All Things Financial Planning Blog


The 5 Biggest Changes in Personal Finance over the Last 20 Years

Personal-DebtMy son recently turned twenty and it inspired me to reflect on all of the changes in his life as well as in my professional life. My son’s progression has gone from being a baby, to a toddler, to a growing child, to a teenager, and finally to a young adult. He is now trying to figure out his professional place in life as he just finished his first year of college. During that same timeframe, I’ve seen personal-finance go through its own five stages of maturity. Twenty years ago it was more about buying a product, being transaction focused, little reliance on technology, running massive volume plans, and focusing just on the money aspects, not health and psychological aspects.

  1. Let’s face it, our culture must sell products and we’re pretty darn good at it. The problem is that the marketing and slick ads of all the things we buy in America today, don’t always match the quality and integrity. I think the biggest move that our industry has made in the last 20 years was to go from selling a product to following a process. The process includes a comprehensive financial plan. The financial plan not only talks about investments but also about understanding debt, figuring out a budget, understanding human capital (what we think of as our skills to make money for ourselves), reviewing your insurance for the major risks in life, and understanding that all of these things are linked together in order to get us all to the finish line.
  2. The transaction focus over the years has ebbed and flowed in terms of the hyperactivity in order to get better performance. Back in the olden days, it was about transactions because that’s how many advisers were paid. It was said that advisers are not in the storage business they’re in the moving business. Today the focus is on asset management for a fee, retainers, hourly fees, and project fees rather than commissions. Although I see a bit of a backlash happening in the last few years where it appears technology is getting ahead of the small investor. The advent of massive millisecond transactions have caused us to doubt the integrity of the system which the world of investments is built upon. We had multiple occasions like the “flash crash” and the search for algorithms giving institutions a major-league advantage over the average investor.
  3. For those who need help with their finances, the place to start your search is to ask a friend if they know somebody that’s good. Yet the next step is to get on the Internet and search for someone that appears to fit your standards. Even though it’s like trying to take a sip out of a fire hose every time you do a Google search people are finding most of their initial information on the internet. Today, I feel it’s much more of a collaborative effort between the adviser and the client. The adviser gathers the information needed to better help assist the client in making decisions. The best advisers these days are more of a librarian than a master of many disciplines.
  4. The financial plans that we put together over the years can be extremely comprehensive and lengthy. The problem with that is that planning by the pound doesn’t always get things done because most people are very busy these days and just want to get down to a summary version. I know that because I do a daily radio show commentary and 14 years ago I had 3 minutes to talk, today I have a minute and 10 seconds. A more modular approach works better because it talks about your specific problem at the moment and how you fix it. I feel that the best plan these days is to have one page versus 100.
  5. Probably the most important change that I’ve seen over the last 20 years is that financial planning has gotten much more holistic. It is about looking at the big picture and trying to incorporate wisdom, along with emotions, as we see the springing up of behavioral economics and why we do what we do. Reading a book like Daniel Kahneman’s Thinking, Fast and Slow (he was the first psychologist to win a Nobel Economic prize) should be mandatory for anybody who’s going to invest or put together a financial plan. It’s really critical to try and take health, wellness, happiness, human capital, emotions, relations, and wealth together as they are all part of the playing field.

The world of financial planning and investment advisory has moved steadily in the right direction over the last 20 years and I hope that it will continue to do so. There is certainly a lot of room for improvement yet I feel that some of the breakthroughs that we’ve seen in healthcare and technology over the last two decades are going to find their way into a simpler, more comprehensive blend of our money and life connections. Robbers used to say, “Your money or your life.” The next phase of financial planning is going to be “Your money and your life!”

Dave Caruso, CFP®
Certified Financial Planner™
Coastal Capital Group
Danvers, MA


I Don’t Understand My Financial Plan

Get Your Questions AnsweredRecently reflecting on some of cinema’s greatest intellectual quotations, I was reminded of movie Detective James Carter’s infamous query in 1998’s Rush Hour. Chris Tucker’s character eloquently asked Jackie Chan’s character, Chinese top cop Detective Lee, “Do you understand the words that are coming out of my mouth?”

Ok, maybe not one of the most memorable moments on the silver screen, but a funny movie that stands up well fifteen years later. But, that’s not what we’re here to discuss. The quote actually jumped into my head during a discussion about how we communicate with one another, especially in advice-based relationships.

A seemingly infinite amount of information is available on virtually every issue known to humankind, all searchable within seconds from any place with access to the World Wide Web. How we process this information, understand its meaning and filter the good, the bad and the ugly really depends largely on whether or not the information is communicated in a manner we can comprehend.

