Online Financial Planning for Consumers eFinPLAN - Evolution of Financial Planning

The Evolution of Personal Financial Planning

by Kent E. Irwin

This is the third in a series of two articles that are an overview of financial planning; please read both articles.

What is Financial Planning?

Explains the basic principles of financial planning. Lists cautions for those seeking help with their finances.

Do-it-Yourself Personal Consumer Financial Planning Software

This article discusses how you can do a lot of your own financial planning utilizing the latest software. Included are the seven fundamental steps, resources and tools that you will need to get the job done right.

The Evolution of Financial Planning

The historical development of Financial Planning services and an outline of several of the ways consumers can receive Planning services.

Financial Planning Defined

The devising of a program for the allocation and management of finances and capital through budgeting, investment, etc. In other words, it is the process of meeting your life goals through the proper management of your finances.

Financial Planning Trends

Financial planning has been an emerging profession for about the last 30 years. Prior to that, financial planning only served the ultra wealthy since they were the only ones with money to invest and who could afford a team of legal, tax and investment advisors. Since WWII, the demographics of our country have changed. People are living longer and have extra income for things other than necessities. In previous generations, people lived hand to mouth either in factories or on the farm, earned and saved little, and died an early death. Today’s poor in America have statistically much more than previous generations had. In addition, the complexities of financial matters and the lack of financial education have created the need for financial planning assistance for every income level.

Financial planning as an industry really came into being, at least in the eyes of the consumer, in the 1980’s and 90’s. Financial planning rode the wave of the biggest and longest bull stock market of all time. A contributing factor to the explosive growth of this industry hinged on the fact that baby boomers reached their peak earning years. In addition, the enlistment of computers to run complex financial analysis also contributed to this rapid growth.

One reason that the financial planning industry will continue to change is that the largest transfer of wealth ever seen is due to occur over the next 30 years. It is estimated to be in the tens of trillions of dollars.

Today many high net-worth individuals are using Fee-only and Fee-based financial planners. Unfortunately, the wealthy are the only ones who can afford their fees.

An Outline of Comprehensive Financial Planning

The areas covered in financial plans for the wealthy have not changed much through this evolution, until now. Table 1 is an outline that most financial planners follow. Table 2 represents additional areas covered by eFinPLAN.

TABLE 1

Financial Planning Areas

Section

Item

Section

Item

Present Financial Condition

· Net Worth

· Data Confirmation

Spending

· Cash Flow

· Debt

· Taxes

Future Goals

· Retirement

· College Education

· Other Goals

Legacy Planning

· Wills

· End-of-life Issues

· Trusts

Investment Planning

· Risk Assessment

· Asset Allocation Worksheet

Ongoing

· Implementation

· Monitoring

· Organization

Risk Management/Insurance

· Cash Reserves

· Property & Casualty

· Life & Disability

· Long-Term Care

Appendix

· Assumptions

· Educational Material

TABLE 2

Additional eFinPLAN Financial Planning Areas

Cash Flow being affected by:

· Transportation

· Debt

· Personal relationship issues

· Values

Using trusted professional advisors to:

· Implement your plan

· Help determine if advanced services of other advisors or a fee financial planner are needed

· A thorough Implementation Action checklist

The Options for Receiving Financial Planning Services

Until now, only individuals who could pay a large fee or who had a large sum of money to invest were able to receive a financial plan; others were offered a ‘free financial plan’ and then sold a product. Frankly, this was the only way financial planners could recoup the value of their time, until now. With eFinPLAN, financial planning is available to people at all income levels without a large fee or a promise to invest with us. For the first time, everyone can have access to innovative comprehensive software.

Up to now, there were four different ways people received financial planning assistance, but now there is an additional way: the eFinPLAN:

TABLE 3

Five Types of Financial Planning Services

Type

Service

Fees or Compensation

Fee-only Financial Planners

Provide comprehensive financial planning assistance, covering virtually all areas of financial planning. They receive no commissions for products sold, as their only source of revenue is a charge for the financial plan and a charge based on assets.

Financial Plan Fee: Ranges from $1,000 to $5,000 for the financial plan—one time or yearly.

Asset Charge: .50% to 2.00% on assets (total or assets under management).

Fee-based Financial Planners

Provide full comprehensive financial planning assistance as fee-only financial planners do.

May receive a fee similar to Fee-only Financial Planners, but may also receive compensation from insurance and investment products that they provide.

Investment Advisors

The main emphasis of Investment Advisors is investment management. Some investment advisors may provide full or modular financial planning services.

Usually charge a fee on assets under management. May or may not charge for the financial plan.

Product Providers

These planners utilize financial planning software to help analyze the need for the insurance or investment products they wish to sell.

Receive commissions for insurance, annuity and investment products sold.

eFinPLAN

A web-based system designed for consumer use, which provides educational, narrative, and numerical information to help people take control of their financial future. Consumers use their team of trusted professional advisors to implement the financial plan.

An initial fee for use of the software and a small annual fee to access the financial planning software to make updates and monitor progress.

The Process of Financial Planning

The process of financial planning has two phases. The first phase is to design a financial plan, or a roadmap of written plans. This usually involves the following 4 steps:

TABLE 4

Phase 1: The Financial Plan Design

Step

Item

Gathering data, including goals.

Analyzing and evaluating financial status.

Developing financial planning alternatives.

Implementing the initial action plan.

After the plan has been established (which can be done in a very short time with eFinPLAN), the second phase includes:

TABLE 5

Phase 2: The Financial Plan Design

Step

Item

Learning about financial matters.

Implementing additional action steps.

Monitoring the progress towards your goals.

Summary

eFinPLAN represents the latest evolution in financial planning. It is the first and only affordable web-based resource that allows you access to innovative and educational software to help you meet your planning needs. eFinPLAN will help you increase the chances of reaching your financial goals because you will:

1. Have a plan.

2. Increase your knowledge and understanding of financial matters.

3. Utilize trusted professional advisors to implement your plans.

4. Regularly monitor your progress.

Kent E. Irwin is CEO and founder of eFinPLAN, LLC. He is also a Chartered Financial Consultant (ChFC), a Chartered Advisor in Philanthropy (CAP) and a Chartered Life Underwriter (CLU). He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . For more information about eFinPLAN, go to the website eFinPLAN.com.

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