It's a great privilege for us at Peak Financial Planning to share an example financial plan with you. We'd like to give you an idea of what the process looks like when working with us to build your financial plan.
When done right, the financial planning process will be something you only experience 1 time in your life (if you have to do it a second time, the first plan has failed...). This makes it difficult to visualize or relate to.
We will be using Steve and Amanda Doe (Fictional characters) as examples in this sample financial plan. Bear in mind that all financial plans are unique - what you see below are only a selection of the reports and data points that might be included in one's financial plan.
This written piece and accompanying video guide will illustrate the data points we will collect, how we address client goals, the types of reports and models we use to convey information, and ultimately how the partnership between you - the client - and we - the advisor - functions.
All account values and investment returns in the "Doe's" example financial plan are based on historic market performance and do not necessarily reflect future market returns.
It is important to note that a financial plan is not a static document that you receive, like a car fax on your car. It is a dynamic, ongoing, iterative process that is routinely updated. It is a combination of financial models along with a relationship with a financial advisor that, when combined, provide a roadmap to reach your dynamic financial goals. If you would like some assistance auditing your financial goals - click here to schedule a free no obligation consultation.
With that out of the way, let's dive into our personal financial plan samples.
Steve and Amanda Doe have gone through life as most of us do. Following the general guidelines without too much consideration of how to adapt those to their personal life. They have a spiderweb of investment accounts, bank accounts, and credit cards. They know roughly what they spend each month. They are comfortable speaking to each other about their finances, but rarely do as they do not have significant consumer debt and therefore don't feel like they are doing anything wrong.
One day scrolling through YouTube, they came upon a video talking about the "Retirement Risk Zone" - a transitional phase in most people's financial lives where they have significant financial decisions to make that have ramifications for the rest of their lives. After watching the video together, they decided it was time to recruit the help of a financial advisor.
After speaking to friends and family and doing a bit of internet research, they arrived at a list of requirements for any financial professional they would consider working with.
1) The financial advisor needs to be "Fee Only". This means that the firm does not receive any commissions, sales related compensations, or referral compensation. The firm will only ever be paid DIRECTLY by the Doe's. This would effectively limit the conflicts of interest the firm might face.
2) The financial advisor needs to be a "Fiduciary". Acting as a fiduciary means that the firm is obligated to act in the client's best interest when making financial recommendations. To obtain "fiduciary" status, the firm must be Fee Only and meet rigorous regulatory requirements.
3) The Advisor must at a minimum be a CERTIFIED FINANCIAL PLANNER PROFESSIONAL. This would ensure that the practitioner would have the training, skill, and experience to support their financial plan.
Peak Financial Planning Advisors are Fee Only Fiduciaries and CERTIFIED FINANCIAL PLANNER PROFESSIONALS. Use this link to schedule a free consultation with us to learn more about working with our fee only, fiduciary financial advising team to build your financial plan.
With the above criteria in mind, the Doe's scheduled an initial consultation with Peak Financial Planning.
The Doe's completed a "Financial Fact Finder" in advance of their initial meeting with PFP. Completing the fact finder was the first time they aggregated their financial picture into one place and proved to be a highly informative exercise. Having the data from the fact finder assisted their PFP advisor in assembling a list of questions that should be asked in advance of the financial planning process.
During the 45-minute, free consultation, PFP explained their business structure, their flat fee system, how they handle wealth management relationships, and what the financial planning process would look like. Their PFP advisor asked questions about their lives, their goals, and over the course of the conversation it became clear to Steve and Amanda that a financial plan is only partially numbers - a large portion of the value of the financial plan would be uncovering the personal goals and psychology they have around money. Steve and Amanda were reassured to have an exact dollar amount of the fees, a timeline of the process, clear expectations of their time commitment, and an understanding of the guidance they would receive from their financial plan.
Steve and Amanda felt safe and comfortable with PFP's approach to financial planning and investment management and decided to move forward with the relationship.
Steve and Amanda's PFP advisor explained it would be helpful to think of PFP's 4-month Financial Planning process as three distinct phases.
Phase 1 - The audit of the Doe's financial position.
Upon beginning work together, Steve and Amanda's first formal financial planning meeting, called the "Plan Proposal", would be scheduled at least 4 weeks out.
