Financial planning is a very broad term. One common public conception is that it involves budgeting, or strategies to pay off credit cards. This is a simplistic but positive view. In the worst case, “financial planning” is nothing more a series of 20 year charts, geared to convince you to buy a financial product. Of course, the term can also refer to work that is much deeper and more sophisticated, and that’s where Peloton tries to add value. This blog describes how Peloton approaches financial planning in our Private Client Group. We use a common three-phase approach to tailor the solution to each client’s needs.

Accomplishing Goals (ages 30-50)

Most young people begin their adult years with some goals, though often they aren’t formalized and sometimes they’re not even known. Having time on your side is great, provided you make good decisions and work diligently toward accomplishing them. The potential losses could also be devastating – the death of a parent with young children, or the results from over-spending are two clear examples.

The first type of planning involves setting goals and protecting against certain risks. While Peloton does not sell life insurance, it does meet a specific need and we advise clients about the right level and type of coverage. How and which types of accounts to use to save for future goals is also critical at this stage. A comprehensive planning engagement makes sense at this time because the number of opportunities for good and bad outcomes is so large. During a comprehensive planning engagement, Peloton utilizes eMoney® software to help clients gather and organize their financial data. Once we see someone’s whole financial picture, we can provide specific, actionable advice.

Managing Wealth to Last (55+)

As clients move through middle age and begin to consider slowing down at work or retiring, we find that the value of formal, comprehensive planning engagements lessens. However specific types of sophisticated planning can be very helpful. In Where’s the Value in a Financial Plan? we highlighted income tax planning as a primary need for certain clients. In a similar manner, it is important during these years to revisit estate plans, ensuring that prior plans still reflect current needs. Of course, income tax planning and estate planning should mainly be done by CPAs and attorneys. Our roles are to ask appropriate questions and integrate tax and legal professionals into the planning team.

Beginning in the later working years, saving capacity often rises.  Throughout retirement, investing well – achieving asset growth while also generating sufficient income to spend – takes precedent. More of our work in this phase relates to managing Custom Portfolios for clients. A custom portfolio is structured to meet cash flow needs consistently, irrespective of market volatility. “Planning” at this stage is really more about executing the prior plan well.

Providing and Gifting (65+)

Nobody likes thinking about their own mortality, or the death of loved ones. But these realities are also inevitable. During these “golden years” many clients begin to consider the impact their financial wealth could make on others. One of the most common needs we address in this phase is ensuring that both spouses understand what will happen to assets if their partner passes away. One tool that’s particularly useful in these discussions is a simple net worth statement showing the amount and varieties of assets. Another is an estate distribution chart which illustrates where the money will flow at death.

This time is also when many clients consider gifting strategies. Gift planning generally follows two routes: gifts to heirs and gifts to charitable causes. How much and when to pass money to the next generation demands careful thought. Gifts to heirs also have certain tax consequences, so some formal planning often makes sense. Similarly, legacy gifts to non-profit or civic organizations carry tax implications.

Conclusion

As money managers for individuals and households, Peloton has always done financial planning for clients. Sometimes our work looks more like the common concept of planning (e.g., Accomplishing Goals), and sometimes it’s more about daily execution of the prior plan. In all cases, though, financial planning at Peloton is client-centered and tailored to your unique needs and life stage. We’ve never been “just investment managers”. We hope this raised some questions for us in your mind. We invite you to call Peloton today to discuss your planning needs.