Financial Planning

Assembling Your Financial Dream Team

Basketball has always been a big part of my life; I fell in love with it when I was two years old, played through college, and continue to enjoy it with my two boys. The other day I was watching a game with my oldest, Roman, and I had an epiphany. Much like a basketball team’s quest for a championship relies on five players on the court playing their roles, the quest to reach financial goals relies on a coordinated effort from a team of professionals playing their roles. For those not familiar with the positions on a basketball team, let me bring you up to speed.

92 Dream Team

  1. Point Guard: An extension of the coach on the court. Responsible for running the team–calls the plays, directs teammates, regroups the team if things don’t go as planned, and controls the overall flow of the game.
  2. Shooting Guard: Main responsibility is making shots. Usually, the team’s best shooter, and often one of the leading scorers.
  3. Small Forward: The most versatile position on the team. Not quite a post player, but not quite a guard either. Usually, able to shoot the ball, but also able to play closer to the rim if needed.
  4. Power Forward: The team’s utility player. Does the dirty work–sets screens, rebounds and defends.
  5. Center: The team’s glue on the defensive end–protects the rim.

Cue the 1990’s Bulls Intro Music:

At Point Guard, your Financial Advisor/Planner.

The financial advisor is the member of the team who will take a look at your total financial picture; while everyone on the team is important, the other four teammates are specialist in their area of expertise. The financial advisor reviews all aspects of your financial picture, discusses your goals, develops a plan to reach those goals, and monitors your plan to make sure you are making progress towards your goals. Point guard skills are displayed during the creation and implementation of your financial plan; the financial advisor begins calling the plays by making recommendations for the other teammates to carry out. Although the financial advisor makes the recommendation, it is up to the teammate to implement the recommendation using their expertise.  Communication is key to success on the court, as well as with your financial planning. It is important that your financial advisor and teammates are communicating with each other to insure everyone is on the same page. Without communication, your plan can fall apart.

When picking your starting five, your first pick should be the financial advisor. But beware, it will probably be your most difficult pick. Unfortunately, the term financial advisor is extremely liberal, and it has been abused for years by salespeople with no intent in actually advising clients. So, where do you begin to find a financial advisor? Finding a CERTIFIED FINANCIAL PLANNER™ professional is a good start.  The CFP® designation is widely accepted as the leading designation for financial advisors and planners, and those carrying it are held to a fiduciary standard (if you are not sure what that means, watch my video blog). They should also be providing a comprehensive approach to your financial planning, which means they are fulfilling the role of the point guard.

It’s worth noting that many financial advisors may fill two positions on your starting five. Some advisors may handle the investments for your financial plan, and some advisors may handle the taxes for your financial plan. Filling two positions is manageable, but any more than that, and I’d be concerned the financial advisor is stretched too thin. No one can be an expert in everything!

At Shooting Guard, your Investment Advisor/Manager. 

Investments are the sexy part of your financial planning, just like shooting and scoring are on the court. Everyone loves to talk performance, the stocks they own, and how they’ve invested in the next big company…very similar to how basketball players love to talk about how many points they scored, along with the shots they made. And just like basketball has ESPN, sports talk radio, and evening news coverage, investments are the only part of your financial planning that has newsletters, radio shows, TV personalities, and television networks dedicated to it.  This makes for a lot of noise, which makes picking your investment advisor extremely important. There have been numerous studies that show investors do worse on their own than if working with an investment advisor, and it’s all because of emotions. The investment advisor will create a investment strategy influenced by your financial advisor’s plan and your tolerance for risk. Having an investment strategy, with an investment advisor to help you carry it out, will give you a better chance at not giving into your emotions when it comes to investing.

Finding an investment advisor can be just as difficult as finding a financial advisor. Looking for a investment firm established as a Registered Investment Advisor (RIA) is a good place to start. Investment advisors at a RIA are also held to a fiduciary standard; these investment advisors are compensated by their clients, not investment companies, which helps to reduce (nearly eliminate) conflicts of interest. As you now know, a fiduciary is acting in your best interest when developing your investment strategy.

