The Tools & Techniques of Financial Planning, 13th Edition

By Stephan Leimberg, Robert J. Doyle, Michael S. Jackson and Martin J Satinsky

Part of the popular Tools & Techniques Series and Leimberg Library, the 13th Edition of The Tools & Techniques of Financial Planning covers all aspects of financial planning, including cash and budget management, debt, education and retirement planning, tax and investment issues, risk management, estate planning and more. Complete with the key principles, processes and practices of financial planning, this must-have resource offers planners a well-organized approach for explaining financial planning strategies to clients while also ensuring the suitability of the products being offered.

In addition to providing helpful charts, handy checklists, and insightful case studies, The Tools & Techniques of Financial Planning features:

• Clear, easy-to-read descriptions of all aspects of financial planning, including cash and budgeting issues, education and retirement planning, risk management, health cost management, and estate planning and tax issues
• In-depth discussions of fundamental concepts like time value of money, business law, and economic principles
• Ethical and practice standards for major professional organizations in the financial planning field
• Helpful examples show how concepts apply for real-world planning scenarios
• Detailed citations that provide jumping off points for more detailed research needs

 New in the 13th Edition:

• Updated tax and accounting information, including the 2017 Tax Cuts and Jobs Act
• Expanded coverage of practice standards and ethical considerations, including the new ethical rules for the CFP Board
• Updated insurance and risk management content, including the new commercial flood program
• Newly revised health insurance and health cost management topics cover the current marketplace for individuals and small businesses
• New chapter on state best interest requirements, including New York's Section 187

 Topics Covered:

• Principles and Processes of Financial Planning
• Education and Retirement Planning
• Tax and Investment Issues
• Estate Planning
• The Planner-Client Relationship
• Practice Standards and Ethical Considerations
• Ethical Rules for the CFP Board
• Financial Planning Goals
• Planning for Special Needs
• Financial Planning Fundamentals
• Cash and Budget Management
• Credit and Debt Management
• Time Value of Money and Quantitative Analysis
• Legal Issues
• Wills and Trusts
• Related Disciplines
• Risk Management and Insurance
• Health, Disability, and Long-Term Care Insurance
• State Best Interest Requirements
• And More! See the “Table of Contents” section for a full list of topics

 As with all the resources in the highly acclaimed Leimberg Library, every area covered in this book is accompanied by the tools, techniques, practice tips, and examples you can use to help your clients successfully navigate the complex course of financial planning and confidently meet their needs.

• Language: English
• Publisher: The National Underwriter Company
• Release date: Aug 30, 2019
• ISBN: 9781949506525

Book preview

NATIONAL UNDERWRITER

a division of ALM Media, LLC

THE TOOLS & TECHNIQUES OF FINANCIAL PLANNING

13TH EDITION

Stephan R. Leimberg, Robert J. Doyle, Jr., Michael S. Jackson, and Martin J. Satinsky

Part of the popular Tools & Techniques Series and Leimberg Library, the 13th Edition of The Tools & Techniques of Financial Planning covers all aspects of financial planning, including cash and budget management, debt, education and retirement planning, tax and investment issues, risk management, and estate planning. Complete with the key principles, processes and practices of financial planning, this must-have resource offers planners a well-organized approach for explaining financial planning strategies to clients while also ensuring the suitability of the products being offered.

In addition to providing helpful charts, handy checklists, and insightful case studies, The Tools & Techniques of Financial Planning features:

•    Clear, easy-to-read descriptions of all aspects of financial planning, including cash and budgeting issues, education and retirement planning, risk management, health cost management, and estate planning and tax issues

•    In-depth discussions of fundamental concepts like time value of money, business law, and economic principles

•    Ethical and practice standards for major professional organizations in the financial planning field

•    Helpful examples show how concepts apply for real-world planning scenarios

•    Detailed citations that provide jumping off points more mare detailed research needs

Highlights of the 13th Edition

This 13th Edition of The Tools & Techniques of Financial Planning has been fully updated to address today’s most important financial planning topics, including:

