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#4 - What are Your Financial Planning Principles?


Are you on the path to crafting a robust financial roadmap for your retirement but feeling unsure about where to concentrate your efforts?

In this episode, Eric Blake discusses the importance of financial planning principles with a focus on the need for a financial plan to define success and pursue goals, especially for women in transition or ready to take control of their financial future.

 Key Highlights: 

  • Some of the challenges of discovering a dependable financial advisor
  • The significance of engaging a planner-focused professional, rather than someone solely driven by product sales
  • The adaptive nature of financial planning
  • The art of preparedness for unforeseen events and effectively managing risk
  • And much more!

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We specialize in helping women over 55 develop a retirement strategy that provides dignity and independence throughout retirement.

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Ways to Enjoy Today's Episode

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Episode Transcript

Wendy McConnell: Welcome to the Simply Retirement Podcast with your host Eric Blake. I'm Wendy McConnell. That was very impressive with the fancy pronunciation of the name.

Eric Blake: Okay, you need some background on that. My son-in-Law and his family are French. French is their first language. I practiced multiple times to make sure I got this one right. His name is Antoine.

Wendy McConnell: So that part was easy.

Eric Blake: That part was easy. The last part, again, I practiced that name multiple times. I love this quote, and there are multiple versions of it floating around. There's one from Brian Tracy. I think there’s one attributed to Benjamin Franklin too, but I had to go with this one. I had to go with the French author.

Wendy McConnell: Do you know who was truly the first to say it?

Eric Blake: My guess is that there are different versions of it. The one from Benjamin Franklin is one version. I don't remember the exact wording on that one, but this is the one I've seen most often, so this is the one I went with. I feel it applies to our topic today.

Wendy McConnell: And since you did all that practice, let's hear his name one more time.

Eric Blake: Antoine de Saint-Exupéry

Wendy McConnell: We won't even know if you're wrong, so it's all good.

Eric Blake: There’s a YouTube video out there, so I've listened to it multiple times too. You can find it if you want.

Wendy McConnell: Okay. Today, we’re talking about your financial planning principles, right? 

Eric Blake: That’s right.

Wendy McConnell: Why is it important to know these principles?

Eric Blake: We work with a lot of women who are in transition in some form or another. They've been widowed. They've been divorced. Maybe they're still married, but they're ready to be more involved in the financial planning conversations. Or maybe they're single, and they've decided that they want to work with a financial advisor as they transition into retirement. The problem is that the term financial planning can kind of freak people out a little bit. It's hard to know what financial planning really means., and my goal is to give a framework of financial planning principles. So, I'm going to share a little bit about our principles specifically, but I think you could use them as a guideline for establishing your own, whether you choose to do it on your own or hire a financial advisor to work with you.

There are a lot of women who have taken a backseat in financial planning conversations, so they're a little hesitant to reach out to a financial advisor. Unfortunately, our industry has not made it very easy. Almost anybody can call themselves a financial advisor, whether they're an insurance agent or a stockbroker. What is financial planning? What is a financial advisor? What's a CFP, a Certified Financial Planner? If you're going to hire somebody, you need to start working through this and have a feel for what you're looking for. This is where having a framework can be helpful. If you're considering a firm like Blake Wealth Management, we’re planning first. Every strategy, every investment, every conversation starts with planning. How is this going to impact your financial plan?

Wendy McConnell: So you're going to help us figure out who is going to help us instead of being the used car salesman.

Eric Blake: If you're going to do your own planning, I think you can use this framework. That's really what my thought was, that you could use this framework for your own planning or have some frame of reference. If you're going to hire a financial advisor, what do you want them to do for you? Sharing a common set of principles and beliefs is critical to a successful relationship with a financial advisor. That's why today I wanted to share our principles so people can utilize the information however it’s best for them.

Wendy McConnell: I think that's a great idea. It can be a guidepost. 

Eric Blake: Absolutely. We share these on our website. You can go there to see what our principles are. We also share our investment principles. We'll talk about that in a future episode, but being able to let people see what we’re all about is important when they’re evaluating us as a firm. People can use them as their own guidelines for making better financial decisions.

To Be Successful, You Must Have a Plan

Wendy McConnell: Let's start with number one.

Eric Blake: This is a very strong belief for me. To be successful, I think you need to have a financial plan because it defines what success means. You want to identify your life's purpose and the goals associated with that purpose. Then, we want to create a financial strategy specifically designed to pursue those objectives.

Wendy McConnell: So, you’re always wondering what it is that's most important to the client.

Eric Blake: Absolutely. We want to know what's important so that we can stay focused on it. Anytime things get difficult, difficult markets are difficult. The 2022 economy was a struggle for everybody, but if we come back to those basics and that financial plan, we can keep it in the forefront while making decisions.