To prepare for the "Plan Proposal", over the course of the four weeks Steve, Amanda, and their Peak Financial Planning advisor would collaborate via phone, email, and zoom to audit the Doe's current financial position.
The PFP team would use this time to assess, diagnose, and prepare the Doe's financial plan and accompanying recommendations.
The "Plan Proposal" would begin phase 2 of the experience.
Phase 2 can best be thought of as the onboarding and education component of the financial plan.
Their PFP advisor explained that phase 2 could take anywhere from 6-8 weeks to complete, depending on the speed at which the team (Steve, Amanda, and their PFP Advisor) could meet.
This phase would consist of a series of 75-minute zoom sessions (which you can see listed in the image above) where Steve, Amanda, and their advisor would get together to answer the following questions:
1) What is the earliest age Steve and Amanda could responsibly retire at?
2) What would their safe withdrawal limits be based on their current accumulated wealth and projected savings behavior?
3) What changes could they/should they consider in order to optimize their odds of success in retirement?
This phase is best visualized as the "building of the financial house". During this phase the ground is cleared, the foundation laid, the scaffolding put up, the roof put on. By the end of the onboarding phase the Doe's financial house will be complete, and ready to move on to phase 3.
Phase 3 can best be thought of as the implementation and system building portion of the financial planning process.
Their PFP advisor explained that implementation might take an additional 6 weeks to complete, again, depending on the speed at which the team (Steve, Amanda, and their PFP Advisor) could meet.
Implementation sessions are 30-minute or less meetings where Steve, Amanda, and their advisor would get together to complete the actions outlined in their financial plan.
During this phase, their PFP advisor would provide templates, instructional videos, calculators, and systems that would be used to monitor and implement the plan on an ongoing basis.
Steve and Amanda's PFP advisor explained that Peak Financial Plannings core philosophy was that no client should be REQUIRED to begin with an Asset Management (Wealth Management) relationship in order to obtain a highly qualified financial plan.
Thus, their flat fee structure in exchange for a 4-month financial planning engagement was born.
However, for those who would like to engage Peak Financial Planning in a wealth management relationship, the option does exist.
At any point DURING the financial planning process, a new client could choose to engage Peak Financial Planning in a Wealth Management Relationship - a new investment management agreement would be provided.
Financial planning fees would be halted so as not to "double dip" on fees, and all financial planning and wealth management activities would be executed under the new agreement.
Steve and Amanda's PFP advisor explained the mechanics and details - specifically that for those parties that want to continue an ongoing relationship with Peak Financial Planning beyond the 4-month financial planning engagement, this would need to be done via a wealth management relationship.
Steve and Amanda were comforted to know that they would not be forced into a wealth management relationship and could take up to four months to engage with Peak FP to determine if a wealth management relationship was EVEN SOMETHING they would be interested in.
(You can read all about Peak Financial Planning's fee structure here.)
Optional Ongoing Relationships under a Wealth Mangement Agreement
Steve and Amanda's PFP advisor explained that a financial plan is a living, breathing strategy.
It's dynamic and constantly responding to changes in their life's circumstances.
Their PFP advisor explained that should they choose to engage in a wealth management relationship, and therefore continue an ongoing relationship, they would meet their PFP advisor a minimum of 3 times per year to review, update, and execute on the pillars of their financial plan and investment strategy.
Steve and Amanda are reassured to hear that they would have an option to reach out to their PFP advisor at any time throughout the year to schedule additional time by phone, zoom, or in person should their financial circumstances change.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
Upon formalizing the financial planning relationship with PFP, Steve and Amanda were walked through the firm's formal data gather process. Their PFP advisor walked through:
1) How to set up RightCapital (Financial Planning Software).
2) Which documents on the Document Gather Checklist the Doe's should provide.
3) How to securely share documents with their PFP Advisor.
4) How to locate screenshare support videos explaining the above should the Doe's need additional support.
The Doe's provided:
These documents were uploaded to a secure file vault within the Right Capital planning tool for their PFP advisor to review.
Right Capital provides a comprehensive financial dashboard. It would allow Steve and Amanda to aggregate their full financial picture into one place so that they do not need to house that information in their heads (and hope they do not forget details!).
Using the walkthrough video provided by their PFP advisor, they linked their bank accounts, investment accounts, credit cards, mortgage loan, car loans, and investment property value to Right Capital.