•    Updated tax and accounting information, including the 2017 Tax Cuts and Jobs Act

•    Expanded coverage of practice standards and ethical considerations, including the new ethical rules for the CFP Board

•    Updated insurance and risk management content, including the new commercial flood program

•    Newly revised health insurance and health cost management topics cover the current marketplace for individuals and small businesses

•    New chapter on state best interest requirements, including New York’s Section 187

As with all of the resources in the highly acclaimed Leimberg Library, every area covered in this book is accompanied by the tools, techniques, practice tips, and examples you can use to help your clients successfully navigate the complex course of life insurance planning and confidently meet their needs.

For customer service questions or to place additional orders, please call 1-800-543-0874 or email [e-mail].

Related Titles Also Available:

•    The Tools & Techniques of Income Tax Planning

•    The Tools & Techniques of Charitable Planning

•    The Tools & Techniques of Estate Planning

•    The Tools & Techniques of Estate Planning for Modern Families

•    The Tools & Techniques of Trust Planning

•    The Tools & Techniques of Life Insurance Planning

•    The Advisor’s Guide to Annuities

•    Tax Facts on Investments

•    Facilitating Financial Health

13TH EDITION

The Tools & Techniques of

Financial Planning

LEIMBERG LIBRARY

Stephan R. Leimberg

Robert J. Doyle

Jr., Michael S. Jackson

Martin J. Satinsky

ISBN: 978-1-949506-52-5

Library of Congress Control Number: 2019947249

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person-should be sought. – From a Declaration of Principles jointly adapted by a Committee of The American Bar Association and a Committee of Publishers and Associations.

Circular 230 Notice – The content in this publication is not intended or written to be used, and it cannot be used, for the purposes of avoiding U.S. tax penalties.

published by

THE NATIONAL UNDERWRITER COMPANY

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The National Underwriter Company

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Thirteenth Edition

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ABOUT THE NATIONAL UNDERWRITER COMPANY

a division of ALM Media, LLC

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PREFACE TO THE THIRTEENTH EDITION

It is impossible to assess the full future impact of the change in concentration of wealth. This 13th Edition reflects the financial planning opportunities of the present but also provides a glimpse of the tools, techniques, and risks of the future. It’s all about change.

But it is quite clear now that more wealth than imaginable in past periods has been amassed in relatively few hands – and the gap between the ultra-wealthy and the merely affluent is widening almost as much as the vast divide between the average American and the top 1 percent of income and asset ranges. These changes will have unquestionably significant effects on every aspect of the social and political structure of our country.

So much has changed – and yet – so much remains the same.

The need for honesty, openness, objectivity, and integrity is greater than ever. Ethical backbone is one of the most important attributes of today’s planner.

The need for a planner to understand the person – as well as the statement of financial condition, as Dr. Jerald W. Mason, then education director for the International Association for Financial Planning, called it – is more important than ever. The need to seek out, quantify, and solve other people’s problems remains – as does the need to impress clients with the significance and urgency of action; what we call the money value of time.

Constant investment management vigilance, broader diversification, expense minimization, and constant asset suitability and appropriateness checks are more essential than ever.

The need for a planner to continue to study and master new concepts remains. And the challenge of keeping current with respect to new products and the tax laws that affect them has changed only in that it is more difficult and essential than ever.

Our goals in writing this book have not changed. We want to help professionals help individuals and businesses obtain and retain financial dignity and achieve their economic dreams.

My co-authors, editors, and I invite you to share in our collective knowledge and experience – and to feel free to give us more feedback so that we can make future editions more useful to you.

STEPHAN R. LEIMBERG

July 2019

ABOUT THE AUTHORS

Stephan R. Leimberg

Stephan R. Leimberg is CEO of LISI, Leimberg Information Services, Inc., at leimbergservices.com, a provider of e-mail/internet news and commentary for professionals on recent cases, rulings, and legislation; CEO of Leimberg and LeClair, Inc., an estate and financial planning software company; and President of Leimberg Associates, Inc., a publishing and software company in Bryn Mawr, Pennsylvania at leimberg.com.

