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Financial Advising: The Fun Part

Creating solutions for your clients’ needs is challenging and fulfilling.

By Donald Ray Haas, CLU, ChFC, CFP, MSFS

The really fun part of financial advising is possibly the most challenging. This is Developing and Presenting the Financial Plan, the fourth step in the financial advising process. The first three steps were discussed in this column in the past two issues of Advisor Today (December 2000 and January 2001).

This step is fun because advisors now have an opportunity to utilize their base of knowledge to explore solutions applicable to a client’s circumstances. The development of advice that could have far-reaching implications for the client creates a heavy responsibility that is a challenge like no other.

Today, everyone in this country, (and soon in the world), will have access to more investment information on the web than they can possibly digest and understand. Advisors have access to the same information, but we not only understand the information, we can properly apply our knowledge to it.

Preparing recommendations
In the financial advising process, this application takes the form of preparing recommendations that range from the simple to the highly complex.

Another example of the challenge in preparing recommendations is working out how to tell a client that if he retires next month at 62 (as planned), he will be broke at 65. The advisor is hard pressed when shattering dreams of any kind. I was faced with this situation several years ago.

As you can imagine, there are millions of such real-life situations. And it’s a significant responsbility to be involved in these extremely important decisions.

Allocating income
An important element of financial advice is addressing how clients allocate their income. I present this on what I call a Cash Management Statement. Developing information for this statement may be difficult for the client, especially if he has never prepared such a document. I tell new clients, "If you have never compiled a Cash Management Statement, it will be the hardest thing I’ll ever ask you to do."

The following instructions will assist you in the preparation of the statement and ensure its accuracy:

  • Prepare a spreadsheet by setting up a column for each category of expenditures listed on the Cash Management Statement.

Your client’s task is to list every expenditure he had during a 12-month period. There are only three sources of information for all expenditures. They are:

  • Check book registry, charge and credit card statements. Transfer the amount of every item to its proper category.
  • Cash. This will be the difficult one. It is great if they have receipts for some expenditures; otherwise, you will have to guess. First, have the client try to remember the large cash items; next, the routine items for which they paid cash.
  • Total each category and transfer the total amounts to your Cash Management Statement. Total the amounts on this list and compare the total amount to your gross income for the period.
  • Now review each item to determine if it should be "revised" up or down to meet your desired goals. This is not an easy task but it is worth the effort because you will know where your client’s money goes. And with this knowledge, you will be in a position to suggest the best places for needed or desired changes.

When financial advisors have completed gathering data, analyzing, evaluating, developing and consulting, they are ready for what could be called the "Money Steps" in the six-step process: Implementing and Monitoring.

Next month, we’ll explore these steps.

Donald Ray Haas, CLU, ChFC, CFP, MSFS, has been an insurance agent and financial consultant for 44 years. He can be reached at 248-213-0101 or at

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