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Houston Financial Planning Seminar: Highlights

Jonathan Swanburg
By: Jonathan Swanburg
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Last week in our Houston office, we hosted a financial planning seminar focused on the on the planning technology we use to consolidate and analyze our clients' entire financial lives. Rather than recording myself standing in front of the room for an hour, hoping you could see the slides and hear the audio, I decided to record a few summary videos that touch on the highlights.

Risk Assessment Tools

This video walks through our process for using Risk Assessment tools to build the portfolio best suited to your goals and comfort with volatility.

The short version: First we ask a series of questions that create trade offs between risk and reward. Based on your answers, and considering likely market conditions, we determine how much loss you could tolerate over a six-month period. To that number we prescribe a risk score that ranges from 0 (you can tolerate no volatility) to 100 (you can tolerate extreme volatility). Second, we compare your current holdings to your prescribed risk score and stress test the portfolio to determine how it would have performed under extreme market conditions such as the Financial Crisis from 2007 – 2009 or a quickly rising interest rate environment like we saw in 2013. Finally, we offer a proposed portfolio that is more closely aligned with your goals.

Ultimately, as we’ve written about before, the best long-term portfolio is the one that you can hold through good times and bad. If your portfolio is too aggressive or you don’t appreciate the inevitable volatility, you will likely sell when you get scared and be positioned too conservatively when the market rebounds. A portfolio that is allocated too conservatively may be tolerable in the near term but devastating over the course of an investor’s lifetime.

Wealth Management Client Portal

This video highlights the wealth management portal we use to aggregate your financial life from the client-side of the platform. (Request your free access here).  

First, we show how we’d dynamically aggregate your accounts so the data is accurate and up to date. Second, we highlight the importance of analyzing your allocation across all of your investment accounts rather than looking at each account in isolation. Third we describe how the Vault should be used to digitally store copies of important documents such as passports and powers of attorney.  (The full Vault Checklist can be downloaded here.) Finally, we go through some of the available reports such as a personal balance sheet, 5-year cash flow, and net worth over-time.

Wealth Management Client Reporting

While a one-page summary is a terrific tool for understanding a financial plan, the quality of the output can be deeply skewed by small mistakes in the underlying assumptions.

In this video, we walk through cash flow and an income tax reports to show how details like the types and timing of income can create significant tax consequences which in turn create meaningful financial planning opportunities.

Scenario Building and Stress Testing

A good financial plan lays out a strategy for confidently achieving your financial goals. However, it must be flexible enough to adapt to changes in your life, market conditions and tax laws. The Decision Center component of our wealth management tool does exactly that. 

In this video, we review a client’s base-case scenario and identify the changes the client could make to improve the plan’s likelihood of success. In the Decision Center, we can simulate a wide variety of market conditions specific to the client’s investment allocation and establish the range of likely outcomes.

Finally, we use this client’s plan as an opportunity to visualize the importance of staying invested for the long-term. Many investors believe that entering retirement requires getting very conservative to reduce the risk of loss. However, over a 30 or 40-year period, not only does staying too conservative not reduce the potential loss, it can actually exacerbate the likelihood of failure.

Click here for the full deck of original slides including all the appropriate disclaimers.