Wendy McConnell: I think a lot of people have an issue with the word plan because they feel it will be restrictive.

Eric Blake: Right. I think it's more about identifying what's truly important to you. We need to know where we're going to develop a roadmap. We talked about the Simply Retirement roadmap in a recent episode, and that's where we outline where your Point B is, with Point A being where you are today. We figure out what strategies we can take action on to get you from Point A to Point B.

We Are Planning Focused

Wendy McConnell: What would you say the next principle would be?

Eric Blake: Our firm is planning-focused. If you're going to hire a financial advisor, you want to know what they do and what to expect. There are firms out that only sell insurance, do annuities or are specifically investment-focused. We are very planning-focused. We keep your complete financial life in mind to ensure proper alignment between each of your goals.

Wendy McConnell: If I were to show up at a financial planner’s office and they were just trying to sell me insurance, would that be a sign that it's not a wealth management-type firm? That it’s more people who are just trying to sell?

Eric Blake: It's possible. It's hard to make generalizations without hearing conversations, but anytime you feel like an advisor is leading with a product, there's a good chance they're more product-focused versus planning-focused. Which question do they start the conversation with? If somebody asks what your long-term and short-term goals are before they ask you about the product or investment they offer, and they ask about your goals or your risk tolerance, that’s a planning-focused firm. Risk tolerance is a great question. Understanding what somebody's risk tolerance is, though it may not be the first conversation to have if you're talking about true financial planning.

Wendy McConnell: It's so important to be able to identify this because so many people are afraid they're going to get taken advantage of. It's good to know the difference between somebody who is helping you plan your future and those who are trying to sell you something. A little bit of the used car salesman aspect comes into that. You get a little afraid.

Eric Blake: That ties back to our Simply Retirement roadmap process where we say that the first step is a 15-minute introductory phone call where we're going to ask you a lot of questions. We're going to ask about your goals. We're going to try to figure out if it's a good fit. There’s no conversation about investments in stocks or bonds or mutual funds or insurance products. We're not far enough along in the process to know the right strategy or product for you specifically. That's not going to come until the second meeting, where we start talking about strategies and potential products, and maybe not even then. The first thing is making sure we are a good fit for you and for what your goals are: it’s our ‘what you're trying to accomplish’ meeting. Then we get into our next topic, which is let's identify your goals. That's the entire conversation. That first meeting is talking about your goals and what you want to accomplish. What’s important about money to you? Understanding that first and foremost, before we ever get to a stock, a bond, a mutual fund, an insurance product, any of that — that that's way down the road from that point.

Wendy McConnell: That’s very good information, Eric. We appreciate that.

Eric Blake: Absolutely.

Financial Planning Is Not Precise; It Is Adaptive

Wendy McConnell: Hit us with number three.

Eric Blake: Number three is that financial planning is not precise. It is adaptive. When you think about the changes we experience every single day, let alone every single year, there are always going to be changes. When you're talking about financial planning, the initial financial plan we might create for a client is good for about the next 24 hours, if that. It’s key to regularly review your plan and make adjustments as you need to. We meet with every client twice a year. Typically, that's going to be in May and June, right after tax time, so you’re thinking, “I've just gotten my 2022 tax return done,” for example. Now, we need to start looking at the potential strategies for 2023 and beyond. How do we take proactive steps to minimize your lifetime tax liability?

Then we meet again around October. November is when we would typically implement new strategies to make sure that we get it done and that we get it done before everybody gets busy with Thanksgiving and Christmas and holidays and family. Family is extremely important to me, and it's important for our clients as well. We want to make sure we're not worried about whether clients have taken their required distribution in time. We want to knock that stuff out way before the end of the year before you get tied up with family and friends and holidays. That's typically our schedule. 

Wendy McConnell: When you talk about things constantly changing, it reminds me of when you're buying technology, like a phone or a computer or whatever. By the time you get it home, it's outdated.

Eric Blake: Think about this. We just put out our weekly email newsletter, and that was one of the topics we covered, talking about the surprises we've seen in the last few years, COVID being the biggest example. Nobody saw that coming. Nobody knew the impact or what the ultimate impact was going to be, especially when we were right in the middle of it. You think back to March of 2020, and nobody knew what was going to happen. It was going …

Wendy McConnell: … to be two weeks.

Eric Blake: Exactly. It was like two weeks, two weeks...

Wendy McConnell: To flatten the curve.

Eric Blake: It became another two weeks, and another two weeks, and now it's amazing that that's three years ago.