This will allow both Steve and Amanda as well as their PFP advisor to see real time updated balances for all their accounts in one place, saving a tremendous amount of time in future meetings by eliminating the need to play "account balance catch up".
Behind the scenes, Steve and Amanda's PFP advisor performed an exhaustive audit of their financial position. The product of this audit was a list of missing documents as well as a slew of questions that needed answering from Steve and Amanda before their PFP advisor could proceed with constructing their personal financial plan.
This list of questions was sent to Steve and Amanda along with a screenshare video of their PFP advisor explaining how to complete the exercise and provide responses.
Steve and Amanda proceeded to answer their PFP advisors' questions.
Steve and Amanda's explained that they would like to explore the following possibilities:
1) They both want to retire in the same calendar year - when Steve turns 65 and Amanda turns 61
2) They want to have a $12,000 per year travel budget for the first 10 years of their retirement, with the option for a $12,000 travel budget for their entire retirement health and physical condition permitting.
3) They want to identify the maximum spending tolerance of their financial assets, not necessarily to spend it, but simply to understand what their boundaries and limitations might be.
4) They want to know if there is anything they can do to retire earlier then age 65 and 61.
At this point Steve and Amanda's PFP advisor had a much clearer picture of the Doe's financial situation and an understanding of their goals.
Each week leading up to their "Plan Proposal" meeting, Steve and Amanda's PFP advisor sent a weekly email check in complete with screenshare video asking for any remaining outstanding items, or simply giving them a status update on their plan in preparation for the proposal meeting.
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The CFP® professional at PFP added all of the Doe's personal finances into Right Capital.
The PFP advisor created 2 baseline financial plans for the Doe's. One plan was built using a Monte Carlo, or probability of success based tool (Right Capital), while the second plan was built using a Modern Guardrails cashflow based tool (Income Labs). The Monte Carlo based baseline plan would show whether or not the Doe's would be able to achieve their stated goals if they were to change NOTHING about their current financial behaviors. The Modern Guardrails cashflow based tool would show the Does' maximum safe spending amounts AND portfolio guardrails.
Their PFP advisor explained that the two tools would be used to cross reference each other and corroborate each other to reduce margin of error and give clearer "if - then" contingency plans to support the financial planning recommendations. Both baseline plans are used for comparison purposes so that the PFP advisor can show the effects of their financial recommendations against the Doe's current actions.
With the baseline plan complete, the PFP advisor then created a comprehensive list of all of the Doe's possible financial action items.
With the list of recommendations complete, Steve, Amanda, and their PFP advisor sat down to discuss the recommendations.
Their PFP advisor stressed that there is no perfect financial plan. Often times the plan that is the best "numeric" plan is actually not one that most people will execute on. It requires too much sacrifice, too many difficult tradeoffs.
The Doe's baseline financial plan example showed a probability of success of 66%. This indicated that as things currently stand, Does' would have a 34% probability of having to make some kind of financial adjustment over the course of their life.
The Doe's explained that they were a bit uncomfortable with this. They asked what it would take to see a plan success rate closer to 75%.
Over the course of the 75-minute Plan Proposal meeting Steve, Amanda, and their PFP advisor discussed each of the plan recommendations that could make this increase in probability of success possible in detail. They discussed the tradeoffs of each item - some would cost time, some would cost money, and some would mean sacrifices in either current spending or desired future spending.
Steve and Amanda felt comfortable with the 8 recommendations their PFP advisor presented them. On the spot, their PFP advisor showed them 2 plan scenarios - one scenario where 5 of the 8 recommendations were implemented, and another scenario where all 8 of the recommendations were to be implemented.
In the first scenario (with 5 of the recommendations implemented), Steve and Amanda's probability of success went from 66% to 71%. At their PFP advisors' recommendation, they adjusted that scenario slightly to reduce the Doe's annual pre-retirement spending by $400/month, resulting in a success rate increase to 74%! Steve and Amanda were surprised at how sensitive the plan was to spending and made a mental note to think further on that.
In the second scenario (with all 8 of the recommendations implemented), the probability of success went to a whopping 82%. In addition, their PFP advisor demonstrated how, by executing on the additional 3 recommendations Steve and Amanda would not need to reduce retirement spending and still maintain the 82% success rate.
To be thorough, the Doe's PFP advisor ran them through some additional scenarios showing them how working longer, reducing spending, and increasing savings might improve their plan success rate.