Leimberg is the author of numerous books on estate, financial, and employee benefit and retirement planning and a nationally known speaker. Leimberg is the creator and/or principal author of the entire nine book Tools & Techniques series including The Tools & Techniques of Estate Planning, The Tools & Techniques of Financial Planning, The Tools & Techniques of Employee Benefit and Retirement Planning, The Tools & Techniques of Life Insurance Planning, The Tools & Techniques of Charitable Planning, The Tools & Techniques of Income Tax Planning, The Tools & Techniques of Investment Planning, The Tools & Techniques of Risk Management, and The Tools & Techniques of Practice Management. Leimberg is co-author, with noted attorney Howard Zaritsky, of Tax Planning with Life Insurance, The Book of Trusts with attorneys Charles K. Plotnick and Daniel Evans, and How to Settle an Estate with Charles K. Plotnick, and The Buy-Sell Handbook.

Leimberg is creator or co-creator of many software packages for the financial services professional including NumberCruncher (estate planning), IRS Factors Calculator (actuarial computations), Financial Analyzer II, Estate Planning Quickview (Estate Planning Flow Charts), Toward a Zero Estate Tax (PowerPoint Estate Planning Client Seminar), Gifts That Give, Gifts That Give Back (Powerpoint Client Charitable Planning Seminar), and Long-Term Care (Powerpoint Client Seminar).

A nationally known speaker, Leimberg has addressed the Miami (Heckerling) Estate Planning Institute, the NYU Tax Institute, the Notre Dame Law School and Duke University Law School’s Estate Planning Conference, The American Bar Association Planning Techniques for Large Estate and Sophisticated Planning Techniques courses of study, the National Association of Estate Planners and Councils, and the AICPA’s National Estate Planning Forum. Leimberg has also spoken to the Federal Bureau of Investigation, and the National Aeronautics and Space Administration.

Leimberg, a 2004 recipient of the National Association of Estate Planners and Councils Distinguished Accredited Estate Planner award, was named 1998 Edward N. Polisher Lecturer of the Dickinson School of Law, and was awarded the Excellence in Writing Award of the American Bar Association’s Probate and Property Section. He has been honored as Estate Planner of the Year by the Montgomery County Estate Planning Council and as Distinguished Estate Planner by the Philadelphia Estate Planning Council. He is also recipient of the President’s Cup of the Philadelphia Life Underwriters, a three time Boris Todorovitch Lecturer, and the first Ben Feldman Lecturer.

Martin J. Satinsky

Marty Satinsky, CPA/PFS, J.D., LL.M., AEP, has been providing tax and financial planning services to individuals and businesses for over thirty years. He has worked with regional and international accounting firms, including seven years as a tax partner with Coopers & Lybrand. Mr. Satinsky currently practices in his own accounting firm.

As a partner in the accounting firm of Smart and Associates, LLP, Mr. Satinsky specialized in tax consulting for high net worth individuals and closely-held businesses. As Director of Professional Development, he was also responsible for the Firm’s training and Continuing Professional Education (CPE) program through Smart University.

An accomplished author on personal financial matters, he has co-authored seven books on income and estate taxes and personal financial planning, including the popular Tools and Techniques of Income Tax Planning.

Mr. Satinsky was also a founding shareholder of Second Opinion Financial Services, Inc. (SOFS) a company with a focus on educating professionals on the use and mechanics of life insurance. SOFS developed a software program that dynamically illustrated the impact of the variables affecting the performance of life insurance products.

A frequent lecturer, Mr. Satinsky has also been an instructor at the American College, Temple University Law School, Georgetown University Law School, Syracuse University Law School, the University of Pennsylvania, and Philadelphia University.

A graduate of the Pennsylvania State University and the Law School of the University of Pennsylvania, he also received his Master of Law degree in Taxation from Temple University Law School.