But then you think about how, in 2022, nobody had Russia invading Ukraine. That wasn't on anybody's bingo card, was it? Nobody knew about that. And now we have the banks this year, and people are wondering if the banking system is going to go down. We can't control these things. They're just going to happen. But we can control how we react to them and make sure we don't completely destroy our financial plan because of the unexpected. It's not going to be the last time. It wasn't the first, and it's definitely not going to be the last.

We Control the Things We Can Control

Wendy McConnell: That leads right into number four.

Eric Blake: We control the things we can control. We're not going to pretend to know which way the market's going to go tomorrow or the next six months. We have a pretty good idea over the long term what the market's going to do, but even then, there's no guarantee. We're not going to try to predict things, and we believe in controlling what we can control, which is the amount of money we're saving, how long we give our savings to grow, and what our asset allocation is. Our behavior, how we react to different things that come our way, and making sure we're planning for the various risks that are out there are what’s important. A pandemic isn’t something we can plan for, but we can make sure we've got enough life insurance. We can make sure we've got long-term care insurance. We can make sure we've got some of these risks planned for in advance.

Wendy McConnell: Sounds like a lot of insurance policies,

Eric Blake: You're talking about risk. There are different ways of managing risk. When we talked about the seven essential strategies for investing in retirement, one of the things we discussed was having a war chest. How do we protect you during down markets? We have to have a strategy for that. You can't wait until you're in the middle of a 25% decline in the market to ask what we’re doing. We need to have a strategy in place. We need to know the plan in advance. That, quite honestly, is the best way to avoid reacting emotionally when these things happen.

Wendy McConnell: Remind me again, what is the war chest? 

Eric Blake: The war chest is what we’re drawing money from when you're retired. It's a different conversation from when you're putting money in. When we think about a war chest, what that means is a pile of money. Think of buckets. We're going to have buckets of money: we know we still need our money to grow, so we're going to allocate some to stocks. That's our growth, what's going to help us keep up with inflation. But when we have a year like 2022 or even a worst-case scenario like the financial crisis we saw in 2008, where we saw a significant decline, we need to make sure we have access to income, regardless of what the market's doing. I don't want clients to call me and say, “I still need money. Let's just stop all my income because the market's down.” That doesn't happen. I've never received that call asking to just turn the switch off for a little bit. 

Instead, to make sure we can still provide the income that you're looking for, we have our war chest, which is typically lower volatility assets. It could be some cash, some fixed-income bonds, some different things that don't have the same level of volatility that stocks do to get us through those difficult markets when they happen.

Wendy McConnell: A little bit of a safety net. 

Eric Blake: You can call it a safety net, a war chest, a security blanket. There are all kinds of different names we can come up with.

Prepare for What Can Go Wrong; Invest for What Can Go Right

Wendy McConnell: Let's talk about number five.

Eric Blake: We want to prepare for what can go wrong and invest for what can go right. Even the very best investment portfolio can be undone if you're not prepared for life's what-ifs. That could be Death. A lot of our clients faced that scenario when they lost a spouse or a husband. It may be health issues, accidents, lawsuits, or becoming disabled. Any number of things that can throw off the best-laid plans. We plan for those. We're not going to be able to avoid them, so how do we work around them? We can't control what happens to us, so it's imperative that we prepare for the different possibilities and how we're going to react if they do happen.

Wendy McConnell: People don't want to think about these things, so how do we get across that it's important to address these potential issues?

Eric Blake: If your only method of success is Plan A and Plan A doesn't happen, and you don't have a Plan B, you're going to be in trouble. A big part of what we talk about with financial planning is having contingencies built in because it's not going to go perfectly. We talked in the last episode about how when a pilot flies to Hawaii, they have a flight plan but they're making thousands of adjustments. If they're leaving from California and flying to Hawaii, there are thousands of adjustments that they're making during that flight. They know where they're going to end up, but they never know what the weather's going to do or whatever the case might be. Being able to make adjustments as you go is the key to getting where you want to be.

Wendy McConnell: That's why the number one thing for everything is to have a plan.

Good Planning Has a Long-Time Horizon

Eric Blake: Have a plan. We consider good planning as having a long time horizon, and what I mean by that is we view every client relationship as a lifelong partnership. When we go through the process of our Simply Retirement roadmap with somebody, we want to provide as much value as we can. By the time we get done, I provide recommendations. We tell them they can hire us or do it on their own. They can go take the information to somebody else and work with another financial advisor. That's fine, but what we're looking for is long-term relationships. We're trying to provide as much value as possible because if you hire us, we expect to walk with you every step of the way from that point forward. We want to be there for our clients over the next 10, 15, 20 years. We want to be there for you as much as we can.

Wendy McConnell: What are the things we need to keep in mind as we decide whether to move forward? 

