Chapter 9
Developing a Product:
Writing a Financial Plan
The Process of Financial Planning:
Developing a Financial Plan
Lytton, Grable & Klock
2006
Writing Style & Voice
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Writing style: Consistently used, distinctive,
personal approach to communicating in
writing
Should reflect awareness of the primary
information processing styles:
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Visual
Auditory
Kinesthetic
Information Processing Style
Guidelines
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Visual (eyes)
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Pictures, graphs, charts, and other
visual aids
Auditory (ears)
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Discuss, talk, review
Kinesthetic, experiential (actions)
•
Engage the content through webbased calculators, software
simulations, “to do” list
Writing Style & Voice
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Voice conveys an image of the writer and
the message through
• Author’s point of view
• Author’s choice and use of pronouns
• Author’s choice of active or passive verb
tense
What Voice to Use?
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A knowledgeable expert with technical expertise;
An objective professional serving as a fiduciary;
A trusted confidante and friend;
A counselor, coach, referee, challenger, or
educator;
A business person or service provider with good
customer relationship skills;
A trusted family friend; or
A motivator and “voice of reason” for financial
issues.
Exploring Voice
1. Point of view
• Impersonal – factual message
• Personal – personalized message
2. “Person”
• First person: I, me, my, we
• Second person: you, your
• Third person: she, he, her, him, his, they,
•
them, their
“One” – impersonal and gender neutral
Objective, Subjective &
Possessive Case Usage
Case
Subject or Subjective
 First Person
 Second Person
 Third Person
Object or Objective
 First Person
 Second Person
 Third Person
Possessive
 First Person
 Second Person
 Third Person
Singular Usage
Plural Usage
I
You
She or He
We
You
They
Me
You
Her or Him
Us
You
Them
My
Your
Her or His
Our
Your
Their
Exploring Voice
(cont’d)
3. Verb form
• Active verb tense:
Shorter, direct more
forceful and personal sentences.
•
“Yogini purchased a $1M term policy.”
• Passive verb tense: More impersonal,
detached sentences.
•
“A $1M term policy was purchased by Yogini.”
As a Trusted Coach & Educator
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To be more objective:
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To be more informal, but personal:
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Use a consistent voice, but don’t jolt the
client between educator and coach
• Plural possessive and use of “one”
• More passive sentences
• Pronouns and client’s first name
• More active sentences
Plan Style & Format
Remember,
anything that can assist a client in accessing
and interpreting a plan will enhance the
probability that a client will buy into the ideas
presented and, most importantly, ultimately
implement the recommendations.
Rules for the Plan
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Functional format with easy to read fonts, that
are repeated throughout the plan
Consistency in the formatting, writing style, and
voice from one plan section to another
Format to maximize the mix and impact between
color and black and white
Use a plan cover that sends the right message
Check and recheck for errors, omissions, and
grammar
Rules for the Plan
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(cont’d)
Each core content section within a
comprehensive plan should be comprehensive
Write well, but clearly – and provide resources
Make sure the plan follows the process
Use a combination of pre-scripted and client
specific information – set in the current context
Document, document, document!
A Well-Written Financial Plan Is:
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Integrative
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Realistic
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Synergistic
A Well-Written Financial Plan Is:
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Integrative: The sections link together, as do the
recommendations
Realistic: Goals, analysis, and
recommendations match the client –including
assumptions and marketplace. Can be
implemented with or without the advisor.
Synergistic: Comprehensive financial life
roadmap – the “whole is worth more than the
sum of the parts”
Components of a Plan
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Plans vary with the business
model of the advisor and the
services, products delivered
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Sequencing may vary, but all
good plans include these “bones”
I. The Cover Page
Should include:
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The firm’s name and address
The planner’s name
A brief firm or planner vision statement
A phrase such as “A Comprehensive Financial Plan
Prepared for [Client’s Name]”
The term “confidential” clearly indicated
Any applicable disclosure statements as required
The date of the plan
II. Letter to the Client
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Informational message that varies with the
business model of the advisor, the
services/products delivered, and the client
relationship. Letter may include some or all
of the following:
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A personal, friendly overview
An outline for the future relationship
Statement of compliance and legal disclosures
Signed and dated by the advisor
Personal, Friendly Overview
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Reintroduce the planner/firm to the client
Restatement of commitment to goal
accomplishment
Review of the planning process
Review of the planner/firm’s core values
Statement of commitment to an on-going client
relationship
Outline For The Future Relationship
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Timing of periodic reviews;
Expected client preparation for review meetings
(e.g., updating client information by mail or online);
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Provision of quarterly reports or other client
updates;
Availability of the planner or other staff for client
assistance;
Mailing of newsletters; or
Access to the firm’s other services
Statement Of Compliance &
Legal Disclosures*
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Confidentiality of client data – privacy statement
Confidentiality of planning relationship
Investment performance disclaimers
Disclaimers for confirming advice, working with
other professionals
*May be on a separate disclaimers page in the
Introductory Materials Section
III. Copy of the Original Client
Engagement Letter
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Contractual letter signed by the client outlining
responsibilities of the advisor and client
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If signed earlier, then a copy rather than another
original may be included in the plan
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May appear at the end of the plan as
confirmation for the advisor to proceed with
implementation
Messages in the
Engagement Letter
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Explain the scope of the engagement and
expectations for client and advisor:
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Plan only, and perhaps an overview of components or
scope of review
If implementation, then how, by whom, and when
Retainer or concierge services
Messages in the
Engagement Letter
(cont’d)
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Disclaimers
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Plan, analysis limited to client provided
information
• Investment disclaimers
• Tax and other legal services disclaimers
IV. Table of Contents
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A navigational tool that explains:
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Plan organization and contents
Availability of supporting documents (analytical or
educational)
Page numbers
Color coding (page numbers, tabs, etc.) if used,
should improve, not hinder the navigation
V. Other Introductory Materials
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Designed to foster client confidence, planner
credibility and client commitment. May have
been in other marketing materials, so may be
omitted or summarized in the plan.