He is a Certified Public Accountant in Pennsylvania and has been admitted to the Pennsylvania Bar. He is a member of the American Institute of Certified Public Accountants, and the Pennsylvania Institute of Certified Public Accountants, as well as the American Bar Association and the Philadelphia Bar Association. He has served as an officer of the Philadelphia Estate Planning Council and as a member of the AICPA Personal Financial Planning Executive Committee and the PICPA Personal Financial Planning Committee.

Mr. Satinsky has conducted numerous seminars on tax, estate planning and financial planning topics, including many presentations on life insurance issues, for such organizations, as the Pennsylvania Bar Institute, the AICPA, PICPA, FPA NAPFA, Accountants’ Continuing Education Network, CLE Options, and several Estate Planning Councils. In 2000, he was honored with the Distinguished Estate Planner Award by the Philadelphia Estate Planning Council and in 2006 he received the Distinguished Accredited Estate Planner Award from the National Association of Estate Planners and Councils.

Mr. Satinsky is a past Chairman of the Jewish Community Centers of Greater Philadelphia and is an emeritus member of its Board. He has also served as the Treasurer of Hillel of Greater Philadelphia and a member of the Board of Jewish Community Center Association and the Maccabi Continental Games Board. He has been active with the Federation of Jewish Agencies in Philadelphia, Washington, D.C. and Syracuse, N.Y., and is now serving on the Board of Directors of the Gordon Jewish Community Center of Nashville and Temple Sherith Israel.

Michael S. Jackson

Michael S. Jackson, CPA/PFS, M.T., is a Tax Partner with Grant Thornton and leads the Philadelphia Private Wealth Services Practice. He has over twenty years of experience providing a wide range of tax compliance and consulting, financial planning and wealth transfer strategies for closely held businesses, private and publicly held company executives and affluent families. He began his career with Ernst & Young, LLP in their Entrepreneurial Services Group, specializing in S corporation, partnership, and individual tax consulting and compliance. Prior to joining Grant Thornton, Mike was a partner at SMART and Associates, LLP and held a senior management position in their tax and financial planning division.

Mike is a frequent lecturer of tax and financial planning topics for various organizations, including the American Institute of Certified Public Accountants, Lehigh University, Institute for International Research and the Skybridge Alternative Conference. In addition to The Tools & Techniques of Financial Planning he is a co-author of The Tools & Techniques of Income Tax Planning, which is widely used as educational and editorial resource material by the financial planning profession. In addition, Mike has authored articles for Bloomberg/BNA’s Tax Management Memorandum and Estates, Gifts and Trusts Journal, and is regularly interviewed by national, regional and local news organizations.

Mike is a Certified Public Accountant in Pennsylvania and a member of the American Institute of Certified Public Accountants and Pennsylvania Institute of Certified Public Accountants. In 1998, he received his certification as a Personal Financial Specialist by the American Institute of Certified Public Accountants. He holds a Masters in Taxation from Villanova University School of Law and graduated magna cum laude from Drexel University with a Bachelor of Science in Business Administration, with majors in accounting and finance.

ABOUT THE EDITOR

Jason Gilbert, J.D., M.A., is a senior editor with the Practical Insights Division of The National Underwriter Company, a division of ALM Media, LLC. He edits and develops publications related to tax and insurance products, including titles in the Advisor’s Guide and the Tools & Techniques series of investment and planning products. He also develops content for National Underwriter’s other financial services publications and online products. He has worked on insurance and tax publications for more than nine years.

Jason has been a practicing attorney for more than a dozen years in the areas of criminal defense, products liability, and regulatory enforcement actions. Prior to joining National Underwriter, his experience in the insurance and tax fields has included work as a Westlaw contributor for Thomson Reuters and a tax advisor and social media contributor for Intuit. He is an honors graduate from Wright State University and holds a J.D. from the University Of Cincinnati College Of Law as well as a master’s degree in Economics from Miami University in Ohio.

EDITORIAL SERVICES

Connie L. Jump, Senior Manager, Editorial Operations

Emily Brunner, Editorial Assistant

CONTENTS

Preface to the Thirteenth Edition

About the Authors

Part 1: Principles and Processes

Chapter 1: What is Financial Planning?

