The Importance of a Customized
Financial Plan

It's a temptation: You see online financial plans that can be quickly downloaded and filled in. Or you receive an offer to create a financial plan for little or no cost. How effective is this fill-in-the-blank approach? Douglas Paddock, a BB&T Financial Planning Specialist, provides some insights – and words of caution – based on actual client profiles.

On the surface, clients may have similar characteristics and goals but when explored deeper, no two clients are really the same. While the industry seeks to mass-produce financial planning advice and implementation, individuals usually require customized approaches and solutions. Generic financial plans may be okay for generic people...there are just no generic people.

Closer investigation reveals significant differences between outwardly similar clients.

Consider this scenario involving two clients. Both are men in their late 50s, married with three grown children, have shown a taxable income of over $500,000 per year, and have a net worth of $5 million. The two couples share similar financial concerns. They listed the following, in order of priority:

  1. Managing investments
  2. Supporting the lifestyle they want in retirement
  3. Maintaining their household's wealth
  4. Increasing their household's wealth
  5. Estate planning
  6. Tax planning
  7. Supporting the lifestyle they want today
  8. Providing for their family's financial security
  9. Leaving an inheritance
  10. Paying for their children's or grandchildren's education

Inputting the two clients' data into financial planning software would produce identical analyses and recommendations. What a mistake! Closer investigation reveals significant differences between these outwardly similar people. Examples include:

Marital Issues
Client A and his wife have both been married before. Two of the adult children (ages 30 and 34) are his from a previous marriage. The youngest (age 18) is theirs. Mrs. Client A loves the older children and they love her.

  • Impact on financial plan: Finding a way to maintain family harmony.

Child-Related Issues
Client B has a son who has worked in the family business since childhood. The son will take over the business when Dad retires. One of the other two grown children is a successful professional and has no desire to be a part of the family business. The third child has struggled to find herself, is a single parent and is involved in a current relationship that worries Mom and Dad.

  • Impact on financial plan: How to achieve equitable treatment of children not involved in the family business.

Investment Issues
Client A has been a successful real estate investor. He has no significant investing experience with traditional investments like stocks and bonds. Because of a lack of experience, there is a fear of traditional investment vehicles. He knows that retirement income needs will require investing, but he also wants to continue to take advantage of opportunities in real estate.

  • Impact on financial plan: How to achieve a comfortable transition to a diversified portfolio.

Liquidity Issues
Client A just sold a major piece of real estate for $3 million. He intends to invest $2 million of it for retirement. His plan is to use the rest to pay taxes and for real estate investment opportunities. Client B is not going to sell his business since his son is taking over.

  • Impact on financial plan: For Client B, a source of retirement income.

Estate Planning Issues
Client A is extremely tax averse. The priority is to minimize estate taxes. Client B's primary concern is passing the business to the son and treating the other children fairly.

  • Impact on financial plan: Ways to accommodate personal priorities.

Clearly, these two clients need to follow very different strategies to achieve their investment, tax planning, retirement planning and estate planning goals. While on the surface they appear to have so much in common, there are major differences not likely to be identified through a fill-in-the-blank input form.

BB&T's comprehensive approach to financial planning takes more time and is fee-based. But we know from client feedback that our clients appreciate the care we take to truly understand their family situation, their investment preferences, tax issues, philanthropic focus, values and priorities.

The result is a fully integrated, multi-faceted strategy that reflects the expertise of the full BB&T Wealth team as well as the client's CPA, attorney and other outside partners. Long term, the client has the advantage of a trusted advisor to serve as a monitor and point of contact for assistance, input and updates.

So, short answer, underscored: When it comes to financial planning, rely on people rather than computers. And be sure the people you rely on take the time to ask probing questions that allow you, together, to identify the traits and values that define you as a person and therefore must be guiding forces in developing your financial strategy.


This article originally appeared in the Spring 2008 issue of Wealth magazine.

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