Download An Evolved Approach to Financial Planning

An Evolved Approach to
Financial Planning
April 2015
By John Kailunas II, LUTCF, FSS
th
2687 44 St SE
Kentwood, MI 49512
616-224-2204
www.regalfin.com
Contents
The Problem… Uncertainty. ......... 3
Solution .......................................... 3
Summary ........................................ 4
Regal Investment Advisors .......... 5
The Problem… Uncertainty.
Baby Boomers are changing as a result of
the ‘great recession.’ They lack confidence
and are turning to professional help for their
financial goals.
Solution
If financial advisors want to alleviate this
widespread fear and confusion, they need
an evolved financial planning approach.
• Independence
• Holistic Approach
• Diversification
• Personal Responsibility
• Understand Your Clients
Summary
Investors are looking for personalized and
independent financial advice, providing an
opportunity for the truly independent
financial advisor.
Regal Investment Advisors
Regal Investment Advisors is an industry
leader providing innovated investment
solutions through ongoing partnerships with
insurance and financial professionals.
The Problem… Uncertainty.
The Baby Boomer generation took a devastating hit during the ‘great recession,’ causing
retirement accounts, personal savings, and real estate holdings to suffer dramatic
losses. There were virtually no asset classes that escaped the wrath of the market
collapse, although some were more affected than others. Before this collapse, many
investors held the ‘do-it-yourself’ mindset. Today, uncertainty and a general lack of
confidence are turning investors to professional help for clarity and direction.
Some investors tried to obtain advice from the numerous discount trading platforms and
web-based programs that offer tools and resources to passive investors. Although these
vendors can offer some assistance, they don’t provide human interaction or consider
each client’s unique situation. Therefore, many have been given inaccurate advice
leading to poorly crafted financial plans and significant financial loss. Many investors are
now hesitant to take this type of financial advice because of these considerable
limitations.
In addition, there is a lack of trust felt by the average investor. Americans are frustrated
by the market as well as the actions of banks, insurance companies, and investment
firms. Many of these large institutions have tarnished their reputations, which questions
their integrity. Furthermore, the proprietary sales forces of some of these companies
speak to the consumer, trying to force sales of products and services rather than
working alongside the client in achieving their specific financial goals.
Solution
If financial advisors want to alleviate this widespread fear and confusion, they need an
evolved financial planning approach. The following characteristics should be integrated
into the financial advice provided to each client.
Independence
This evolved approach must be truly independent, with each client’s best interests
paramount. A variety of tools and services are needed to complete the retirement plans
of the Baby Boomer generation. No single company can provide all of the products and
resources needed to achieve the financial objectives of every investor. This
independent approach enables the advisor to more effectively assess the financial
markets and to use all the tools at hand to serve their clients.
Holistic Approach
Professional advisors need to integrate insurance and investment solutions for their
clients. These two distinct disciplines each offer tremendous advantages on their
approach to retirement planning. The guarantees of insurance-based products can
provide security and peace of mind to individuals approaching retirement. However,
traditional investment products can provide significant flexibility, growth potential, and
diversification. The combination of these solutions can provide a retirement plan that
more accurately considers the unique challenges of each investor.
Diversification
Portfolio diversification involves allocating assets across numerous asset classes with
differing risk and return characteristics. Historically, a diversified approach has provided
investors with increased risk-adjusted returns and a more consistent path to their
financial goals. However, the recent extreme markets have caused some investors to
question the benefits of diversification. Various portfolio managers claim to have
protected against this downturn and imply their strategies provide all gains with no
losses. Unfortunately, there are no riskless investment strategies that provide returns
substantially higher than the risk-free rate of return treasury bills. Why? Everyone
would invest in these strategies which would drive the returns down to the risk-free rate
of return. This is why diversification is so critical. No one knows which asset classes will
provide gains, so why would you put all of your money into such a limited group of
investments? Prudent investment strategies maintain extensive diversification that is
consistent with each client’s unique characteristics.
Personal Responsibility
Personal responsibility, accountability, and discipline are critical for financial success.
The economic downturn has served as a wake-up call for most investors. The Baby
Boomer generation is looking to start securing their retirement savings. The idea of
another market downturn in which the retirement finish line is in sight is distressing. They
do not have the strength of heart or desire to go through another portfolio recovery
period. Those who were once passive or those who ignored the future now have a
sense of urgency and desire to save for the future, therefore securing their financial
independence.
Understand Your Clients
The retirement planning process is composed of three primary phases: accumulation,
preservation, and distribution. Obviously, the appropriate financial plan and investment
strategy varies depending on the phase of each investor. The major reason for these
differences is time horizon and its impact on risk tolerance. Consider an investor in the
accumulation phase versus an investor in the distribution phase. The timeline to make
decisions and react to market conditions is greatly compacted. There are no magic
solutions to rebuild a portfolio after significant market erosion if the investor has an
extremely limited time horizon. Independent financial professionals must completely
understand each client, considering the retirement planning process and how it impacts
investment strategy. Furthermore, ongoing reviews are needed to ensure each financial
plan adapts to changing market conditions and the client’s situation.
Summary
The recent and significant market volatility has caused many investors to question their
financial planning approach as well as their entire investment philosophy. Investors are
fearful and confused, looking for personalized and independent financial advice. This
challenging market environment provides an opportunity for the truly independent
financial advisor. The foundation of the client advisor relationship is trust, developed
through deep understanding and personal interaction. This relationship helps the advisor
understand the core issues of each client, including their personal goals and financial
objectives. This leads to a customized financial plan that accurately addresses the
unique needs, goals, and objectives of each client.
Regal Investment Advisors
Regal Investment Advisors developed the Regalfolios and the Boutique Manager
Platform to provide discretionary portfolio management to individual client families and
institutional investors through ongoing partnerships with insurance and financial
professionals. The firm was created by forward thinking individuals that have deep roots
in the insurance industry and also specialize in investment management. This unique
history and understanding effectively positions the firm to benefit the American public
when planning for retirement or other future investment goals.
Investment advisory services offered through Regal Investment Advisors, a SEC registered investment advisor. Investing involves risk including the potential loss
of principal. No investment strategy, such as asset allocation or diversification, can guarantee a profit or protect against loss in periods of declining values. Please
note that rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created
that may increase your tax liability. Rebalancing a portfolio cannot assure a profit or protect against a loss in any given market environment.