocation, and using the loss to offset capital gains on the sale of company stock or gains from normal portfolio activity. If losses exceed total gains, up to $3,000 per year can be used to reduce your salary.
Asset Location Strategy
We utilize an asset location strategy to maintain tax-efficiency across all of your managed investment accounts.
By holding tax-inefficient assets (like income-producing bonds, or stocks that pay large dividends) in tax-efficient vehicles (like a 401k), we can defer taxes until retirement when you are likely to be in a lower tax bracket. Conversely, we hold tax-efficient assets (like municipal bonds) in tax-inefficient accounts (like taxable brokerage accounts) to ensure you don’t miss out on the built-in tax savings.
We prepare tax projections to understand how your wealth management strategy will impact your tax liability. We approach each planning recommendation through the lens of tax efficiency.
Education Planning
Education planning is a major component of our value-add as financial planners. The cost of higher education is ever rising, and it can be difficult and time-consuming to navigate the college financing process on your own.
Without proactive planning, many high-earning individuals find that they are forced to pay with current cash flow for the level of education they wish to provide their children. Those in higher tax brackets are phased out of most forms of financial aid except merit-based scholarships and student loans. Paying out-of-pocket and utilizing student loans are wealth-limiting options that can be avoided with proper planning. This is where we come in.
Each year, we research the costs of higher education and create detailed projections for our clients based on variables, including desired level of education, anticipated costs of tuition and room and board, inflation rate, and time horizon until funds are needed. Based on this analysis, we create customized education savings plans and update them each year. We often recommend 529 plans as a tax-efficient way to save for the cost of higher education. Through our proactive process, we can ensure that financial resources are available when needed, minimizing the burden of student loans and supporting our clients’ pursuit of educational goals.
Estate Planning
Often forgotten or intentionally avoided, proper estate planning is a critical part of preserving and protecting your wealth. Not only does it ensure your long-term wishes are carried out, but it also creates a smooth transfer of wealth to future generations while minimizing taxes.
We are not licensed estate attorneys, but we do keep an eye out for potential estate planning pitfalls like improper titling of accounts, lack of a will or other estate planning vehicle, and unintended consequences of giving large assets. We have experienced estate planning professionals in our network who we consult with to help our clients.
Achieving Financial Independence
With our comprehensive process, we go beyond traditional retirement planning. We focus on financial independence which entails having the resources and freedom to live life on your terms, irrespective of age.
Achieving financial independence is a top priority for many of our clients. They are typically high-earning professionals who receive generous equity compensation packages. Yet even with all of that, financial independence is not as straightforward as it sounds.
Through understanding where our clients are and where they want to go, we prepare detailed financial projections and offer creative solutions for developing a personalized strategy that aligns their income, savings, and investments to generate long-term sustainable wealth. With our process, many of our clients are able to achieve financial independence much sooner than they originally anticipated.
Charitable Giving
Charitable giving is both an act of generosity and an opportunity to align your values with your financial goals. Through tax-efficient strategies like contributing to a donor-advised fund, we help clients who are charitably inclined design a philanthropic plan that maximizes the positive impact of their charitable contributions. With our help, you can get the psychological benefits of charitable giving well before you’ve achieved financial independence. It can be an ongoing component of your overall financial plan, allowing you to give back and make a difference in the causes you care about most.
Financial Education
Financial education is an important part of our role as financial planners. Through our annual reviews, quarterly newsletters, blog library, and responsive communications, we keep our clients informed about investment concepts, financial markets, current financial events, and the impact of various decisions on financial wellbeing. We provide guidance and thorough explanations that help clients make informed decisions about generating and protecting their wealth.
The Power of Fee-Only
When it comes to managing your finances and planning for the future, we hold ourselves to a higher standard. As fiduciary-bound professionals, we are legally obligated to act in your best interest. We believe the best way to do this is through the fee-only compensation model. Unlike brokers who earn commissions from product sales, we are only compensated by our clients, not from companies whose products we recommend. The standard of care differs by type of financial advisor, so be sure you know who you’re working with. You can feel comfortable as a JLFranklin Wealth Planning client that we receive no third-party kickbacks or incentives to push products.
The value of fee-only financial planning is unbiased advice; when you work with the JLFranklin team, you get creative wealth management solutions and proactive tax mitigation, so you can stop wondering about your financial future and start living the life of your dreams. If you’d like to learn more about our services and approach, or you’re not sure you’re being well served by your current advisor, take the next step toward financial freedom by scheduling a consultation today.
