Task Analysis

My goal for this task analysis is to outline the steps for selecting a financial advisor and completing a financial plan for an individual’s financial situation. I have been doing financial planning for over 15 years and believe that based on my background that I have the ability to direct people in multiple phases of their financial lives through the process of not only selecting the right financial planner but also in understanding the focus points for completing a financial plan based on their current financial position.

Task Outline
I. Selecting the right company
A.
B. C.

Company size
Financial stability Product Focus and Availability

II.

Selecting the right advisor
A. B. C. D. E. F. G. Qualifications Experience Existing Clients Referrals Intentions Credibility Compensation Focus

III.

Determining your financial position
A. B. C. Financial Inventory Peer comparison Desired vs. current

IV.

Establishing your financial Priorities
A. B. C. D. E. Your goals vs. your goals What are you trying to achieve Established patterns Money or lifestyle The time freedom money freedom quandary

V.

Adjusting your plan as your needs change
A. B. Planning is never complete Adjust, adjust, adjust

Task Breakdown
I. Selecting the right company

Company size – Should you choose small or large, industry giant or boutique operation? Size is relative to the needs of the client the more interaction one desires to have with their advisors, the smaller the firm one should choose to work with. Be cautioned however that traditionally some of the largest scandals have come from some of the smallest firms. Smaller firms tend to have less oversight than larger firms. This lack of direct oversight and being held to the rules and regulations that protect consumers

may lead to increased risk of being ripped off. Choose a size that fits your overall interaction needs and still provides a level of security for your financial concerns. Financial stability – This is one of the easiest measures of a financial services company to ascertain. All financial services companies receive several public ratings that allow you to very easily determine their financial strength. There is no hiding from the auditors. That is not to say that a company may not try to paint a picture that is roseier than what it actually is. It is very difficult for any company to cover poor financial stability over an extended period of time. Choose a company that has had strong financial stability for no less than 10 years. Ratings services include standards and poors, Moody’s and etc. A bit of time just doing a Google search of, “ Rate my financial company” will yield a ton of information and is time well spent. Product Focus and Availability – Most companies fall into a product focus of 4 core areas: Banking, Assets, Insurance or Wealth Management. Traditionally their main product focus in any of these core areas will also be that companies core strength. This is not necessarily a bad thing. For instance a grocery store may sell bread but if you want an artisan loaf of sour doe you would be better off at a bakery in San Francisco. This may mean ultimately that you need to work with several different firms in fulfilling your end implementation of your financial plan, but you will be well rewarded to do so.

II.

Selecting the right advisor

Qualifications – Start with the basics here. Act as if you were an employer in a job interview. A lot of financial planners came into the business as a second career. This is a very common recruiting tactic amongst firms. If you can imagine that a senior manager from the automotive industry would make for a very good financial planner not because of his knowledge but more so because of the number of connections he or she has in his current industry. Be wary of designations, CFA, CFP, CLU, CHFC are fairly common, necessary and credible designations to hold. Others such as the RFC, CRRS, CRLTC are not as credible and you would be amazed at how little the individual has accomplished in order to receive the designation. In the end, simply ask the advisor: what their degree was in, what do they do to stay educated and up to date and what did they have to do in order to earn the designations they are flaunting. Experience – Regardless of formal qualifications experience is king. I have known many Ivy League business school grads who paled in comparison to

those who graduated from just a local business school. The reason for this is simple, Universities do not typically teach you how to adjust outside of textbook scenarios. No one can really teach it. Adjustments and knowing what to do in high pressure situations come purely from living through mistakes. Find an advisor that has been around for longer than ten years and you will find an advisor that has been through multiple market adjustments, faced just about every client scenario and has developed the legal and financial resources that will benefit any client they come across. Existing Clients – The number of existing clients is not as nearly as important as the type of clients an advisor is working with. For example if I went to an attorney that had 50 of the top corporations in the world, you may say that he is a great attorney. If I wanted to use that attorney for a divorce I was about to go through, his existing clients would not reflect well for my needs. An average advisor should have no more than about 200 client of which 80% should be financial planning clients. Any more an you are at risk of becoming just another number to that advisor. Referrals – You need to get a minimum of at least three referrals from an advisor. Get the advisor to give you the referrals and then ask for their contact information as well. Be sure to call each referral and ask specific open ended questions like, How did the advisor react when you were faced with a negative or awkward situation or what adjustments has the advisor made when your plan ran off track. Don’t throw the referral any snowballs, you already know that they are going to give positive feedback, find the underlying traits that may not be so positive. Another tactic here is to ask the referral for a referral to another client of the advisor. Regardless of what is found out, look for a pattern of behavior expressed through the referral sources. Compensation Focus – Just like the company and their product focus, you must be extremely mindful of the advisors compensation focus. Knowing the company’s product focus up front will be extremely helpful in determining what the advisor may recommend to you. If it is Insurance based financial services company for example, it is a sure bet that the planner you are talking with is going to recommend a large life or annuity product to you. It’s not that you don’t necessarily need it, it may just not be the most appropriate way to plan for your financial future. Ask the advisor to disclose how they are compensated, whether they sell just their company’s products or others and which ones they get paid to sell more of. Also ask the advisor to give you a breakdown of his or her product mix that they have sold over the past 5 years. Finally just look around the advisors office, chances are if there are plaques all over the wall saying, “ National Life Insurance Sales person of the Year”, you know what he is going to be offering you in your financial plan.