This certainly has its applications in the world of personal finance. I’d argue the personal finance industry at-large, more often than not, adds layer upon layer of complexity to relatively simple concepts in order to add an air of sophistication and justify an unnecessary amount of cost. I won’t go further on that today except to say that if something sounds too good to be true, you can’t understand it, what it costs and what risks are involved, run away.
Instead, I want to focus on the authentic struggle many financial planners and advisors have in working to develop the right communication strategy based on their clients’ needs.

Scalability allows a company to grow, taking a successful model and increasingly diluting it for consumption by an increasingly growing audience. The problem with scale in the financial planning business is that those seeking advice are all at different points in their lives, with different goals, different resources to meet those goals and different ways to achieve success in meeting those goals.

We also all comprehend things differently, learn through different stimuli and apply concepts to our daily lives at different speeds. Confused? Me too. What does all this mean?

It means that we have a gap in the relationship between financial planning professional and client that both sides have to work to fill. Financial planners need to ensure they have a process in place to help identify how best to communicate concepts and recommendations in a manner that best suits each client involved.

The client, on the other hand, has the duty to speak up when they don’t understand something in their plan, be it an investment recommendation, the path to reach a savings goal or a concept or term used to illustrate a point or answer a question. “I don’t know” or “I don’t understand this” are not only acceptable responses to questions posed or information presented by a financial advisor, but should be a welcome opportunity for the advisor to take an improved approach in helping the client comprehend, thereby teaching the advisor a little more about communicating with their client and challenging them to find better ways to illustrate concepts in the future.

The bottom line is, we all need to be more vigilant about what we understand about the decisions we make and are made for us in our daily lives. When it comes to an advice-based relationship, the more we question, challenge, and discuss, the deeper, more rewarding the relationship will be. Wowing someone with the ability to use big, complicated words to make a point isn’t a talent. Effectively communicating in a manner that gives your audience the best opportunity to understand is.

Chip Workman, CFP®, MBA
Lead Advisor
The Asset Advisory Group
Cincinnati, OH

1 Comment

STAYING Fiscally Fit

I’ve written several blogs, both for the Financial Planning Association and others comparing financial services to the diet & health industry. It’s where fiscal meets fitness, if you will. Today, I have another take that deals with the dreaded “maintenance” portion of any good diet or personal financial plan.

Several years ago, as a recent college grad, I was out of the practice of doing anything physical and had become overweight. I was unhappy and desperate to reverse the trend. I quickly found a diet that promised to melt away the pounds. I’ll spare you the details, but a fast 60 pound loss became 70 gained. Next, a shake-based program through a weight loss center sponsored by a local hospital got my attention. Another 70 pound weight loss came and went like the passing of the tides. This yo-yo effect, according to my doctor, was even worse for me than staying overweight. After a few more years of struggle, I decided enough was enough.

An investment plan can be very similar. You lock into one trend for a while and then, disappointed in the results, switch to the next fad of the moment. And, just like your physical health, the results of yo-yo investing are more damaging to your fiscal health than picking an even imperfect plan and sticking with it through thick and thin.

Fiscally and physically, slow, smart and simple always seems to win the race. Physically, we know that eating less and exercising more are the keys to success. Similarly in investing, having a plan, keeping costs low and buying when prices are low and selling when prices are high are the keys to long term success.

My two initial runs at weight loss took a lot of work. Chasing investment returns and the latest planning trends can too. You might save tooth and nail to finally pay off that credit card debt or reach that important goal. What occurs next, however, is almost more important than meeting the initial goal. How do you maintain the habit?

My weight didn’t come back overnight. Neither do bad financial habits. You celebrate. You buy that one item as a reward for all your efforts. It feels good and can even be healthy. It’s the next three, four or ten rewards that get us into trouble. Unfortunately, like maintaining healthy eating and exercise habits, personal finance and the path to making consistently smart decisions about your money is a marathon, not a sprint. Once you’re on track, it takes patience, determination and discipline to stay there.

I know, I know. Those are everyone’s three favorite things. Mine too! Hey, I said maintaining physical and financial health was similar, not easy.

I eventually found a way to set new eating and exercise habits. Slowly but surely, those habits replaced bad ones. Little by little, the weight came off. Since 2010, I’m proud to say I’ve lost 90+ pounds and have seen over the last several years that these habits are here to stay.

What goals are you trying to achieve? Are you looking for the quick fix or are you constructing long term changes to your habits that will provide less instant gratification and more long terms success? The results, both to our waistlines and our wallets, can be profound.

Chip Workman, CFP®, MBA
Lead Advisor
The Asset Advisory Group
Cincinnati, OH


Will You Teach One Financial Lesson?

I saw a survey many years ago that suggested only one in five parents felt competent to teach their children about personal finance. A recent article in Military Money, quoting a survey by Schwab, said only one in four parents are training their children “by giving them a lot of experience budgeting, spending and saving it.”

It is time for each of us to teach one person one financial lesson. The lesson could be about needs and wants. It could be about creating through a budget. It could be about the value of starting to save early. It could be about the cost of buying on credit.