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Mission/vision statement
Statement of principles or core values
Ethics statement
Privacy statement
Investment policy statement
Mission/Vision Statement
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Mission: Focuses on market segment and
the strengths, weaknesses of the firm to
serve that target market
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Vision: More global statement of the firm’s
aspirations and the principles and values
that govern the firm’s operation
Mission/Vision Should “Speak”
to the Firm’s Potential Clients
We strive to bring our clients financial peace of mind.
Our goal is to identify optimal recommendations to
help guide our clients in reaching their financial goals
and objectives. We do this by building trusting, longlasting client relationships that always focus on the
best interests of our client—not our own. It is our
goal to give the best guidance and advice to help our
clients consistently make sound financial decisions
in pursuit of their hopes and dreams.
Statement Of Principles
Or Core Values
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What does this planner/firm stand for?
• Customer service
• Teamwork
• Professional expertise
We expect a high level of customer service and
satisfaction from our staff.
We believe that planning through teamwork provides
better service.
Ethics Statement
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CFP Board of Standards, Inc. Code of Ethics
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Integrity
Competence
Objectivity
Fairness
Confidentiality
Diligence
Professionalism
Professional association code
Privacy Statement
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Likely provided with initial client information, may
be included in the plan
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May be required by law – at initiation of the
business relationship and with annual updates
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States policies on how data will be used, shared
with other professionals with disclosure and
consent, and confidentiality maintained
Investment Policy Statement
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Signed by planner and client to establish
guidelines for the appropriate and mutually
agreed upon management of the client’s
funds
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Provides a transparent set of investment
policy parameters that provide discipline
for the planner and the client
VI. Client Profile, Summary of
Goals, Assumptions
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Establishes the foundation, or
grounding, for the plan development
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Sets the parameters, or constraints, on
the planning process
• Resources
• Goals
• Assumptions
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One last opportunity for client validation
Client Profile
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Full demographic profile, and final check
for accuracy
• Names, address
• Employment
• Ages, health status
• Other pertinent information
Summary of Goals
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Clearly defined and perhaps ranked,
mutually agreed upon goals
• Specific
• Measurable
• Attainable
• Realistic
• Trackable
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Guide the plan and the implementation
Assumptions
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Summary of all assumptions, although they may
be repeated in respective sections.
• Factual information about the household or
other planning issues
• Assumed information about the
household or other planning issues
VII. Executive Summary or
Observations & Recommendations
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Purpose of the Plan
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Key goals and objectives
Methods Used to Analyze the Situation
•
Assumptions used
Results of the Analysis
Recommendation(s)
•
Projected financial outcomes
Implementation Strategies for Action
Timeline for Implementation
How Much of the Story to Tell?
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May be general or detailed – which impacts the
remainder of the plan
May be organized by goals or core content
planning areas
Keep a balance between the summary and the
core content planning sections
“Title” of the summary and the approach
should reflect the voice of the firm and the
clients served
VIII. Individual Core Content
Planning Sections
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Each core content planning section should be
consistently similar –establishes a “routine” for
the client and the firm
Assume the client has limited knowledge,
unless confirmed otherwise
Educate and motivate – don’t overwhelm!
