Retirement Planning

Putting Together the Pieces of the Financial Planning Puzzle

Many investors look at financial and retirement planning from a singular point of view. In essence, they put money into their portfolio, which has one goal: grow as much as possible for the ultimate result of funding their investment goals. For all intents and purposes, it’s a box made of money, held together with compound interest.

Financial plans are not that simple. They consist of multiple components that do different things at different times for different purposes. For many clients, especially those who have accumulated sufficient assets to hire a financial advisor, those components typically include funding retirement, covering children or grand-children education costs, buying a second home, setting up a donor-advised fund and leaving some money behind for the family. Each of these components will likely be addressed by different financial instruments each of which would have different risk, return, liquidity and time horizon features. It wouldn’t make solid financial sense to put all of your money into a savings account for the purpose of funding your retirement, or all of it in one stock for that matter.

Simon Holford, chief executive officer and managing partner of Pasadena Private Wealth, believes that financial planning is like putting together a puzzle. It consists of many different parts, all of which are required to create a complete financial picture for the client. The overall goal is to create a financial plan that helps the client to achieve specific investment goals.

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Holford founded Pasadena Private Wealth in 2018, along with managing partners Iain Whyte, who serves as chairman, and Bryan Muth, director of retirement plans. The firm provides total wealth management services, which include financial planning, portfolio management, real estate services, business consulting, retirement counseling, and trust and estate planning.

Every client’s financial puzzle is different, as it will involve different goals, needs, financial resources, expenses and so on. In many cases, changes in the client’s situation along the way will alter the final picture. While some advisors will still recommend off-the-shelf solutions, customized financial planning is often the best approach for tailoring the products to the client – and not vice versa.

Holford built Pasadena Private Wealth on the foundation of providing clients with personalized, responsive financial services. The firm’s advisors take a “three-dimensional approach” to evaluating their clients’ financial lives. This involves conducting a thorough analysis of an individual’s balance sheet, rather than just their investment portfolio. This enables them to develop a better understanding of their goals and situation from a personal, professional and business perspective. The advisors will then put together a customized wealth strategy that combines the client’s portfolio assets, real estate investments, and business interests.

“We often start with figuring out the client’s personal index, which is the rate of return they need from the assets to do what they want to achieve,” said Holford. “Once we’ve developed the appropriate portfolio, we’ll assign their assets to different compartments in seeking to help them achieve specific goals.”

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Given that people are living much longer, often into their 90s, financial plans must be built with clients’ longevity in mind. Retirement can last for 30 years or more, and if not properly planned for, people can easily outlive their retirement funds. It’s essential to factor this into the planning process, and build a mix of portfolio assets, rental real estate and private equity investments that are designed to deliver under different scenarios, including changes in lifestyle, variances in the market and other situations.

Holford and the other advisors with Pasadena Private Wealth provide clients with different portfolio offerings that have different risk profiles and time horizons, which can address changes in lifestyle, as well as variances in market conditions.

“We put together various risk management portfolio strategies to deal with various scenarios,” said Holford. “We’ll also factor long-term care into financial plans, and stress test them for various potential costs. We’ll even work in hybrid policies that include life insurance with long-term care riders.”

Financial advisors, and the industry as a whole, should focus on helping clients to look at financial planning from a multi-pronged approach. Rather than investing for a singular purpose, advisors should help clients to segment their investments for specific goals. Each asset or group of assets should be aligned for different purposes. Advisors should evaluate the different groups of assets based on their respective performance, and not at just the overall portfolio’s performance. It’s important to help clients understand that different parts of their portfolio have different purposes.

percentholford300x200As Holford and his team of advisors treat their clients’ portfolios from the perspective of an intersection of investment, real estate, and business concerns, they leverage technology to create comprehensive financial plans, which also enables them to evaluate their clients’ balance sheets. This supports communications with their clients, educates them on the status of their overall financial picture, and provides more responsiveness when making changes to their investment strategy.

“We use technology to help clients view their financial information from their own portal,” said Holford. “They can view both their financial plan and their balance sheet, giving them their whole financial picture in one place. This enables them to get a comprehensive picture of their financial performance, and allows us to better update clients on progress towards their financial goals.

For more information on Pasadena Private Wealth, visit: pasadenaprivatewealth.com

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