Few of us have developed all the right financial habits. Most of us regret some purchase we made; or perhaps a purchase we did not make. Maybe we bought on credit planning for the money to be in hand before the bill came. Maybe we took a risk that did not pan out or took a pass on a risk that did pay off for a few brave souls. But few of us have no knowledge.

What can you pass along to young people in your family or at your work? What have you done well to make your financial situation just a little bit brighter?

It is Financial Literacy Month. Will you teach one financial lesson to help make the world a better, more prosperous, more generous place?

John Comer, CFP®
Comer Consulting, LLC
Plymouth, MN

1 Comment

Ready, Set, Save

Stop Treading Water & Start SavingIn the world of personal finance, saving is putting money away in the present for future consumption. We’ve all read about the dismal savings rates of Americans and the lack of a financial safety net and, although we have seen an annual increase in the saving rate after the dip into negative territory in 2005, we are still playing “chicken” with our financial future.

Recent research by the Corporation for Enterprise Development (CFED) shows that more than 127 million people (43.7%) in America are asset poor1 and living one paycheck away from poverty. Looking at these statistics it would seem that for the average American saving just isn’t possible. There are some organizations and programs across the U.S. looking to change that perception and help EVERYONE get ready to save.

Set a Goal, Make a Plan, Save Automatically

One such program is America Saves a national campaign that offers tools, resources and even email coaching support to help individuals and families save for a healthier financial future. This organization started in 2007 and has made great strides in generating community-wide support for increased savings for young and old alike with initiatives like America Saves Week (February 19 – 26) which is just around the corner. Here is how you can get involved:

  • Individuals – If you need some support to get started, you will find it with the Personal Wealth Estimator and a wealth (pun intended) of information on savings strategies and tools. With the Kick Start Your Savings tracking tool you can participate in Save Up! and receive rewards for saving and paying down debt.
  • Organizations (employers, groups, educators and non-profits) – There are three simple steps to get started and you will receive a resource kit with everything you need to participate in America Saves Week including sample activities, posters, flyers and presentation materials. You can even connect with national campaigns in your area.

America Saves is on a mission to help people get motivated, and get into the habit of saving by setting up automatic contributions to a savings account. Already saving? Great, then use this week to review your asset allocation and, while you are at it, review your goals to make sure that your savings projections will meet the target date you have set.

Family Mint

If you are already saving and have been looking for a program to help you teach your kids (or other young ones in your life) about saving, check out Family Mint. This online budgeting and tracking tool helps parents communicate the importance of financial intelligence and provides a way for kids to set financial goals and manage and track their money online.

According to the U.S. Bureau of Economic Analysis (BEA) the personal saving rate in December 2011 was 4.0 percent compared with 3.5 percent in November. Now, we know that target savings rates, just like any other “number” in our financial plan is personal and depends on many other factors. What we do know is that, before the increase in the use of credit in our society, Americans were saving at least 5 percent and as much as 14.6 percent in 19752 and now in the face of staggering consumer debt and a slow growing economy our personal savings will be crucial to our financial security.

So, join the movement and jumpstart or rejuvenate your savings during America Saves Week. Sign up, take action and help someone else you know (or someone you don’t know) begin saving for a secure financial future.

1 A household is considered asset poor if it does not have sufficient net worth (total assets minus total liabilities) to live at the poverty level for three months in the absence of income.

Saundra Davis
President & CEO
Sage Financial Solutions
San Francisco, CA


Finding a Financial Advisor Who Complements Your Style

To enjoy a successful financial advisory relationship, both the client and financial planner have expectations and styles that need to fit like a glove. This article is intended to help you identify your expectations, so you can match with an advisory style most beneficial to you.

 Advisors often profile prospective clients as “delegators,” “validators” or “do-it-yourselfers.”

Delegators want little involvement in their financial affairs due to a lack of time or interest. Delegators are happy to give up control and authorize their financial advisor to implement strategies on their behalf, either with or without prior approval. Delegators may work with brokers or high-touch fee-only financial advisors who charge based on assets under management. Delegators with significant wealth may also use family office services for bill-paying and personal financial bookkeeping. 

Validators often have a vision of their financial future and are simultaneously uncertain exactly how to reach their destination. Their financial acumen may range from very limited to experienced, yet they often feel confident in their decision-making ability. They also recognize that, as a professional with wide experience, a financial planner can supplement the valuator’s own knowledge and understanding. Validators are willing to pay reasonable fees for services. They want both advice and the ability to maintain control over their finances. Validators are eager to learn and participate in the planning process. They typically chose fee-only (no product sales) financial advisors who may or may not charge a percentage for assets under management. 