After talking through things, the Does were comfortable with proceeding with plan scenario 2 (with the 8 recommendations) with an understanding that they could adjust course as they approach their retirement age.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
Over the course of the "onboarding" meetings, Steve and Amanda's Peak FP advisor spent time explaining how safe withdrawal rates are calculated and monitored, how the Doe's portfolio guardrails would be calculated and monitored, and what kind of savings/spending behaviors and investment rate of return would be necessary in order to make their retirement work.
Steve and Amanda were provided this list of "Financial Planning Deliverables" and education on each component of those deliverables.
Incorporating the feedback from their onboarding meetings, Steve and Amanda's PFP advisor arrived at their Plan Presentation meeting with a final presentation of their financial plan. Their PFP advisor explained that their plan would be broken down into 5 "micro" plans: A Cash Flow plan, an Income plan, an Investment plan, a Tax plan, and an Estate plan.
Because a financial plan is a hypothetical model, it is critically important that the inputs into that model are as accurate as possible. Cash flow, or spending habits, are the foundation upon which good financial plans are built. If estimates of spending are off by a significant margin, all of the downstream recommendations fall apart.
Steve and Amanda's PFP advisor recommended implementing a two-part cash flow system:
1) A bookkeeping system to monitor income and spending to start ASAP. This system would allow the Doe's to get in touch with their spending habits which would be beneficial for several reason. First, it would verify that the budget worksheet the Doe's provided is accurate, and that the spending data in the plan is accurate. Second, it would help the Doe's visualize their desired retirement spending so they could make informed decisions about what to keep, what to cut, what's negotiable, and what's non-negotiable when it comes time to retire. Third, it would allow the Doe's to course correct quickly were their income or expenses to change suddenly.
2) A slush fund (Dave Ramsey Envelope) system to help provide savings cushions for annual expenses, one-time purchases, and surprises. The slush fund system is a series of emergency funds that account for surprise areas of spending that PFP advisors find clients do not account for.
Based on their estimated spending in retirement, Steve and Amanda's PFP advisor recommended that they need to achieve a 22%-25% savings rate each year until retirement. Steve and Amanda are currently saving 17% of their annual income. With their bookkeeping and slush funds system in place, both thought it possible to increase their savings rate to the desired range.
Steve and Amanda's PFP advisor explained that the income plan is the strategy of identifying how much income they will need to cover their desired level of spending in retirement.
The Required Portfolio Income formula is quite simple. It is:
Desired Spending - Guaranteed Income = Required Portfolio Income
Because Amanda and Steve have the retirement savings to support it, as well as being in excellent health with potentially longer than average lifespans, their PFP advisor recommended that they defer claiming Social Security until Steve's age 70, Amanda's age 66 in order to capture the largest guaranteed benefit.
Using their social security benefit estimates (found on their social security statements), Steve and Amanda's PFP advisor identified their portfolio income requirement. Their advisor explained that each year as they neared retirement, they would review their savings, cash flow, and investment performance in order to make adjustments to the income plan.
Two meetings during the onboarding process were dedicated to just the investment education portion of the Doe's Financial plan...
Steve and Amanda's PFP advisor explained that their investment plan is constructed to support their income plan.
Using their RPI calculation and Modern Guardrails Plan, a "target rate of return" was obtained that would support the Doe's income needs in retirement.
In order to achieve their desired level of spending in retirement, they would need to achieve a roughly 7.5% rate of return on their portfolio assets. As their portfolio was currently constructed, they were achieving a 6.4% rate of return.
Steve and Amanda's PFP advisor recommended shifting away from a strategic asset allocation relying on vague numbers such as a “60%/40% portfolio” towards a tactical asset allocation that would both produce better growth and provide greater capital preservation.
Regarding their actual investment selection, Steve and Amanda's PFP advisor recommended adjusting their investment selection to reduce high mutual fund fees (1.45% average) and replace them with low fee exchange traded funds (.08%-.15%), some directly held stocks (no fees), and some directly held bonds (no fee's).
Their PFP advisor also explained that their investment strategy would adjust based on changes to the economic environment and technical market conditions.
Steve and Amanda's PFP advisor explained that taxes are most retirees' BIGGEST expense in retirement.
The Doe's PFP advisor recommended that they execute on two actions for their tax planning process.
