1. What is financial planning?
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?
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 approach to wealth management here.
3. What are your advisors' professional credentials?
4. Why should I work with a CFP® professional?
The CERTIFIED FINANCIAL PLANNER™ designation is widely considered the highest in the field of comprehensive financial planning. As of 2014, only about ~20% 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?
6. What are your asset management fees?
The annual fee is divided into quarterly payments, payable on the first business day of each new quarter. The fee is assessed based on your account value as of the last business day of the previous quarter.
7. Where are your clients’ assets custodied/held?
8. Are there any other costs I should know about?
Our custodian Charles Schwab charges a $15 transaction fee for purchases/sales of certain mutual funds. These transaction fees are paid directly to Schwab, not Taylor Hoffman. Effective 10/7/19, Charles Schwab will not charge transaction fees for stock and Exchange Traded Fund (‘ETF’) purchases/sales. Investment products such as mutual funds and ETFs also have their own fees to cover the fund managers’ various expenses (known as the fund’s expense ratio).
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?
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?
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. What happens to my 401k, 403b, or TSP account after I retire?
- Do nothing and 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.
12. What digital tools do you offer clients?
- 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.
13. Can you work remotely?
14. Once my initial financial plan and investment portfolio are in place, what does an ongoing relationship with Taylor Hoffman look like?
Click here to see more ways in which we serve our clients.