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Professional Financial Planning

Professional Financial Planning. Insuring Economic Security. What is Professional Financial Planning?. Simply Put: The process of allowing a person with financial needs to develop and implement a plan to meet those needs. The Financial Planning Process. Gather relevant data and information

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Professional Financial Planning

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  1. Professional Financial Planning Insuring Economic Security PFPCh1.ppt

  2. What is Professional Financial Planning? • Simply Put: • The process of allowing a person with financial needs to develop and implement a plan to meet those needs. PFPCh1.ppt

  3. The Financial Planning Process • Gather relevant data and information • Analyze current position and identify all financial problems • Define and develop financial goals • Develop a strategy to meet those goals • Implement the plans • Regularly review and Update the Plans PFPCh1.ppt

  4. What is an IRA? Why should I save for retirement? I do have Social Security! How much do I need to have for retirement? Why would I want to save on a taxed advantaged basis? How does my employer’s retirement plan fit in? I have an IRA. Should I convert to a Roth IRA? What should I invest in? How does risk come into play? Have I already met life insurance, health insurance, and disability income needs? Will a Roth work Better? The Need for Financial PlanningExample: The Roth IRA PFPCh1.ppt

  5. How Compensated Fee-only- charges an hourly or flat fee Fee-based – fee based on percentage of assets Fee-offset – set fee but offsets fee on sales commission Commission based planners – income generated by sales Professional Designations CFP, Certified Financial Planner – Awarded by CFP Board of Standards ChFC, Chartered Financial Consultant – The American College of Financial Planning PFS, Personal Financial Specialist – American Institute of Certified Public Accountants Financial Planners PFPCh1.ppt

  6. Tripod of Economic Security Social Security Employer Based Benefits Individual Investment and Insurance What are the trends wrt the above? What do you have control over? Threats to Economic Security Premature death of a wage earner and/or supporting spouse Divorce Illness or Accident – medical expenses or lost income Inadequate income during retirement Loss of Job Economic Security PFPCh1.ppt

  7. Milton Friedman Permanent Income Hypothesis Notion of current spending decisions a function of their total lifetime income in mind. Franco Modigliani Life Cycle Hypothesis Rate of consumption in a period is part of a life-long plan. Income in one period is just one input to shaping that plan. Income and Consumption Patterns PFPCh1.ppt

  8. A Financial Life Cycle What is happening during these periods? Income Consumption Early Yrs. Post Retirement Middle Yrs. PFPCh1.ppt

  9. Why Should a Person Use a Financial Planner? • Identifying the need and the solution • Peace of mind • Develop a strategy to achieve financial goals • Manage risk from unfavorable human life contingencies • Increasing wealth • Provide efficiency in transferring assets to the next generation PFPCh1.ppt

  10. What is Required • Proper record keeping • Proper construction of financial statements • Developing reasonable financial goals • Account identification, source of income, how titled, when cash flow is generated • Proper valuation of assets PFPCh1.ppt

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