10th Annual Garrett Financial Planning Conference

I attended the 10th Annual Garrett Financial Planning Retreat in Eureka Spring Arkansas this week. This annual event is a financial planning conference for Garrett Planning Network members. The focus of the conference is continuing education with seminars and workshops run by highly regarded industry leaders such as Rick Ferri, CEO of Portfolio Solutions; Michael Kitces, Director of Research for Pinnacle Advisory Group; and Tom Gardner, CEO of the Motley Fool.

Financial Planning includes a wide range of topic areas and so as you might expect the sessions were also diverse. I attended 12 sessions that included investments, retirement planning, life insurance, annuities, marketing, communications and practice management. Each session broadened or deepened my knowledge is some way. And this is the point of the continuing education requirements set by the CFP® Board of Standards and by the National Association of Personal Financial Advisors (NAPFA). The Financial Planning Profession requires broad and deep knowledge that must also be kept current. It also requires a set of skills that go deep yet also integrates the many topic areas into a cohesive, comprehensive financial plan. Conferences and other educational events provide the forum to keep financial planners skill and knowledge in top form.

In addition to education the conference was also a time to meet with other like-minded fee-only financial planners and share our knowledge with each other. The Garrett Planning Network is a wonderful group of professional people who happily collaborate and share their knowledge and skills with each other. The members believe that by sharing with each other we continually improve the solutions we deliver to our clients, our practices, and our profession as a whole.

The Garrett Planning Network Inc. is an international network of fee-only financial advisors and planners. We are independent advisors and our goal is to make competent and objective advice accessible through hourly as-needed financial planning. Our financial advisors bring the shared wisdom of a broad based network with significant experience in financial planning and investment management.

We focus only on the needs of our clients which means:
* Our clients’ priorities come first! We work for our clients and only our clients.
* We have no limitation on assets or net worth.
* Fee only means that we do not sell products or accept referral fees.
* We may offer asset management for people that want it, but it is not required.
* Long term relationships are encouraged, but long term commitments are not required.

Free Financial Planning

On Saturday, October 9  I volunteered as a professional financial planner at “Financial Planning Day” at the Sunnyvale Public Library. I was one of approximately 35 financial planners who provided individual one-on-one advice to the 140+ people who attended. There were also three workshops available throughout the day. The San Jose Mercury News published the following article the next day: http://www.mercurynews.com/ci_16300317?nclick_check=1

During the day  met with five individuals and one couple for 30 – 60 minutes each.  These people ranged from their 20’s to their 60’s though most were middle age with concerns due to a recent or pending job loss. Topics included current spending, retirement planning, investments, cash planning, education funding, long term care insurance, social security benefits, and tax planning.

This event is one of over 20 such events happening throughout the country this month, jointly sponsored by the Financial Planning Association, The Foundation for Financial Planning and the U.S. Conference of Mayors. These are free events open to the public at which advice is provide with no strings attached. There is no marketing of any kind allowed: business cards, marketing materials and selling of products or services are not allowed. More information is available at www.financialplanningdays.com

This is my 3^rd year volunteering for this event. The original event was in Oakland 2 years ago and I volunteered in Oakland last year as well. I believe that these events are a very important community service to make financial planning available to people who may not know about or have access to professional financial advice.

This year in addition to volunteering in Sunnyvale, I am supervising a similar event in Scotts Valley in November. The “Scotts Valley Financial Planning Clinic” is also a free event that is open to the public. It is sponsored by the Scotts Valley Chamber of Commerce and provides one-on-one financial planning advice sessions with professionals with no strings attached and no marketing or selling of products or services involved. There will also be two short seminars on financial planning topics. The event is Wednesday November 10 from 4pm – 8pm at the Scotts Valley Community Center. For more information see: www.georgefa.com/scottsvalleyfpc

The Purpose of Investments

As a financial planner I consider investments a means to an end: To enable you to achieve your life goals. For most people the largest goal is the ability to maintain their current lifestyle throughout retirement and not run out of money. Other common goals include funding primary, secondary and/or higher education for their children, buying a house, and travel. There are of course many others.

So before nailing down an investment plan the first task is to clearly understand your life goals, both short and long term. The purpose of your investments is then to provide the funding to enable you to achieve those goals. And the longer the timeframe you have before the funding is required, the better the chance are they you will be able to fund it.

By its nature this context implies a long term perspective. With such a perspective the daily rantings of market commentators has little meaning. What matters it what is going to happen to your investments long term. So how do you create a long term investment plan that is right for you? There are a number of variables which each affects your plan:

·         Funds required to achieve your goals

·         Value of your current portfolio and how it is invested

·         The rate of return of your portfolio

·         Ongoing savings

·         The risks you face including portfolio risk and the ability to continue ongoing savings.

Assuming the funds required and the value of your current portfolio unchangeable for a moment, then the areas you have to work with to create a realistic plan are your ongoing savings, your rate of return, and your risk. Lets first look at risk and return.

Risk and return are intimately tied. The return a market demands for any security is actually based on the risk inherent in the security. In fact this return is defined as the riskless rate of return, assumed to be a 3 Month Treasury Bill, plus a risk premium representing the various risks included with the security.

Diversification provides the best approach to managing this risk while still providing a reasonable return. By investing small amounts in many different uncorrelated assets overall risk is reduced and a more consistent long term return is achieved. Assets with low or uncorrelated assets will usually behave differently then each other. A period of decline in one area will typically be countered by gains in another area.

The mechanism for providing this diversification is asset allocation. An allocation that includes the optimum amounts of the following asset classes can achieve this diversification: US equities (large and small), international developed equities, emerging markets, multiple types of fixed income, cash, real estate, and possibly some alternative investments.

Determining an optimum asset allocation that is appropriate for you requires an examination of your personal views about risk. It is important to understand your ability to tolerate risk, your capacity to absorb financial risk and the amount of time until your funds are needed. Knowing this an asset allocation can be identified that provides the most return consistent with your risk factors.

With this in hand the last issue is your savings rate. Using appropriate analysis tools or formulas the savings rate required to achieve your goal can be determined, given all the other previously determined factors. If this amount or savings is not achievable then and re-examination of the other factors is needed. Maybe your goals are too lofty. Maybe you can find a way to save more? Maybe you can actually tolerate more risk which will give you a higher return?

The point is that now you are asking the right questions regarding your investments. The purpose is to fund your indentified goals. The mechanism is to establish and maintain an optimally diversified asset allocation plan which provides the proper risk adjusted return for your specific situation.