November 13, 2023

What is a Financial Plan?

Written by: Jay Mota
Financial Planning

A lot has changed over the years in the financial services industry. Mainly how financial services companies and professionals are to work with clients. In June 2019, the Securities and Exchange Commission adopted rules designed to enhance the quality and transparency of the relationship between retail investors and advisors. One of these rules was the SEC’s Regulation Best Interest (Reg BI) which establishes a “best interest” standard of conduct for financial services companies and their professionals. This standard of conduct has an obligation to act in the retail investors’ best interest and is satisfied only by complying with each of the rule’s components: Disclosure, Care, Conflict of Interest, and Compliance. You can read more about Reg BI here, https://www.sec.gov/regulation-best-interest. One-way companies seek to achieve this standard of conduct is providing a financial plan.

financial plan


Many financial services companies today offer a financial plan along with the products they offer. Some even promote a “free” financial plan. Although any plan is better than no plan at all, the problem is many clients may not understand the different types of financial plans or what to expect from a financial plan. Therefore, it could be hard to determine what you are getting for free or why other advisors may seek to charge for a financial plan.


Financial Planning can be broken down into several different levels. You get out of a plan what you put into it. So, determining the level of understanding you want out of the plan detailing your financial strength now and, in the future, will help you decide what level of financial planning you should pursue.


Here are the different types of financial plans and the focus of each:


Basic Financial Plan:

  • Budgeting: This basic level involves creating a budget to track income and expenses. It could help individuals gain control over their finances and is often the first step toward achieving your financial goals.
  • Goal Management: This generally involves a gauge of where you are towards your goals but may not consider factors such as saving too much for a goal, taxes, or whether you are achieving the goal in the most efficient way.


Intermediate Financial Plan:

  • Goal Setting: In addition to budgeting, this level often involves setting specific financial goals, such as saving for a vacation, paying off debt, or building an emergency fund.
  • Debt Management: Strategies for managing and reducing debt, including credit card balances and loans, are usually addressed at this stage.
  • Basic Investment Plan: This may include opening a savings account or contributing to a retirement account.


Comprehensive Financial Plan:

  • Goal Prioritization: Prioritizing financial goals based on importance and timeline.
  • Risk Assessment: Evaluating potential financial risks and planning for contingencies.
  • Investment Strategy: Developing a diversified investment strategy tailored to individual goals and risk tolerance.
  • Insurance Planning: Analyzing insurance needs and ensuring adequate coverage.
  • Estate Planning: Addressing estate planning needs, which may include wills, trusts, and powers of attorney.
  • Retirement Planning: Detailed strategies for retirement savings and estimating retirement income needs.
  • Tax Planning: Strategies to optimize tax efficiency.


Advanced Comprehensive Financial Plan:

  • Tax Optimization: More advanced tax strategies to minimize tax liabilities, including estate tax planning.
  • In-Depth Investment Analysis: A more detailed and sophisticated approach to investment planning, including asset allocation and specific investment recommendations.
  • Business Planning: For business owners, planning may include strategies for business growth, succession planning, and exit strategies.
  • Complex Estate Planning: Involves more intricate estate planning solutions, like generation-skipping trusts and charitable giving strategies.


Holistic Financial Plan:

  • Lifestyle Planning: A comprehensive plan that considers lifestyle choices and how they impact financial well-being.
  • Philanthropic Goals: Incorporating charitable giving goals and strategies.
  • Education Funding: Advanced planning for education expenses, including strategies for college savings.
  • Legacy Planning: Involves a deep exploration of how wealth and assets will be transferred to future generations and the impact on the family legacy.


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Typically, when I explain the different planning options, I discuss basic financial plans and comprehensive financial plans. The basic plan is always the same; however, when I discuss the comprehensive plan, depending on the client’s needs, it could include advanced and holistic planning tactics. No two clients have the same circumstances or needs, so it is important not to assume what may be right for you until you have an honest conversation about your needs, goals, and concerns.


Basic plans that are commonly offered for free are often computerized outputs based on algorithms. They are free because they only require a little effort to get a result. Comprehensive plans, however, may take hours to ascertain the needs of the client, enter all the data, and require years of experience to analyze and understand potential issues found in the analysis and to be able to make recommendations to help achieve the desired outcomes. With a comprehensive plan, the work doesn’t stop once the analysis and recommendations have been made. Comprehensive planning requires follow-up reviews and updates to the plan as life happens. Therefore, it is almost impossible to do these for free. The cost will usually depend on the level of complexity of the planning and the experience of the advisor you are working with. It is worth noting that some firms, based on the amount of assets you invest with them, may discount this fee in place of the asset management fees collected. It is not free, but, in that case, no payment is collected for the planning.


When being proposed a financial plan, make sure to ask:


  1. What will be involved in the financial plan?
  2. The level of experience the advisor has.
  3. What resources does the advisor have to help you achieve your goals?


Many advisors have designations that show the level of knowledge and experience they have. Some of these designations are and are not limited to ChFC® or Chartered Financial Consultant, CFP® or Certified Financial Planner, CFA® or Chartered Financial Analyst. It is important to note that just because someone does not have a designation doesn’t mean they are unqualified. They may have just decided not to obtain a designation.


Now that you have an idea of what financial planning is and the difference between the types of plans. Don’t delay in having a plan done for you. Critical issues could be looming in your financial future that can possibly be avoided by having an analysis done. Unfortunately, many people do not learn of these issues until they arrive, and by that time, it may be too late to fix them.


If you’re curious in learning more about Financial Planning in these unique times, reach out and schedule a time to speak with one of HUDSONPOINT’s Certified Financial Planners .





Securities and variable insurance products offered through B. Riley Wealth Management, Inc., member FINRA/SIPC. Fee-based advisory services offered through B. Riley Wealth Advisors, Inc., an SEC-registered investment adviser. Fixed insurance products offered through B. Riley Wealth Insurance. The information provided is not directed at any investor or category of investor and is provided solely as general information about products and services or to otherwise provide general investment education. None of the information should be regarded as a suggestion to engage in or refrain from any investment-related course of action as neither B. Riley Wealth Management, Inc. nor its affiliates are undertaking to provide you with investment advice or recommendations of any kind. The information herein has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of B. Riley Wealth Management, Inc..  B. Riley Wealth Advisors, Inc. fees are disclosed within the Advisor’s Form ADV.  Estate, Trust and Tax planning services may require collaboration with third parties.
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