A financial plan charts a course toward a secure financial future based on a household's goals and career expectations.
Outliving one’s retirement savings and not saving enough for retirement are the biggest financial fears and regrets of Affluent households. A financial plan is essential to avoiding these pitfalls, not only from the standpoint of a secure financial future, but for greater piece of mind, which a majority of Affluent investors consider to be one of the primary benefits of working with a financial advisor.
Spectrem Group’s wealth level study, Advisor Relationships and Changing Advice Requirements, finds that what is most likely to be included in a financial plan varies in importance across wealth segments and age level.
Generally, a financial plan is a thorough evaluation of an individual’s current financial situation with a view toward the future based on life goals and career expectations. A financial plan charts a course toward a secure financial future based on those goals.
Non-Millionaire, Millionaire and UHNW households (with a net worth between $5 million and $25 million, not including primary residence) all consider the most important two items in a financial plan to be the rate of return on investments needed to meet their financial goals and a calculation of present net worth. UHNW investors rank the latter item as the most important aspect of their financial plan.
Across all wealth levels, tax planning advice and guidelines is the third most-cited item included in their respective financial plans. But the fourth financial plan priority changes with wealth level. For non-Millionaire households with a net worth between $100,000 and $1 million, it is a spending/budget schedule to avoid withdrawing money too early; for Millionaires (with a net worth up to $5 million) it is a lump sum needed to meet household spending needs, and for UHNW, it is estate succession planning guidelines.
Other items these segments deem important to include in their financial plans include present debt ratios, a lump sum to meet their spending needs and advice and guidelines for charitable giving. This is a higher priority for UHNW investors (28 percent) than it is for Millionaire (15 percent) and non-Millionaire (11 percent) households.
Age, too, is a factor in determining what is considered most important to include in a financial plan. Among non-Millionaire households, Millennials ages 35 and under (39 percent) and Baby Boomers ages 55-64 are the most likely to have a spending/budget schedule included in their financial plans.
Not surprisingly, regardless of wealth level, seniors ages 65 and up and Baby Boomers are the most likely to be sure that estate succession planning guidelines are included. Similarly, Millennials and Gen Xers, the generations most likely to be saddled with debts such as student loans, are most likely to want to have present debt ratios included in their financial plans
Non-Millionaire Baby Boomers and seniors are most likely to want their financial plan to include provisions for a lump sum needed to meet spending needs. In UHNW households, this component is most likely to be found in the financial plans of Millennials.
When it comes to tax planning and advice, the highest percentage of non-Millionaire households who include this in their financial plan are Gen Xers (48 percent), while Millionaire seniors are the age demographic most likely to include this. In UHNW households, it is Millennials more likely than their older counterparts to include tax planning advice and guidelines in their financial plan.</p>
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.