Do-it-yourselfers (“DIYers”) are highly involved with the details of their personal finances. They regularly comb through the financial news and publications. They may even read prospectuses! DIYers often feel they can captain their own financial ship better than anyone else. They keep good records, often track their spending and prepare their own financial forecasts. A DIYer foregoes the following benefits of financial planning services: uncovering “blind spots,” objective feedback and advice free of emotion, access to cutting edge knowledge through continuing professional education, and experience based on working with many clients. Financial advisors recognize that DIYers are not willing to accept help at any fee. DIYers may interview many financial professionals, yet ultimately decide to rely on themselves.

As well, financial planners and advisors come with a variety of educational backgrounds, certifications, philosophies and fee arrangements. You can find descriptions of many types of advisors.  In addition, there are checklists for interviewing potential financial planners and a summary of how planners charge.

CFP® practitioners and members of the Financial Planning Association (FPA) are distinguished from other financial advisors by adhering to a required fiduciary standard. In essence, this means the advisor must always place the client’s interest first and fully disclose any potential conflict of interest. This is higher bar than the suitability standard required for brokers and other sales representatives. Their recommendations need only be suitable for you as a client. 

If you’re looking for the right financial planner, be sure to check out PlannerSearch!

Constance Stone, CFP®
Co-Founder, President
Stepping Stone Financial, Inc.
Chagrin Falls, OH

1 Comment

College Finances – The Basics & Beyond

Students, it’s time load up the cars with the clothes, bedding, soap, deodorant and toothpaste your parents will implore you to use on a daily basis and everything else that will fit in an 8’ x 8’ dorm room and head off to school. Whether freshman year or a return trip, more and more attention is being paid your ability to understand personal finance. Fortunately, more tools than ever are available to help you make the best possible decisions are available.

To ensure you get started on the right foot, I’d like to suggest some added coursework as you hit campus this year. Below are brief course descriptions from the basics all the way to more graduate level work. Passing all three of these courses before you kick off the school year will help keep your wallet in good standing all year long.

FIN 101 – Basic On-Campus Personal Finance:

  • Free Stuff: College students are new consumers making product loyalty choices that can last a lifetime. Companies know it and want your business. Look around campus for coupons and other offers to secure all kinds of free consumer goods. Be wary of anything that asks you to fork over personal information.    
  • Budget: In short, have one. Know how much cash you have to spend each month and let that be your guide. Want to spend big this weekend? Make sure there’s nothing on the horizon for the rest of the month that you might have to miss out on. The discipline you put in place now will serve you well for years to come and ensure you don’t miss out on opportunities or experiences that are really important to you.
  • Credit Cards: Stay away from them or have a very specific, disciplined plan in place to use it. The only real use for cards at this point is for emergencies or to purchase an item or two each month to begin building your credit. That, of course, implies that you’ll pay the balance off in a timely fashion each and every month. Oh, and running out of beer does not count as an emergency.

FIN 362 – Intermediate Financial Literacy

  • Technology: So you’ve got the basics down, but want to make sure you’re using all the tools available to make sure you’re spending smart. Check out, a free site where you can establish your budget, link accounts and receive automated warnings if you’re close to overdrawing your account or nearing the limit on a credit card. This will help you avoid expensive overdrafts and potentially protect you from identity theft if a credit card would end up in the wrong hands.  
  • Credit Score: Speaking of identity theft, there’s no time like the present to start monitoring what may be your true “permanent record” in life. A good credit score can mean saving thousands and thousands of dollars in reduced borrowing costs over a lifetime and lowering insurance premiums. Also, it is often part of background checks in the hiring process. You wouldn’t want to miss out on that first job because you blew it with a credit card one weekend in college. Check out at least once a year. You have the right to one free report from each of the three major credit bureaus. Also check out, a newer site from TransUnion that allows you to view your credit score for free and simulate various activities to see how they impact your credit score.

FIN 465 – Advanced Concepts for the Ultra-Prepared

  • Basic Authorizations (Parents take notes here): Many of your parents’ rights and obligations involving children end at the 18th birthday. While this freedom can be empowering, be careful not to cut ties too hastily. Consider getting some basic paperwork put together by your parents’ estate planning attorney to give them the authorization to make calls on your legal, financial and medical affairs if and when appropriate. Imagine having a medical emergency and your parents having to go through a court to get rights to basic information. Take this a step further and have a Family Educational Rights & Privacy Act (FERPA) prepared that gives them the right to communicate with your school as well. 
  • Take a course: These tips will help you get in the right mindset for making prudent choices, but there’s so much more to learn. More colleges than ever are offering some kind of personal finance course. It’s empowering to leave school not just with a degree and a job, but with the ability to negotiate the purchase of a car, a home and understand the basics when it comes to your credit, spending plan and more. Take the time to seek out these courses as part of your curriculum; it may be the most valuable credit hour you’ll earn in school. Best of luck!

Chip Workman, CFP®, MBA
Lead Advisor
The Asset Advisory Group
Cincinnati, Ohio