Chapter 2: Financial Planners and the Planning Process

Chapter 3: Tools in the Financial Planning Process

Chapter 4: Financial Services Industry Regulations

Chapter 5: Professional Ethics and Disciplinary Rules

Part 2: The Planner-Client Relationship

Chapter 6: Attitudes and Behavioral Characteristics of Clients

Chapter 7: Financial Goals – Current Lifestyle

Chapter 8: Clients with Special Circumstances

Chapter 9: Building Relationships with Cross-Cultural Clients

Part 3: Financial Planning Goals

Chapter 10: Education Funding

Chapter 11: Comprehensive Retirement Planning

Chapter 12: Planning for Special Needs

Chapter 13: Issues of an Individual’s Estate

Part 4: Fundamentals

Chapter 14: Budgeting and Cash Management

Chapter 15: Personal Financial Statements

Chapter 16: Credit and Debt Management

Chapter 17: Financing Asset Acquisitions

Chapter 18: Economic Concepts

Chapter 19: Time Value of Money and Quantitative Analysis

Chapter 20: Financial Institutions

Part 5: Legal Issues

Chapter 21: Business Entities

Chapter 22: Ownership of Property

Chapter 23: Business Law

Chapter 24: Monetary Settlement Planning

Chapter 25: Wills and Trusts

Part 6: Related Disciplines

Chapter 26: Risk Management and Insurance

Chapter 27: Income Tax Planning

Chapter 28: Investment Planning

Chapter 29: Health, Disability, and Long-Term Care Insurance

Chapter 30: Charitable Planning

Chapter 31: Selection of Fiduciaries and Other Advisors

Chapter 32: State Best Interest Requirements

Case Studies

Jason and Andrea Dalton

Phillip and Marsha Sanders

James Wilson and Harold Newton

Janice Peterson

Tom and Sharon Brown

Cindy Wilson

Jeff and Sharon Williams

Appendices

Appendix A: Present Value of a Lump Sum

Appendix B: Present Value of an Annuity Due

Appendix C: Present Value of an Ordinary Annuity

Appendix D: Future Value of a Lump Sum

Appendix E: Future Value of an Annuity Due

Appendix F: Future Value of an Ordinary Annuity

Appendix G: Tax Exempt Equivalents

Appendix H: Will Review Checklist

Index

WHAT IS FINANCIAL PLANNING?

CHAPTER 1

INTRODUCTION

In the purest sense, financial planning is, quite simply, cash flow planning. It is planning to have available the amount of cash needed at the time it is needed, or in the hands of the desired person, to accomplish an individual’s financial goals.

The steps taken to implement a financial plan will be in response to these cash flow goals. For example, if a couple is currently retired and their only source of cash to maintain their lifestyle is the limited investments in their Individual Retirement Accounts (IRAs), those investments will need to be structured more for current income and less for appreciation. On the other hand, if the couple is comfortable, and that have more than enough assets to handle their personal financial needs for the rest of their lives, they may allocate more of their investments for growth in order to enhance their ultimate bequests to their children or to charity.

Financial planning can also be defined as:

1.    creating order out of chaos;

2.    a deliberate and continuing process by which a sufficient amount of capital is accumulated and conserved and adequate levels of income are attained to accomplish the financial and personal objectives of the client;

3.    the development and implementation of coordinated plans for the achievement of a client’s overall financial objectives;

4.    an effective and responsive combination of income tax planning, retirement planning, estate planning, investment and asset allocation planning, and risk management planning.

Select one of the above, or select all. There seems to be no one universally accepted definition of financial planning. That’s understandable since the planner’s role must be as different as the needs of clients and their ability or willingness to pay for advice. No two people or problems will ever be exactly the same.

For many clients, the creation of a simple and workable system that will help them control their cash and pay their bills on time will be highly successful financial planning. For others, successful financial planning will involve the full time efforts of a planner, staff, and sophisticated computer and administrative support. Most planners will be working with clients whose needs fall somewhere between these two extremes.

