Financial Planner Education Is Essential In Today" s Job Market
Planning for retirement can be a very tedious and meticulous undertaking. With an estimated 78 million "baby boomers" currently approaching the age of retirement, financial planners have become even more essential. A financial planner education will cover topics such as related investments, optimal asset allocation, post-modern portfolio theory and retirement planning. Before beginning the actual investment planning for retirement, planners and clients work together to formulate an investment policy statement (IPS). This "contract" outlines the general rules for the manager and provides the general investment goals and objectives of the client.
Drafting an IPS is commonly associated with qualified retirement plans. However, a "modified" policy statement can be contained as part of an investment or financial plan for an individual or couple, whether the money is qualified or not. Such a statement and/or outline can help clarify what the practitioner is supposed to be doing for the client; it can serve as a framework to work within as well. During financial planner training, it is understood that although investment policy statements are not required, they are strongly recommended. They are "mission statements" that act as a yardstick for the client to objectively measure performance. When used for retirement accounts such as 401(k) plans, the investment policy includes reference to the investment committee, advisor, asset manager and plan participants.
During financial planner training, trainees will learn that all retirement money is treated in one of three ways: taxable, tax-deferred, or tax-free accounts. With tax diversification, the advisor is hedging client accounts by allocating assets across a range of accounts that are taxed differently—from tax deferred accounts such as traditional retirement accounts and annuities to taxable accounts such as brokerage accounts and bank CDs to tax-free accounts such as a Roth IRA and Roth 401(k). By holding a variety of accounts with different tax characteristics, putting the right kinds of investments into each one and tapping them strategically, the advisor can maximize the client's after-tax returns, particularly during retirement. Ideally, taxable bank and brokerage accounts are where living expense and emergency money come from. These include municipal bonds, stocks, and taxable bonds. Tax-deferred and tax-free accounts are where the bulk of a client's assets should be—with tax-advantaged assets possibly going into a taxable or tax-favored account.
The investment policy statement acts as an investing blueprint to guide the planner when deciding upon choosing the portfolio assets. Although the planner does not refer back to the document on a daily basis, he or she can reference it and use it as a report card for the portfolio, to compare the investment performance to the initial goal. Successful utilization of tools and tactics gained during a financial planner education will benefit both the planner and the clients. A client's investment policy statement also covers his or her individual liquidity requirements. Some investments are more liquid than others and it must be specified how quickly the client would need to get his or her money back if looking to cash out the investments, specifically for retirement needs.
Drafting an IPS is commonly associated with qualified retirement plans. However, a "modified" policy statement can be contained as part of an investment or financial plan for an individual or couple, whether the money is qualified or not. Such a statement and/or outline can help clarify what the practitioner is supposed to be doing for the client; it can serve as a framework to work within as well. During financial planner training, it is understood that although investment policy statements are not required, they are strongly recommended. They are "mission statements" that act as a yardstick for the client to objectively measure performance. When used for retirement accounts such as 401(k) plans, the investment policy includes reference to the investment committee, advisor, asset manager and plan participants.
During financial planner training, trainees will learn that all retirement money is treated in one of three ways: taxable, tax-deferred, or tax-free accounts. With tax diversification, the advisor is hedging client accounts by allocating assets across a range of accounts that are taxed differently—from tax deferred accounts such as traditional retirement accounts and annuities to taxable accounts such as brokerage accounts and bank CDs to tax-free accounts such as a Roth IRA and Roth 401(k). By holding a variety of accounts with different tax characteristics, putting the right kinds of investments into each one and tapping them strategically, the advisor can maximize the client's after-tax returns, particularly during retirement. Ideally, taxable bank and brokerage accounts are where living expense and emergency money come from. These include municipal bonds, stocks, and taxable bonds. Tax-deferred and tax-free accounts are where the bulk of a client's assets should be—with tax-advantaged assets possibly going into a taxable or tax-favored account.
The investment policy statement acts as an investing blueprint to guide the planner when deciding upon choosing the portfolio assets. Although the planner does not refer back to the document on a daily basis, he or she can reference it and use it as a report card for the portfolio, to compare the investment performance to the initial goal. Successful utilization of tools and tactics gained during a financial planner education will benefit both the planner and the clients. A client's investment policy statement also covers his or her individual liquidity requirements. Some investments are more liquid than others and it must be specified how quickly the client would need to get his or her money back if looking to cash out the investments, specifically for retirement needs.
Source...