The first - that both Steve and Amanda shift their contributions from ROTH 401k accounts and into traditional 401k accounts. This would save them roughly $15,000 per year in income taxes.
The second - that the Doe's execute a ROTH conversion strategy over the course of their retirement that, executed properly, would result in roughly $1,300,000 more tax adjusted ending portfolio assets.
In addition, given their wealth, it appears likely that the Doe's would be leaving sizable assets to their heirs. Steve and Amanda's PFP advisor explained that ROTH conversions help position their assets into more tax favorable buckets so that their heirs are not hit with huge tax burdens as a result of their inheritance.
Steve and Amanda had recently had their will and trust updated in advance of beginning work with Peak Financial Planning.
After reviewing their estate documents, their PFP advisor had no urgent recommendations to take action on.
They set up reminders to do annual reviews of the Doe's retirement account beneficiaries, as well as bi-annual reviews of their will and trust documents so as not to let those fall through the cracks.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
With the financial plan presented and agreed upon, Steve and Amanda moved into the implementation phase.
Their advisor had added all the action items to the project management dashboard of the financial planning tool, Right Capital in advance.
Together, the three of them went through the list of recommendations. They created tasks, set deadlines, and scheduled three 30-minute implementation meetings during which to complete those tasks. Lastly, their PFP advisor provided them a list of the additional documentation that would be required to complete those tasks.
Their advisor explained that the Doe's would receive regular email reminders about tasks assigned to them as well as a regular "digest" of the tasks accomplished during the prior week. This would keep the Doe's up to date about what their advisor might be doing on their behalf behind the scenes, such as opening new accounts, completing investment account transfers, updating beneficiaries, making investment model adjustments, etc.
At this point in the planning process, the Doe's agreed that they wanted Peak Financial Planning, as a wealth management firm, to execute the implementation of the investment and tax portions of the Doe's financial plan.
PFP handled all of the paperwork to move the Doe's taxable and retirement accounts to be managed at their broker and custodian, Charles Schwab.
PFP coordinated with the Doe's CPA to navigate the tax implications of the recommended portfolio reallocations.
Looking for a Fee Only Fiduciary Certified Financial Planner Professional to help you achieve your financial goals? Click here to schedule a free no obligation consultation.
After the financial plan was built and implemented, the Doe's engaged in an ongoing financial planning and wealth management relationship with PFP.
The Doe's PFP advisor explained that the ongoing relationship would be organized around 5 pillars.
The Does were comforted by having clear, predictable direction each year into and after retirement. They felt reassured to know that all their financial and investment advice needs would be serviced under one roof, for one comprehensive fee.
The Does PFP advisor explained that the PFP policy is to hold a 3 meetings per year with each ongoing client to ensure that they feel educated and connected to their retirement plan. Their advisor explained that there is no additional cost or mounting fees if the Does were to request additional time via meetings, phone calls, or emails.
The Does found that the ongoing relationship, team oriented, client first approach of Peak Financial Planning helps them sleep well at night knowing they have a true financial partner in their camp.
If you’d like to review some additional personal financial plan examples, please refer to our Youtube channel as well as the Case Studies section of our website.
Financial Planning is an ongoing dynamic relationship between you and your financial planner. At Peak Financial Planning the process takes 4 months, and can be broken into three phases:
Phase 1: Audit - which usually takes 4 weeks.
Phase 2: Onboarding - which can take between 4-6 weeks.
Phase 3: Implementation - which lasts an additional 6-8 weeks.
Peak Financial Planning advisors are Fee Only, Fiduciary, Flat Fee advisors. We charge a flat fee ranging from $5,000-$12,000 for a 4-month financial planning engagement. Ongoing financial planning and wealth management relationships are available via an OPTIONAL Investment Management relationship. Send us a message for more details or view our pricing page here.
You can view a printable financial plan example here.
Or you can watch this YouTube video for some additional financial plan examples.
Financial stability is a product of planning and education. The process of building a retirement plan will improve financial literacy, increase your financial education, create a feeling of confidence, and overall improve your odds of achieving financial freedom.
Making changes to your investment or retirement strategy are extremely high risk, high consequence decisions. Before you make hasty adjustments to your plan, it’s critical that you review financial plan examples or case studies that the professional helping you has created. You want to make sure that that professional has the expertise and experience required to guide you successfully to your financial goals.
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