1. What is financial planning?
Financial planning is the ongoing process of managing one’s financial affairs in an organized and purposeful manner in order to achieve stated objectives.
Surprisingly, a recent study by Charles Schwab found that 75% of Americans do not have a financial plan. The two most common reasons cited were 1) thinking you don’t have enough money to make a plan, and 2) wanting to do a plan, but just not knowing where to start.
Financial planning starts with having a conversation about your goals and objectives. The next step is to take inventory of your financial affairs, i.e. the inputs that will help you achieve these goals. A financial planner will then analyze all the data to gauge where you stand in relation to those goals, and outline what you need to do to get (or stay) on track. These recommendations are then periodically monitored to ensure progress is being made and/or whether it is necessary to adjust course given new circumstances.
It is important to remember that financial planning is a process not a product. The tangible result of a financial plan is typically a written report, but the report is ultimately meaningless if the recommendations are not relevant or actionable.
2. What is wealth management, and how is it different from financial planning?
Wealth management is not to be confused with financial planning.
Financial planning is a “catch-all” term for the process of formalizing financial goals and analyzing what needs to be done to achieve them.
Wealth management, on the other hand, combines financial planning with investment management to create a high-touch, all-encompassing service. Wealth managers act as a central point of contact, or as a “financial quarterback”, for nearly all areas of a client’s financial life.
Learn more about our F-A-M-I-L-Y approach to wealth management here.
3. What are your advisors' professional credentials?
We are proud of our employees’ educational and professional achievements! Designations our advisors have earned include the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation, as well as the Certified Public Accountant (‘CPA’) certification. The CFP® designation is widely considered the most prominent certification as it relates to comprehensive financial planning.
4. Why should I work with a CFP® professional?
Financial professionals have the ability to pursue advanced credentialing in almost every area of the finance industry. From investment and portfolio management, to insurance, estate planning, and even divorce planning – an advisor’s business card can turn into “alphabet soup” given all the designations out there (check out this list from FINRA – there are over 200 different professional designations in the finance industry!).
The CERTIFIED FINANCIAL PLANNER™ designation is widely considered the highest in the field of comprehensive financial planning. As of 2018, only about ~30% of financial advisors held the CFP® certification.
An individual must accomplish the following in order to earn his or her CFP® marks:
- Minimum education level (bachelor’s degree)
- Minimum of three years of relevant work experience in the financial planning industry
- Complete a six-course curriculum covering virtually all major financial planning subject matter
- Pass a six hour exam covering such topics as: CFP Board’s rules & regulations, the financial planning process, retirement planning, investment management, risk & insurance management, tax planning, and estate planning
CFP® certificants must also maintain strict adherence to CFP Board’s ethical standards and also meet ongoing continuing education requirements every two years.
Beyond the above base requirements, CFP® professionals are also required to act as fiduciaries at all times when providing financial advice – something not necessarily required with other financial designations. Be sure to ask your financial professional whether their designation requires them to act as fiduciaries.
Visit letsmakeaplan.org to learn more about the benefits of working with a CFP®.
5. How are you paid?
Taylor Hoffman does not receive commissions from the sale of investment products. As a fee-based fiduciary advisor, we are primarily compensated by clients through an annual asset management fee. The fee is calculated as a tiered percentage of the assets we manage for the client (see FAQ #6 below for more detail). The asset management fee covers both investment management and ongoing financial planning services.
As of July 2019, we also offer limited engagement, standalone financial planning services for new relationships. The cost for a standalone financial planning engagement is $250 per hour, with a minimum fee of $1,000 (subject to change). Prior to the engagement, you and your Taylor Hoffman advisor will mutually agree upon the scope of services to be performed. Standalone financial planning clients are not required to open investment accounts, and Taylor Hoffman does not assume any ongoing investment management responsibilities. Additionally, standalone financial planning clients assume responsibility to independently implement any recommendations resulting from the financial plan.
6. What are your asset management fees?
As of September 2019, the fees we charge for asset management are tiered as follows:
The annual fee is broken into quarterly payments, paid on the first business day of each quarter and calculated based on the account balance as of the last business day of the previous quarter.
7. Where are your clients’ assets custodied/held?
We use Charles Schwab, one of the largest financial institutions in the United States, to hold client assets. This means clients will open an account at Charles Schwab, which we then oversee and manage as your investment advisors. As discussed in FAQ #13 below, clients receive monthly account statements directly from Charles Schwab and have the ability to independently monitor their accounts 24/7 directly from Charles Schwab’s website.
8. Are there any other costs I should know about?
Part of being open, honest, and transparent with clients is making sure there are no “hidden” costs or surprises as to how we are compensated.
Effective 10/7/19, Charles Schwab no longer charges transaction fees for stock and ETF purchases/sales. Note, Schwab does charge a $15 transaction fee for purchases/sales of certain mutual funds. These transaction fees are paid directly to Schwab, not Taylor Hoffman.
Additionally, during the course of our advisor-client relationship we may recommend you seek other professional services, such as paying an attorney to draft/update estate documents or buying more insurance. Clients are responsible for all costs associated with such services/transactions. Taylor Hoffman does not receive compensation from third-party entities for referrals.
