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At the Halfway Point: NAMB President Glances Back and Looks Forward

National Mortgage Professional
Jan 15, 2003

What financial planning is notDonald F. Hadleyfinancial planning, definition, precautions Total financial planning is almost always done on a fee basis. At my company, a few clients that we work with only want insurance (life, disability and long-term care) or investments (stocks, bonds, mutual funds, institutional managers and private money managers). The remainder usually need only products, or do not understand financial planning. Financial planning is not: *Buying life insurance; *Investing money in a hot stock or investment; *Getting your taxes done; *Writing a will or another legal document; *Setting up an LLC or corporation; *Calculating how much you need for retirement; or *Doing an asset allocation. While all of these items may be important parts of your financial situation, being concerned only with such things is like building a house and only worrying about the bathroom fixtures. There is much more at stake: What else is important? How large a home you want? Will you want any future construction? What is the layout of each room? Is there room for a garden? What about a walk-out second story deck off your bedroom? Where will the sun be in the morning? Where will it be in the afternoon? Is there room for a jacuzzi? Like building a house, financial planning takes thought, time and energy that can turn a house into a comfortable home. Financial planning, according to the Financial Planning Association's Certified Financial Planner Guide is defined as the process of determining how individuals can meet their goals through the proper management of financial resources. As a firm, we define it as, "helping clients, friends and family to build and protect wealth to accomplish their dreams and to better care for their important relationships." Financial planning, however, does involve: *Holding an annual advisor meeting of your certified financial planner, certified public accountant, attorney and any of your closest advisors to do a review of your situation; *Reviewing the proper business structure to prevent unreasonable lawsuits, reducing taxes to the lowest possible legal level and setting the most advantageous basis for selling the business or passing it to the next generation; and *Ensuring your income is increasingly less dependent on the ability of your business to produce income. As you grow older, the next generation of management and your competitors may influence your income more than you want them to. Ask yourself the following questions: *Do your investment risks match your retirement and independence objectives? The objective may not be to make as much money as you can, but solidly and safely grow your wealth. *Do the financial products you have support the above objectives? *Are the most recent changes in the tax law being utilized by you, your business and your family? *Are you protecting your heirs from taxation, the business, each other, divorce, etc.? *Do you track where you keep all your records and documents, so that, in case of an emergency, they will be readily available? You should prepare to sell your business in the next five to 10 years, and, at the same time, prepare to keep it forever and make sure that those around you understand your immediate goals, as well as your lifetime objectives. If the economy in your area has problems, or your business is badly hurt by outside factors, what can you do to be prepared? Ask yourself if you are getting what you, your family and your business want out of life, and how your financial situation is helping or hurting that endeavor? Donald F. Hadley is the president of Fidelity Financial Group Inc. He can be reached by phone at (800) 786-4332 or by e-mailing dhadley@ffgusa.com.
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