The financial problems our clients face in their lives can be categorized by the letters L-I-V-E-S.

L.    Lack of Liquidity. Liquidity is the possession of sufficient cash and/or income to pay bills, debts, taxes, and other expenses on time. A lack of liquidity is the inability to quickly turn invested capital into spendable cash without incurring unreasonable cost. This problem can result in a forced sale of assets at pennies on the dollar. For instance, if a client must sell stocks or mutual fund shares in a down market, or if an executor must sell a valuable real estate portfolio to pay federal or state death taxes and administrative expenses, the buyer will offer to pay the lowest possible price for the most precious asset. This forced sale often becomes a fire sale, a loss of prime growth or income producing assets at a fraction of their real value.

I.    Inadequate Resources. Insufficient capital or income in the event of death, disability, at retirement, or for special needs such as college or preparatory school or to provide needed services for a handicapped child.

I.    Inflation. Not enough has been done to inflation proof the client’s portfolio. Figure 1.1 emphasizes the crippling impact of inflation on each dollar’s ability to buy goods and services.

I.    Improper Disposition of Assets. The client is leaving the wrong asset to the wrong person at the wrong time and in the wrong manner. Picture, for instance, a client leaving a sports car to a ten-year old child or $100,000 cash outright to a twenty-one-year-old college student.

V.    Value. Not enough has been done to stabilize and maximize the financial security value of the client’s business and other assets.

E.    Excessive Taxes. Excessive taxes add to the cost of an investment and retard progress toward a client’s objectives.

S.    Special Needs and Other Issues. Clients have desires that go beyond mere quantifiable goals. Psychological assurance and comfort should be part of the financial planning process. For example, a client may want to provide additional levels of financial care for a spouse or children who are disabled or emotionally troubled.

Figure 1.1

No matter how you define financial planning, all clients are confronted with the need to determine whether their available resources are adequate to accomplish their financial goals and objectives.

The financial planning resources are:

1.    earned income (salary, wages, business income) while still working (full time or part time);

2.    accumulated investment assets; and

3.    employer pension plans and Social Security benefits.

The usual financial planning goals and objectives can be broadly categorized as:

1.    current lifestyle;

2.    children’s education;

3.    retirement funding;

4.    parental issues;

5.    estate planning; and

6.    other special needs (such as a disabled child).

In addressing these goals, the client’s charitable desires often come into play. Some clients want to maximize the charitable giving during their lifetime while other clients prefer to give less while they are living but are desirous to leave much of their estate to charities.

When focusing on parental issues, keep in mind that there are two distinct sides to this coin. While it is most common for clients to consider the needs of their parents as a use for their resources, many clients look to their parent’s assets as a resource to fund their own retirement. But, as people are living longer, and are often afraid to let go of their assets while living, it has become common for clients counting on inheritances to fund their retirement to find that they are well beyond retirement age before they see a penny of their parent’s money. The clients’ planning for their own retirement has been, to put it simply, poor.

One critical point in looking at what financial planning is and what it is not—most clients are in the position where their resources are not adequate to attain all of their goals and objectives. Sometimes compromises need to be made, but, more commonly, and more accurately, the clients must engage in a process of prioritization. The financial resources must be focused on whichever goal or goals the client determines is most important.

For example, when a client wants to determine whether he will be able to retire at a certain age, the process usually involves comparing the expected accumulated resources at the desired retirement date to the remaining lifetime financial needs from the retirement date on. If it is determined that the resources are not adequate to cover those needs, the client must evaluate three options (or combinations thereof):

1.    reduce lifestyle, currently and/or during retirement;

2.    modify his investment strategy to yield a higher return, knowing that there will be a commensurately higher risk; and/or

3.    retire later.

It is very difficult for most individuals approaching retirement date to significantly reduce their lifestyle. It is also foolhardy for someone nearing retirement, with limited resources, to take the risk of investing for a significantly higher rate of return. There simply is no time to recover from a negative result. Consequently, the alternative that typically takes priority is extending the retirement date. There is very little room to compromise. In addition, any desire to leave a significant estate for the next generation will usually take a back seat to the priority of maintaining current lifestyle.