III.

Determining your financial position

Financial Inventory – Start with the basics Determine you own assets, liabilities, income and expenses. You should not need a financial planner to tell you what your net worth is. Prior to ever meeting with an advisor you should be well informed about where you currently stand with regard to your own financial situation. Any good financial advisor will ask you to complete some form of financial inventory prior to even you first meeting with the advisor. This is the only way that they and you will be able to determine whether you have the capacity to reach your financial objectives. It will also give you and the financial planner a good perspective of your perceptions on managing your finances.The financial inventory should cover all six core areas of your financial situations to include: Current financial position, Risk Management, Accumulation Goals, Retirement, Taxes and finally Estate. Peer comparison – Determine how you rank against your peers. Is your college buddy that graduated with you getting ready for an early retirement in Naples, FL or are they getting ready to file bankruptcy. You don’t necessarily need to keep up with the Joneses, you need to surpass them! Desired vs. current – Regardless of how you fair against others, ask yourself if you are where you want to be. This is not as easy as it sounds. In order to do this effectively you must have a bell weather from which you have come from. Write down very specific goals and give yourself specific periods of time in which to achieve those goals. When the time is up asses yourself and make adjustments accordingly. Be honest with the results and determine why you had success or failure in achieving the goal. Because you are not where you want to be does not indicate failure, it may just be less of a success.

IV.

Establishing your financial Priorities

Your goals vs. your goals – It is easy to set goals especially when you have no outside factors influencing those goals. This becomes very difficult when your goals turn into your family goals, or your wife and your goals or your business partner and your goals. Be aware of the goals of others that are involved in your financial situation. Write down your goals and give it to others that are involved and ask them what they would change add or delete. Allowing others to share in your goal planning will make the goals all the more worthwhile to achieve.

What are you trying to achieve – Always ask yourself what you are trying to achieve by reaching a goal. Some goals may be more obvious than others. I want to save for my kids to go to college for example, because I want to give them access to a high quality education that will create opportunity for them. Other may not be as obvious, for example, I want to earn 12% on my portfolio over the next 20 years. What does this goal achieve? It would certainly make you money, but for what. Earmark all goals to a specific purpose. Write down a list of goals, the purpose of the goals and what you would do if you succeeded or failed at the goal. After you have completed this prioritize each goal based on what you would have done based on success or failure. Established patterns – Good or bad patterns of behavior define who we are and how we live. I truly believe there is no such thing as luck. Rich people don’t get rich because they are lucky, they get rich because they figured out how to repeat a pattern of behavior that is conducive to making money. Happy people don’t get happy because they are lucky, they wake up every day and do things that make them happy. Most people truly create their own fate by what they do every day. Simply look at you life and write down all of the negative patterns in your life and all of the positive patterns in your life and commit to doing less of the negative and a lot more of the positive. Keep repeating this process over and over until the majority of patterns in your life are positive. The time freedom money freedom quandary – Do not settle for either, you deserve both and both can be equally achieved. Self evaluation and prioritization are the key to solving this quandary. Time freedom is the result of having to little or too much money. Money freedom is the result of having too little time. In order to achieve both you must dedicate yourself to being disciplined about how you spend both. Establish a plan to make twice as much by doing half as much. A simple trick here is to complete a model week and dedicate yourself to initially achieving 70% of all that is in your model week and keep pushing and refining this model week until you consistently achieve about 90%.

V.

Adjusting your plan as your needs change

Planning is never complete – Planning is a never ending cycle. A plan is something that needs constant attention and work. Dedicate at least one hour every week to planning your financial future. Meet with your financial planner at least once per quarter. Even if there is not much to talk about, you would be amazed at how much new information you will learn from just an hour a week of planning.

Adjust, adjust, adjust – Once your plan is complete and you have the proper review cycle put into place, keep fine tuning the plan. Remember you plan is fluid it is meant to change, it must change. Set short duration in which to measure you success or failure and make small adjustments as you are moving along. Like a sailboat crossing the Atlantic it does not take much to get you to the Bahamas, when you were suppose to end up on the Jersey Shore.