AUGUST 2020

There are few industries in the world that have accomplished what the US commercial aviation industry has - an almost perfect record of safely delivering passengers at heights of five miles and at speeds in excess of 500 miles per hour -- and it has done so year after year. A key contributor to this record: preflight and in-flight checklists. What does this have to do with successful financial planning? More than you might think.

Introducing the Fairhaven Standard of Care

Borrowing insights from aviation, we’ve developed the concept of a Standard of Care for comprehensive wealth management. Highly personalized, not all elements of the following checklist will apply to each person. Unique circumstances will likely demand unique solutions. However, the following framework is intended to facilitate discussion and identify strategies across a broad range of topics.

1. Uncertainty Preparedness: establish a savings account with at least six months’ worth of expenses
 

2. Portfolio Review

  • Define your risk profile

  • Define the roles of active and passive investing in the portfolio

  •  How do you ensure that the portfolio is optimized to avoid impairments/underperformance over time?

  • What performance impairments may impact spending?

  • What is the role of diversification in the portfolio?

  • How do you diversify across asset classes? How many asset classes and why?

  • What is the role of a concentrated portfolio in diversification? What research supports this strategy?

  • What is the role of and reason for alternative investments as diversifiers in the portfolio?

3. Financial Planning

  • Define long-term financial goals

  • Perform a Monte Carlo analysis of goals; establish the baseline likelihood of success and tracking

  • Budget and savings strategy: determine how savings and sacrifices influence long-term goals; establish

  • a monthly savings goal

  • College spending plan (if applicable): establish 529 account(s); how does someone balance 529/savings/scholarship/student plans? How does someone equalize spending if children have different college expenses?

  • Is the individual saving for a wedding?

  • Does the person plan to keep the existing home, buy or rent a short-term domicile, and/or move now or later to a retirement location? What are the titling implications of the client’s goals?

  • Is the individual planning to help adult children financially and/or provide annual gifting? If so, when and how much?
     

4. Retirement Planning

  • Define the vision of retirement, including a spending plan; how will the person generate cash flow in retirement?

  • Review employer-sponsored retirement plan: refine investment strategy

  • Refine holistic investment approach; does the person have additional retirement accounts?
     

5. Legacy Goals

  • Define family gifting goals and philanthropic gifting goals

  • Irrevocable living trust (if applicable): protect assets from the impact of taxes
     

6. Education Goals: Establish 529 accounts for children (engage grandparents/extended family)
 

7. Balance-Sheet Management

  • Review loans and optimize borrowing; consider asset-based lending

  • Review mortgages with consideration of a long-term spending plan

  • Consider establishing a line of credit
     

8. Insurance Review

  • Establish life insurance strategy: Include life insurance/ income replacement?

  • Review home insurance for replacement cost coverage, especially in areas with rapidly escalating replacement costs

  • Review health, disability and umbrella insurance policies for coverage amounts

  • Review all beneficiaries for all plans (including defined contribution)

  • Perform expanded insurance review: traveler’s insurance, pet insurance, inventory of vehicles and hard assets
     

9. Health Savings Account (HSA) (if Applicable)

  • Set strategy for accumulating assets in HSA for later use

  • Establish policy of saving all health-related expenses for later reimbursement

 

10. Medical Screening and Preventative Healthcare Plan: Consider a comprehensive diagnostic service, such as an Executive Health Assessment; recent research shows there are simple lifestyle changes that people can make to significantly improve their quality of life and reduce their risk of early mortality.

 

11. Basic Estate Planning

  • Discuss advance medical directives and durable power of attorney for medical and financial decisions for adults and children; consider sharing with godparents and other adults of influence

  • Update all wills, executors and durable powers of attorney

  • Engage a specialist for advanced estate planning

  • Consider adding an ethical will to enrich the understanding of what this money means to the extended family

  • Establish medical power of attorney for adult children

  • Extended family strategy: establish inheritance/intergenerational gifting strategy (discuss with grandparents); include Roth IRA(s) with grandchildren as beneficiaries

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12. Cybersecurity, identity theft, safety, and documentation

  • Set strategy for identity theft protection

  • Collect next of kin/family contact permissions

  • Collect a record of safes, storage units, and safe deposit boxes as well as accessibility for each

  • Collect records of all accounts, computer files, passwords, photos of personal property, inventory of vehicles and confirmation of financing and ownership.

 

If you have questions about financial uncertainty or about any aspect of financial planning, feel free to reach out to us.

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About Fairhaven

Fairhaven Wealth Management is an independent, privately-owned investment and wealth management firm serving select families and small to mid-sized businesses. At Fairhaven, our commitment is simple – we exist to serve our clients…period. Our culture of service and accountability combined with prudent risk management and tax-efficiency are the cornerstones of our client commitment.

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For more information, please contact:

Marc Horner, CFP®

Founder & Wealth Advisor

mhorner@fairhavenw.com

630.990.9000

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This material has been prepared for informational and educational purposes for our clients and friends. Please consult your Fairhaven Wealth Management professional to discuss how this may impact your own financial plan and/or investment portfolio. This material is not intended to provide, and should not be relied upon for accounting, legal or tax advice or any other purposes. Neither Fairhaven Wealth Management nor its subsidiaries or affiliates provide accounting, legal or tax advice. Please consult your tax advisor or attorney for such guidance. Fairhaven Wealth Management is an SEC registered investment advisor. For a copy of the firm’s ADV Part 2 disclosure document please direct your inquiry to admin@fairhavenw.com.

 

 

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Advisory Services offered through Fairhaven Wealth ManagementNo client or potential client should assume that any information presented or made available on or through this website should be construed as personalized financial planning or investment advice. Nothing on this website constitutes investment advice. Personalized financial planning and investment advice can only be rendered after engagement of the firm for services, execution of the required documentation, and receipt of required disclosures. Please contact the firm for further information.

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