Why Comprehensive Financial Planning Is Important, Now More Than Ever

by: Smith and Howard Wealth Management

As I write this article, we are watching the markets tumble as the world comes to grips with how best to slow the progression of COVID-19 and the disruption to business and daily life.  Being in my mid-forties, it’s nice to have the life experiences such that this is not the first financial downturn I have lived through as an adult.  We have had several discussions with young adult colleagues at our firm about experiencing previous financial downturns for the first time.  When having those discussions, I feel a little bit like the retiree in the rocking chair on the front porch saying, “Back in my day….”.  But from experience comes wisdom, from wisdom comes confidence, and from confidence comes a sense of peace.

We have all heard the adage that the best time to plan for a crisis is before it happens.  But who among us is not guilty of procrastinating working on something that would have spared us some pain, if we had only set aside some time to put things in order?  All clients at Smith and Howard Wealth Management are offered comprehensive financial planning along with their investment management so that we can provide guidance to our clients when it comes to the big picture.

When we discuss comprehensive financial planning, we go well beyond investment planning and forecasting.  Investment performance is a small piece of a household’s overall financial picture.  And while it is likely at the forefront of your mind and your conversations with family and friends right now, your financial plan plays a significant role in how your returns affect your long-range goals.

Comprehensive financial planning looks at income, expenses, liquidity, insurance, estate planning, along with investments.  Your comprehensive plan also goes beyond a linear analysis of what a straight-line average investment return provides.  We use a Monte Carlo analysis for investment returns to stress test your financial plan.  What this means is we run simulations that include the good and the bad years in the markets based on historical volatility.  Our clients who have gone through the planning process with us have the confidence that we have looked at what happens if we have an “event” in the investment markets: an event like we are having now, events that have happened many times over the course over history.  Does this mean we can perfectly predict when the events will happen and how they will affect you?  The answer is, “No” (who could have predicted this one?), but our clients have the confidence of knowing where they stand in their financial plan. In most cases we have discussed with our clients where changes should be made if needed to keep their financial plan on track.

Now may not be the best time to update your plan with recently deflated values without some consideration for future market rebounds. Recent market swings do, however, warrant revisiting your last plan with your financial planner.  Your financial planner can review spending, income, and retirement assumptions and can help you explore how adjustments to those categories can keep your plan intact.  If you have not started a plan with us previously, we are available to help you assess your situation.  Current investment valuations may make your outcomes look weak, but we can help you look at your options.  Like previous financial downturns, this too will pass.  As investors, we much each fight the natural behavioral urge to flee and instead keep our eyes on the big picture and the long-term time horizon.  Feel free to reach out to me or any of us on the Smith and Howard Wealth Management team to discuss your situation.

Unless stated otherwise, any estimates or projections (including performance and risk) given in this presentation are intended to be forward-looking statements. Such estimates are subject to actual known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from those projected. The securities described within this presentation do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in such securities was or will be profitable. Past performance does not indicate future results.