WHAT A FINANCIAL PLANNING REPORT SHOULD COVER

Many clients look to the formal Financial Planning Report as THE PLAN. This, of course is an over-simplification. In any event, the report is the product of the financial planning professional’s analysis, and should be a carefully prepared document that summarizes for the client, the client’s family, and the client’s advisers, the following:

1.    Analysis: Where You Are Now

2.    Objectives: Where You Want to Be

3.    Strategy: How to Get to Where You Want to Be

The actual presentation can be brief, or it can be long. The length of the report must be determined by the task set by the client (does the client want you to do a full analysis or just solve one or two problems?), by time and cost considerations, by your style as a professional, and by your feelings as to how much the client needs to know to have confidence in and take action on your suggestions.

A good rule of thumb is, overstate and bore, understate and score. Most clients prefer to have their problems and potential solutions stated as succinctly, and as graphically as possible. We suggest liberal use of graphs and checklists.

See Figure 1.2 for a table of contents for a full-blown analysis.

Figure 1.2

THE HUMAN SIDE OF FINANCIAL PLANNING

A financial plan is a dynamic expression of ever changing circumstances. Clients’ goals change, as do their resources. These changes often occur without warning and require an immediate response. Obviously, in those situations, there is no time for a formal planning document. Too few of us are really ever formally taught the human side, sometimes referred to as the soft side or qualitative side,¹ of financial planning. We usually learn these lessons in the school of hard knocks (i.e., by making mistakes through trial and error in our everyday work with clients).

Despite that too many planners still focus primarily on the numbers in financial planning, almost in a Jenny Craig-esque before and after picture way of justifying the value of their services to clients, financial planning is very much a people-oriented business.² We suspect that some of these planners simply want to distance themselves from their clients’ issues in a good faith, yet misguided way. However, the principal therapeutic value of financial planning for clients themselves is not the tax savings, but rather, it is the satisfaction and peace of mind that can come with facing and completing important unfinished business while they are alive.³ In our view, there is a significant difference between a tax technician and a financial planner. That distinction is the acknowledgement, understanding, and ability to work with the human side of financial planning.

As in just about all other professional-client relationships, there is usually a wide variance between technical financial planning knowledge that the planner possesses and that of the client, often creating a dependent relationship. As Professor Thomas L. Shaffer described in his seminal work on this subject, Compounding this gulf of knowledge and the dependency that often accompanies it is the fact that, by its very nature, the process of financial planning is highly emotionally charged for most people, and that this is exacerbated in a blended family setting. Clients are forced to face some of life’s most difficult questions, choices and issues regarding succession, giving up control and especially the contemplation of their own mortality.⁴ Frequently, there are actual or perceived pressures on the client from within the client’s family regarding inheritance expectations. Since many clients essentially define themselves by control of their possessions, the very thought of divesting themselves of those assets—whether during lifetime or at death—is highly traumatic.⁵

Meeting our Clients

Planners first meet clients at a certain point in their lives, though we may not know exactly what point they are in their lives at that time or what their life’s experiences or expectations have been. In a perfect world, planners would know much more about their clients’ backgrounds than in reality we do. Much can be done to improve the initial client interview beyond the data gathering exercise that it too often has become.⁶ For instance, clients may arrive in your office still grieving the loss of a loved relative or a dear friend. Others may be at the top of their game, while still others may be under intense work or financial pressure. Some may even suffer from some sort of mental health issue. There is much we do not and cannot know. But we do know this: clients are the sum of their past experiences, their present physical, emotional and mental states and their future hopes, dreams and aspirations. In other words, people come into our professional world with certain belief systems and biases based upon their pasts and their perceptions of the future.

