Broker Check

Documents are critical to a financial planning process that follows the fiduciary standard

| May 31, 2017

"The palest ink is better than the strongest memory"

Don't confuse exclusivity with confidentiality

At one level I apologize to readers for perhaps belaboring what I feel is an obvious point.  Even if you are working with one of the financial "folks" who adheres scrupulously to the fiduciary standard, that practitioner is not -- IMPO -- "In My Professional Opinion" -- able to effectively follow a financial planning process at the fiduciary level without all of your relevant documents.

Way back in the day, we used to call that idea a keen grasp of the obvious.  Yet, this concept is frequently not followed. Sometimes the practitioner doesn't follow it.  Sometimes the client is not interested in following it.  

Multiple times I have personally - not second-hand - heard individuals clearly state they choose not to tell one or more of their financial folks their complete financial picture.  I do understand the confidentiality concerns.  But this practice is actually risky if not downright dangerous to the client.  If you don't trust your financial "folk" with all your confidential info, maybe it is time to find someone you do trust!

Sometimes people confuse the concept of exclusivity with the concept of confidentiality.  I happen to be a practitioner that does not require exclusivity. Actually, again IMPO, sometimes exclusivity may not be possible while following the fiduciary standard.  It might not be in clients' best interests to move something.

Some clients sometimes might feel for the sake of diversification, they do not want to put all of their financial eggs into one basket.  Diversification is a double-edged sword.  If Planner A does not know what the client has with Planner B, unnecessary and perhaps overly-risky duplication and concentration can occur.

That is just one reason why my fiduciary-level financial planning process requires all documents -- all numbered pages, not screen shots.  How else can one tell what the client has?

Your current financial fiduciary -- if you have one -- might be operating under all of the required laws, regulations and guidelines to keep their work in adherence to the fiduciary standard.  That adherence would necessarily reqire all the documents.  If the fiduciary is not requesting the documents, they are not using a fiduciary-level financial planning process.  If the fiduciary is requesting the documents but you are not providing them, then the fiduciary is still not following a fiduciary-level financial planning process.  Doing so requires documents.

Special Note for Couples

Repeating my point from a previous post, many opinions exist about the fiduciary standard. Here is another one of mine.  If you are a "completely" "single" individual, then you might be - widowed - divorced - never married - etc.  If you happen to not own any real estate other than your home, and if you also are not involved in any business interests, your planning might be relatively simple and straightforward. If your goal is to retire as part of a couple, your planning is vastly more complex.  True for married couples.  True for non-married couples. The key is if your goal is to combine finances in some way to meet your retirement objectives.  If you are in that category, then all documents are needed for both people.

 
Documents Needed

All numbered pages.  Not screen shots.  If some of these documents don't exist for you, simply tell your fiduciary ...

Investments

IRA - 401(k) - Non-Qualified - Financial - Alternative - Real Estate investment - Business Investments

Retirement and Pension 

Retirement Plan Statements -- Documents - Pension - current & future estimated benefits 

Beneficiary Designation Forms 

Separate documents for everything that requires a Beneficiary Designation form - Pension - Annuity - 401(k) - 403(b) - IRA - Life Insurance

Insurance 

Life Insurance - Long Term Disability Insurance - Long Term Care Insurance - Group Insurances, if any - current statements - location of policies - in-force re-illustrations

Tax

Tax Returns - Federal Income Tax - all schedules - all pages - Gift Tax return - Business Taxes - Real Estate Taxes

Income / Cash Flow

Income streams - work - current pay and benefits stub - Pension - Annuitized income and / or cash flow  - current and  or future - Business income  - Real estate investment income - etc - Deferred Compensation documents and details.

Personal Financial Statement of Assets + Liabilities

Estate Planning Documents

Will - Trust as Grantor and / or Beneficiary - Powers of Attorney - Durable - Health Care - Living Will - Future Inheritances

Debts

Mortgage Notes & schedules -- Current Statement for all properties -- Credit Card + other debt details

Business

Profit & Loss -  Balance Sheet  - Shareholders' agreements - Stock Options

Marriage

Pre and post nuptial agreements -  Divorce decree - Insurance policies held on ex-spouse

Questionnaire

Expenses Annual /monthly details - Future inheritance - Goals & Values - both partners

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