You can also look for a couple of designations when picking your investment advisor. I think it’s worth stating that a designation does not guarantee a better outcome, but I do think there is value in professionals having certain designations. In the investment world, the Chartered Financial Analyst (CFA®) designation and the Certified Investment Management Analyst (CIMA®) designation are both well respected. If you are looking for an investment advisor specializing in building stock portfolios, the CFA® is the designation to seek. If you are looking for an investment advisor specializing in building diversified portfolios using mutual funds and ETFs, the CIMA® is the designation to seek.

At Small Forward, your Accountant/Tax Professional.

The accountant fits the small forward position because his expertise is needed in multiple facets of your financial plan. Your investment strategy (shooting guard) and estate planning (power forward) will eventually pass by your accountant. Like the small forward has to be able to play outside as well as in the post, the accountant needs to be able to advise not only on your income taxes, but also on your investments and estate planning.

Right out of the gate, find a Certified Public Account (CPA), or a tax lawyer if you have a complicated tax situation, when it comes to picking your tax professional. The CPA is to tax planning what the CFP® is to financial planning, and the CFA® and CIMA® are to investment advising.  The tax code is extremely complex, and it is continuously evolving. It’s a full time job to keep up with all of the changes and minor details, which is why having a CPA is so important. A CPA will do more than just crunch numbers for you; they will provide advice on ways to manage your tax liabilities.

Yes, there will always be Turbo Tax. You can try to save a few dollars by doing it on your own, but it has been my experience, both personally and with clients, that a good CPA will pay for itself in the long run. Now that cannot be guaranteed, but working with a person is much different than answering prompted questions on the computer. If you are confident that you’ll get your deductions right, report everything correctly, and not miss any tax-saving strategies, then maybe Turbo Tax is the right avenue for you. But for the majority, working with a CPA will help address those concerns, and even more importantly, save you TIME!

At Power Forward, your Estate Planning Attorney.

As your power forward, the estate planning attorney handles the dirty work–the topics no one wants to talk about. Death. The inability to make healthcare decisions. The care of children…like I said, the topics no one want to think about, let alone talk about. But, these are very important areas of your financial plan, and it is crucial for them to be properly addressed (Revisit my earlier blog on this topic). Early in your financial planning, your estate planning attorney will draw up your will, power of attorney, living will, and other documents that may be needed for your personal situation.  Later in your financial planning, your estate planning attorney will draw up documents to protect your assets and to help you create the legacy you want to leave behind.

Just like with tax planning, there are cheaper methods of attempting to address this part of your financial plan on your own. And just like with your tax planning, you should work with a professional to make sure your planning is implemented correctly. A computer program can’t take the place of an estate planning lawyer who attended law school, passed the bar exam, and has real life experience with estate planning. Estate planning is not a subject that you can afford to get wrong, so skip a few nights out one month so you can get the proper documents set up correctly.

At center, your Insurance Agent.

The center protects the rim on the court, and your insurance agent protects the important things in your life. Home. Auto. Life. Health. Disability. Long Term Care. Pet. Trip…the list goes on. And let’s face it, insurance sucks (in basketball, defense sucks), but it is necessary; there’s nothing worse than seeing money leave your account each month to pay for something you hopefully never use–the insurance. But, when the event comes that you need your insurance, it will be the best money spent. While your financial advisor can help identify what type of insurances you need, it’s the insurance agent’s job to get you the best insurance policies.

Unlike the other positions, your insurance agent is the only teammate actually selling products (your investment advisor could sell product, but not if you are working with an Registered Investment Advisor). With sales comes conflict, so beware. When looking for your insurance agent(s), looking for an independent agent is a good start. There are numerous insurance companies who have their own agents, but I prefer to work with independent agents because I like to have options. I like to know that my agent has the ability to shop around for the best rates and policies on the market, and not be constrained to only the options available through a parent insurance company.

So there you have it…your starting lineup for your financial planning team.  Now go out there, evaluate the talent, and pick your starting five.



Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimers page.