Disclaimer

This hypothetical financial plan is being presented to illustrate both the process of financial planning and the actionable deliverable you’ll receive from Ruffalo Wealth Management. 

The people and circumstances are completely fictional and are for illustrative purposes only. You should seek the advice of a qualified professional for your particular situation and should not rely upon any of the information herein to make personal financial decisions.  

Hypothetical investment returns presented in this financial plan are based upon historical market index performance and are not indicative of future results. Actual indexes cannot be purchased. Further information about the financial plan’s investment assumptions are disclosed in the financial plan.

Under the Certified Financial Planner Board of Standards, Inc. “Standards of Professional Conduct”. Ruffalo Wealth Management [RWM]adheres to these Standards of Professional Conduct. The example of the Hill’s will you walk through what a client can expect when working with RWM and demonstrate how all of those steps are implemented at RWM.

 

FICTIONAL CASE STUDY

Henry and Karen Hill are a typical corporate couple, with equity compensation, contemplating their retirement and realized that there are many moving parts to their personal finances. They had investments accounts all over the place, were unsure of when they should file for Social Security benefits, thought they had adequate insurance coverage, and were unsure whether they had enough financial resources to last the rest of their lives.

After doing some internet research and talking to friends, the Hill’s decide to enlist the help of a financial planner. They decided that they should hire a CERTIFIED FINANCIAL PLANNERTM professional because of the level of training required to be a CFP® professional. 

Henry and Karen filled out a pre-consultation worksheet prior to the initial consultation with RWM. The worksheet helped the Hill’s to outline the basics of their situation and helped their RWM advisor figure out what additional questions needed to be asked prior to beginning the 

After the initial one-hour, no-cost consultation, RWM provided a fixed-fee quote for the cost of the stand-alone financial plan, allowing Henry and Karen to know what would be involved in the financial planning process, how much the plan would cost, and what they could expect to get from their financial plan.

After signing the Financial Planning Agreement, Henry and Karen get started and schedule the first in depth goal setting and discovery meeting. At the first meeting we mutually defined their goals to be the following: 

  • Create a retirement income plan to generate $12,500 per month in net after income increasing annually at 2.5% for inflation beginning at age 65/62. 
  • Select pension distribution option 
  • Create a social security claiming strategy 
  • Design a plan to manage investments and protect from major market declines 
  • Purchase a beach house for $500,000 from existing assets 
  • Reduce concentrated equity positions on a tax efficient basis and reinvest proceeds 
  • Coordinate investment tax impact with CPA to maximize bet after tax returns 
  • Analyze all accumulated life insurance contracts 
  • Review structure of estate/assets and impact on survivorship for remaining spouse 
  • Transfer wealth at second death to 3 children in trust 

PLAN CONSTRUCTION

The  CFP® professional at RWM reviews all of the detailed information provided during the goals and information gathering meeting. Their advisor enters all financial assets, property, income, insurance, and retirement goals into the financial planning software.  

After constructing the financial plan in our financial planning software and then testing it, each area of the Hills’ financial life is evaluated in the context of their personal goals. Since one area of personal finance can influence another, it is important to have the big picture when making specific recommendations in each various part of a financial plan.

Investment Analysis – How has your current portfolio performed? What are you paying and to whom? What is the risk profile of your portfolio and what changes should you make to bring your investment strategy in line with your financial plan?

Income Tax Strategies – By simulating a 20-year projection of taxable income and spending, a clear picture usually emerges. Opportunities to smooth income (or expenses) over time can create a much lower overall tax burden thus adding longevity and strength to an investment portfolio.

Estate Plan Review – Reviewing an estate plan can identify conflicting titling or beneficiary designations. An estate plan is about ensuring a solid plan exists for eventual transition through diminished capacity and death.

Insurance Report – Insurance is necessary to shift risks which could otherwise be financially devastating. This review will look at the specific coverage and risk exposures you have and make specific recommendations. You need the right coverage and should be paying a fair price for that coverage.

PLAN PRESENTATION

After running various simulations and trying different scenarios, the financial plan was presented to Henry and Karen. The financial plan is first calculated assuming the Hills continue on their current course of action and pursue all of their stated goals.  We determine if what they “want” is possible and the probability of success.  We then synthesize everything we know about your financials and what we know about you personally to create our recommendations to help you accomplish your goals. We then run “what ifs” against the major risks retirees face. 

  • A major health event that requires institutional care 
  • Retiring into a bear market and taking losses in the first few years of retirement 
  • Overspending 
  • Increased income tax rates 
  • Inflation 
  • Death 
  • Longevity risk 
  • Concentrated Equity risk 
  • Government policy 

We then compare the current path VS all of the recommended changes and test the outcomes.  

Sample recommendations would include: 

  • Specific investment changes and custom portfolio design 
  • Tax efficient stock liquidation and reinvestment strategies coordinated with a CPA 
  • Calculation of the appropriate amount if life insurance you may or may not need 
  • Calculation and design of Long-Term care coverage 
  • Recommendation on which retirement accounts to draw from first 
  • Budgeting for major purchase 
  • A bucket plan to manage sequence of return risk 
  • Exact timing of social security 
  • Pension analysis 
  • Deferred compensation payout timing 

IMPLEMENTATION AND MONITORING

After the interactive financial plan presentation meeting, Henry and Karen received printed copies of their reports and the retirement plan. All of the specific recommendations are condensed into a 1 page  action plan checklist so Henry and Karen  could simply, in order, implement all of the necessary actions. 

Henry and Karen also decided to retain Ruffalo Wealth Management for wealth management services after the presentation. This includes managing their investments, Insurance policy management, coordinating tax planning and annually updating of the financial plan. They recognized that they wanted to focus on other things and have a trusted advisor who, moving forward, would continue to help them manage all of the moving pieces of their financial life.

RWM handles all of the paperwork to move consolidate all of their assets to LPL Financial as custodian. Coordinating with the Hill’s CPA, their RWM advisor works through the tax implications of reallocating their portfolio and systematic equity sales 

Henry and Karen’s RWM advisor works with their existing attorney when their wills and other estate planning documents are being updated. 

After the financial plan is implemented, the Hills have continual financial planning and investment monitoring with RWM on a set schedule they mutually determine for their situation.  As questions have come up, the Hills’ contact their CFP® at RWM for financial advice without additional fees beyond their asset management fee. All of their services are included in this one fee. The financial plan is updated annually and as changes in taxation; investments; and insurance occur, RWM will reach out to the Hills, giving information about financial opportunities and threats to their retirement plan. As laws and their situation may change, RWM is available to be involved in the estate and tax planning process as needed. The Smiths have found that the long-term relationship approach of Ruffalo Wealth Management have put their minds at ease, as they now feel they have a true financial advocate in their corner.