Eric Blake: What you want to do first is decide if you need a financial plan. Where are you today? Do you feel like you know what destination you're headed toward? Do you feel like you know the right action steps are to get you there? Using the Simply Retirement roadmap, we think about what financial planning is for our clients, specifically. We're helping our clients address retirement income, tax planning, asset protection, and investments. Those are the four key areas that we’re going to provide recommendations on. We think about financial planning. We know where we are today. We know where we want to be. But we have to figure out the steps. What action items can we take to make sure we're on the right track?

Then, you need to decide whether you’re going to hire a financial advisor to help you navigate the retirement journey. Do you feel you have the time, the expertise, the knowledge to do it on your own, or do you want to delegate that heavy lifting to a financial advisor? You need to make that decision and decide what you want a financial advisor to do for you. There are a lot of great advisors who I know who just do a financial plan: that it. They give you the right track to run on, and you go from there, and that's okay. Maybe you want somebody who handles your investments for you. Decide what you want a financial advisor to do for you, then make sure you understand whether any financial advisor you're working with is doing it. We are what I would call a one-stop shop. We do the planning. We do the investment management. We handle everything from A to Z, so if that's what you're looking for, we may be a good fit. If not, that's okay. If you just want a financial plan or you just want somebody handling the investments or handling your insurance, that's okay. Just make sure you know what your expectations are and find an advisor who will meet those expectations.

Wendy McConnell: What is something we should look out for?

Eric Blake: The biggest thing is understanding how the conversation starts. Listen to the first question any financial advisor asks you to see if you can tell whether they're trying to sell you something or trying to understand your goals and what's most important to you. The first question out of an advisor's mouth, if they're planning focused, is about what's most important to you about money or why money is important to you. Something like that versus what your investment strategy looks like right now? That's not important until I know what you want to accomplish and what's most important to you. Your investment strategy right now doesn't matter because if we don't know what your goals are, how can we align your investment strategy or anything else with your goals?

Wendy McConnell: Can you give me an example or two of what you think would be high on the list for some people? I think some people might be listening and just thinking, well, my goal is to have as much money as possible during retirement, but you need to be a little more specific than that, right?

Eric Blake: When you think about why money is important to you because the answer is typically money, it’s usually just a tool to help you achieve other things. That could be peace of mind. That could be spending time with family. For a lot of our clients, especially if they've been divorced or they've been widowed, spending more time with family is almost always a high priority. I want to be able to take my grandkids on vacation. That's what we're talking about. We're understanding what's most important to you about money. If it's money itself, just more money, that's a hard goal to accomplish because you don't know the result. What does success look like? If we can define what success looks like, we're probably on the right track.

If that means more time with family, more time for travel bucket list items, you think about all the places you wanted to travel to. We're going to Italy in a couple of months. That's one of our bucket list items. If we can accomplish that, we can say we're on the right track. So, what is truly important to you? If it's money itself, we're probably not the right fit. But if it's spending time with family, peace of mind, those types of things, that's what we're hoping to help people accomplish.

Wendy McConnell: Any final thoughts as we start to wrap things up?

Eric Blake: I think it comes down to understanding what you're looking for. If these financial planning principles speak to you, use them however you feel best. Use them for your own purposes. But if it also aligns with what you're looking for in a financial advisor, we’d love to have a conversation about how we can help you align your goals with your plan,

Wendy McConnell: How do we go about making that conversation happen, Eric?

Eric Blake: The easiest way is to go to our website, www.blakewealthmanagement.com. You'll see our process. If you hit that drop-down, you'll see our financial planning principles right there. If you want to take a closer look for yourself, you'll also see the Start Here button. That's what will take you to the Simply Retirement roadmap process that walks you through every step we go through with every prospective client. If that feels like something you're interested in, you can schedule a 15-minute introductory phone call from there. That's always the first step. We want to get to know you, get to know what's most important to you, and then decide whether we go from there.

Content here is for illustrative purposes and general information only. It is not legal, tax, or individualized financial advice; nor is it a recommendation to buy, sell, or hold any specific security, or engage in any specific trading strategy.

All investing involves risk including loss of principal. Results will vary. Past performance is no indication of future results or success. Market conditions change continuously.

Information here is provided, in part, by third-party sources. These sources are generally deemed to be reliable; however, neither Blake Wealth Management, Private Client Services, nor RFG Advisory guarantee the accuracy of third-party sources. The views expressed here are those of Blake Wealth Management. They do not necessarily represent those of Private Client Services, RFG Advisory, their employees, or their clients.

This commentary should not be regarded as a description of advisory services provided by Blake Wealth Management or RFG Advisory, or performance returns of any client. The views reflected in the commentary are subject to change at any time without notice.

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