Financial Planning & Investing Glossary of Terms

Financial Planning

When we began writing plans in 1984, Financial Planning was just a fledgling profession. Financial professionals were investment salespeople in stock brokerage, mutual funds, insurance, limited partnerships and annuities. The labor required to analyze entire portfolios, populate them across product categories and apply meaningful asset allocation was excessive. The costs involved in creating projections and monte carlo simulations made true financial planning innaccessible to all but the super wealthy.

Wealth Management

High net worth investors benefit from a holistic approach in which a single advisory firm coordinates the various specialists needed to manage their financial affairs. A wealth manager uses the services of custodians, investment firms, accountants, insurance agents, estate planning attorneys, lenders, and others as needed. The team of professionals, under the direction of a wealth manager, creates advanced solutions that take into account all aspects of a client’s financial situation.

retirement planning at Financial Planning Inc

Retirement Planning, IRA Rollovers, and Qualified Plans

A financial plan addresses major life goals, such as funding retirement, higher education for children, a major asset purchase, relief from unnecessary taxation, and protection from catastrophic loss. Among these goals, the retirement planning goal is often the most formidable. There are various traditional and Roth accounts designed for retirement funding including IRAs, Solo 401(k)s, annuities, and employer plans such as 401(k)s, 403(b)s, SIMPLE plans, pension plans, and deferred compensation plans (457). Common strategies include IRA rollovers, reverse rollovers, Roth IRA conversions, backdoor Roth IRA contributions, and optimal Social Security claiming strategies.

Estate Planning

Basic estate planning involves decision making regarding ownership and heirs. Decisions are formalized in documents such as wills, trusts, and powers of attorney. Common estate plan goals include probate avoidance, reduction of potential estate tax, determining optimal gifting strategies, charitable planning, and communicating end-of-life medical wishes.

Business Planning

A business plan is a written guide that details plans for every aspect of a business including goals, finances, marketing, operations, and personnel. The ideal business planner is a person with detailed knowledge of a business gained with long experience with the business or similar businesses. Often this role is filled with in-house talent such as owners and board members. A wealth manager can play a role, however: dispensing advice regarding the advisability and structuring of a purchase or sale, the business form to be used, and structuring corporate retirement plans. Note that the purchase and management of investment real estate is a business itself, complete with business assets (the real estate), customers (tenants), business income (rent), and expenses (maintenance, repairs, taxes, and management).

A Deep Dive into Financial Planning