9. Do you sell insurance or other financial products?
No, we do not sell insurance or any other financial products for commissions (see FAQ #5). However, this does not mean we ignore how insurance weaves into your overall financial plan. We will analyze your current insurance coverage (life, disability, property, etc.) and give an unbiased opinion as to whether such coverage is sufficient given what we know about you.
If it is determined there are additional insurance needs, we have trusted third party providers whom we can refer. We do not receive compensation from any third party for referrals. If we recommend you purchase more insurance, it is because we truly think it is in your best interest not because we’re going after a commission.
10. What is your general investment philosophy?
Taylor Hoffman does not believe in “one-size-fits-all” investment solutions. Each client is unique and brings to the table their own set of goals, aspirations, and level of comfort with investing. As such, we are not anchored to any one style of investing. After discussing your goals and investment preferences in depth, we will design an investment portfolio made specifically for you. A client’s portfolio may hold a combination of index ETFs, active mutual funds, individual stocks, and individual bonds, depending on their individual circumstances and the overall market environment.
Generally speaking, our strategies tend to favor a combination of individual stocks (selected based on proprietary research methods), individual bonds, and index ETFs. These vehicles have historically tended to be more efficient from a cost and tax perspective. Learn more about our investment strategy here.
Bottom line – our clients are not cookie-cutter people, so we don’t take a cookie-cutter investment approach.
11. Can you do my taxes?
Taylor Hoffman does not prepare or file tax returns on behalf of its clients. We do, however, encourage clients to introduce us to their tax professionals. Doing so allows us to take a “team approach” to your entire wealth management picture. Having all your professional advisors in-sync is crucial to the overall success of your plan!
In terms of how we approach taxes on a day-to-day basis, we use our knowledge of the tax code to implement savvy wealth management strategies in areas such as investing, saving for retirement, and generating cash flow, just to name a few examples. Benjamin Franklin was correct when he said “…nothing in this world nothing can be said to be certain, except death and taxes”, but it is still important to have a working knowledge of tax laws so you can keep more of your hard-earned money!
12. What happens to my 401k after I retire?
Great question! You are not alone in wondering this. These days it is quite common for the bulk of a person’s wealth to be held in a company retirement plan, such as a 401k. Generally, you have three options on what to do with your 401k when you retire:
- Do nothing – leave it where it is. You are generally not required to transfer your 401k elsewhere when you retire. You can leave it intact as-is and take withdrawals from the account to pay for everyday life. Note, however, some 401k plans have limits on how frequently you may take withdrawals. Additionally, your investment options are limited to what is only offered by the plan.
- “Roll” the account to an Individual Retirement Account (‘IRA’) – whenever you retire or leave an employer, you are able to take your retirement account with you by “rolling” it directly into an IRA at the financial institution of your choosing. A direct rollover is not taxed. IRAs are typically more flexible than employer retirement accounts in terms of taking withdrawals and choosing investments, and can also be managed by a financial advisor such as Taylor Hoffman.
- Liquidate the account for cash – when you retire you could also ask your 401k custodian to liquidate the account and send you a check. This is usually not advisable because the entire balance is taxed, leaving you with less money for retirement and subjecting any ongoing capital gains, dividends, and interest to tax each year going forward. Compare this to an IRA, where money grows tax-free and is not taxed until withdrawn from the account.
It is important to compare your options to figure out what works best for you.
13. What digital tools do you offer clients?
Technology is a huge part of our everyday lives. We’re proud to offer the latest digital technologies for our clients. Our current digital offerings are:
- Taylor Hoffman client portal and branded mobile app – our client portal can be accessed via the home page of our website. To download our mobile app, search ‘Taylor Hoffman Wealth Management’ in the iPhone App Store or Google Play. Notable features include allowing users to monitor account balances, view historical performance & transaction activity, and check progress on their financial plan. The app also allows you to add external accounts (i.e. employer 401ks, 529s, savings accounts, etc.) to keep track of all your finances in one place!
- Charles Schwab website and mobile app – clients also have the ability to create an online login directly through Charles Schwab’s website and/or mobile app. Many of our clients sign up for this service so they can receive monthly statements via email.
14. Can you work remotely?
Great question! Just because we call Richmond home doesn’t mean all our clients do, too. Thanks to today’s technology and digital tools, we are conveniently able to serve clients who live both near and far. We serve clients all across the U.S.
15. Once my initial financial plan and investment portfolio are in place, what does an ongoing relationship with Taylor Hoffman look like?
The short answer is that over the course of the advising relationship, we will serve as a trusted confidante and partner in all areas of your financial life. We are a family-oriented firm and so we strive to treat all of our clients like family.
Click here to see more ways in which we serve our clients.
16. This all sounds great - what's the next step?
We are excited to hear that! The first step is to arrange a complimentary in-person or over-the-phone meeting so we can get to know each other better. Call us at (804) 414-0200 or email firstname.lastname@example.org to schedule a meeting today. We look forward to hearing from you!