Use text and graphics + appendices
VIII. Core Content Planning
Sections (cont’d)
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Cash Flow Analysis
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Net Worth Analysis
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Tax Analysis
VIII. Core Content Planning
Sections (cont’d)
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Insurance/Risk Management Analysis
• Life insurance
• Health and disability insurance
• Long term care insurance
• Property and liability insurance
• Umbrella insurance
• Other insurance needs
VIII. Core Content Planning
Sections (cont’d)
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Investment Analysis
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Retirement Analysis
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Estate Planning
Analysis
VIII. Core Content Planning
Sections (cont’d)
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Specialized Analyses
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Educational funding
Planning for special needs
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Refinancing scenarios
Saving for special objectives
• Charitable giving
• Trust management
• Long-term care planning
• Family business continuation
Core Content Planning Section:
An Outline
I. Overview of core content area and definitions
II. Restatement of planner-client assumptions
III. Review of the analysis of client’s current
situation
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Observations about the current situation
Assessment of the planning needs
Assessment of the current planning efforts
Core Content Planning Section:
An Outline (cont’d)
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IV. State financial planning
recommendations that are
actionable and answer:
• Who?
• What?
• When?
• Where?
• Why?
• How?
• How much?
Example Recommendation
In order to reach your goal of accumulating an
emergency fund equal to 4 months of current
living expenses in your XYZ money market
account, you need to automatically transfer, via
bank draft, $150 from your checking account for
the next 15 months. Cecillia, please initiate the
request by calling XYZ, Inc. within the next 30
days.
Example Recommendation
In order to reach your goal of accumulating an
emergency fund equal to 4 months of current
living expenses in your XYZ money market
account, you need to automatically transfer, via
bank draft, $150 from your checking account for
the next 15 months. Cecillia, please initiate the
request by calling XYZ, Inc. within the next 30
days.
Core Content Planning Section:
An Outline (cont’d)
V. Compare projected recommendation
outcome(s) to current situation
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Document the method used
Apply mutually agreed upon assumptions
Conduct a fair comparison – legitimate and
conservative
VI. Suggest alternative recommendations and
outcome(s) where appropriate
•
Use the options to inform and expand the options,
but don’t overwhelm
Graphic Comparison of Projected
Outcomes
Thousands
College Funding Projections
$100
$80
$60
$40
$20
$0
($20) 10.5
($40)
12.5
14.5
16.5
18.5
20
Child's Age
College Tuition Expense
Proposed Account Balance Projection
Original Account Balance Projection
22
Core Content Planning Section:
An Outline (cont’d)
VII. Provide implementation and monitoring plan
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Explain the source of the cash flow or assets to be
used to fund the recommendation
Give specific implementation advice and establish
responsibility
Tables, “to do” lists, or a timeline can be helpful to
inform and motivate the client
IX. Implementation & Monitoring
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Summarizes, integrates and prioritizes all of the
strategies and actions required to implement the
plan
May include narrative, tables, charts, graphs, or
“to do” lists
Goals of this section:
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To rank and fund the recommendations
To ensure that action occurs
Example Implementation Table
What
Contribute the
$4,000 annual
maximum to a
Roth IRA.
Who
When
How
Strategy
Doug and
Nancy
Before the
end of
2006
Contact your broker to
open the Roth IRA
accounts, or our firm
will be glad to assist
with opening these
accounts. Funding will
come from both your
excess discretionary
cash flow and money in
your money market
account.
Saving for
retirement by using
a tax-advantaged
investment account
that offers the added
benefit of tax- and
penalty-free
withdrawals under
certain
circumstances.
Effect on
Annual
DCF
Post-tax-$8,000
Net Effect of Retirement Planning Recommendations
-$9,200
Discretionary Cash Flow (DCF) After Implementing Recommendations
$7,345
Implementation & Monitoring
Sets the Stage For….
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Implement the plan in a timely manner
Guide future monitoring meetings
Guide future progress assessments
Guide future needed changes in response to
changes in the client’s situation, goals, or the
economic/legal marketplace
X. Client Acceptance Letter or
Client Engagement Letter
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Depending on the business model, the client
engagement letter may
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Formalize the business agreement
May be included as a record of the earlier
transaction
May be used alone or in conjunction with a client
acceptance letter
May appear only at the beginning of the plan
The Client Acceptance Letter
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Informational or contractual message that
varies with the business model of the advisor,
the services/products delivered, and the client
relationship
Sometimes called “acknowledgement of
delivery”
Signed and dated by the client
Reiterates that the plan reflects the
information provided by the client
XI. Appendices
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Supplements to educate the client
• Supporting calculations, spreadsheets, analysis
• Informs the client of the mathematical framework
• Increases transparency of the analysis
• Protects against claims of unsuitability, errors, or
omissions if the analysis matches the assumptions
• Educational articles
• Glossary of key terms (optional)
• Document – with page references, footnotes, etc.
To Write Good Plans…
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Practice the craft of
planning and writing –
get client feedback.
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Check and
recheck….
•
Use Figure 9.5
Financial Plan Review
Checklist
Summary
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Good plans
• capture the interest, trust, respect, and
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commitment of the client.
integrate the client with a realistic plan for
financial well-being.
provide a synergistic financial road map to the
future.
standardize the internal processes for working
with clients.