Clients also come to us with their current psychological states made up in large part from their past experiences and feelings. These experiences can run the gamut. Some may hate their parents, their own children or their siblings because of something that happened (or that they imagined had happened) in a prior family squabble, and this feeling impacts their financial planning judgment and decisions. Others have been divorced in a nasty proceeding and have trouble trusting anyone, including you. Still others firmly believe that they must divide their finances among their children equally, almost as if it were some sort of unwritten but nevertheless immutable rule or fairness requirement. A client’s feelings also may be informed by such things as:⁷

•    their birth order;

•    their personal feelings about their wealth and whether they even consider themselves as wealthy;

•    the sources of their wealth: self-made versus inherited wealth;

•    their present and past love relationships;

•    their present physical and mental health;

•    their past and present financial condition, (i.e., did they grow up poor or come through a serious down economic time or even a bankruptcy in the past);

•    their thoughts and feelings about how their families will look at their deaths;

•    their views on life in general, (i.e., optimism versus pessimism); and

•    past experiences with financial issues, including whether their parents discussed financial plans with them.

The bottom line is that clients bring their psychological baggage into their financial planning encounters with us, some of which can be counterproductive to their financial planning efforts and can present challenges for us in working with them. As we have mentioned in previous chapters, very few planners are formally trained to handle these issues, but handle them we must—as best we can. Before simply assigning all of the blame on the client, however, planners must be aware that all too often we unwittingly bring our own baggage into the advisor-client relationship.

We advisors also have our good days and bad days. When the client walks through our door, we are at a certain point in our own lives too. We may be suffering through a loved one’s illness or going through a divorce or nasty partnership breakup. We may be sleep-deprived from having welcomed a new addition into our family. We may be under intense work, home or financial pressure. We may not be feeling well that day or may simply be having a bad day. It is imperative that we are aware of and have a handle on our own baggage before it detrimentally impacts the advisor-client relationship and our work.

Some of us are better than others at managing not only our own baggage but all of the baggage and problems clients dump on us all day long. Some advisors handle this baggage productively through engagement in activities such as exercise or enjoying classical music, but others are not as productive and drink or engage in other self-destructive behaviors. Many psychologists are required to go through their own therapy before engaging in therapy with others to identify and get a handle on their own issues before they deal with the problems of others. There is no corollary, however, for financial planners at present, so we must soldier on to the best of our abilities.

Many planners have a paternalistic view of their relationships with their clients and believe that they know best what the client needs to do in their financial planning.⁸ This is a potentially dangerous mindset as it risks disempowering the client, which we believe will retard that client’s financial planning progress because the client will not feel in control of their financial planning process and will not do anything in that situation: a client should feel in charge of his or her own financial planning process. Perhaps the single best way to enable that is to listen; to carefully, openly, and honestly allow and encourage the client to voice his or her innermost fears and dreams.

CHAPTER ENDNOTES

1.      You also see it referred to sometimes as the holistic side of estate planning. See, e.g., Gage, David; Gromala, John; and Kopf, Edward, Holistic Estate Planning and Integrating Mediation in the Planning Process, 39 Real Property, Probate & Trust Law Journal 509 (2004) and Beach, Emily E., Nudging Testators Toward Holistic Estate Planning: Overcoming Social Squeamishness on the Subjects of Money and Mortality, 26 Ohio St. J. on Disp. Resol. 701 (2011).

2.      Paul Hood frequently described his estate planning practice in part as practicing psychotherapy without a license in which he regularly faced emotional reactions for which he was not trained to deal.

3.      See, e.g., the story of Ishmael in Moby Dick, who expressed relief after signing his will this way, After the ceremony was concluded upon the present occasion, I felt all the easier; a stone was rolled away from my heart.

4.      See, e.g., Shaffer, Thomas L., Death, Property, and Lawyers (Dunellen Press 1970) (hereafter, Shaffer), p. 72. Back in 1665, in his Reflections, No. 26, Francois de La Rochefoucauld wrote [N]either the sun nor death can be looked at without winking.

5.      See, e.g., Sartre, Jean-Paul, Existential Psychology (Baines 1953), p. 132, in which Sartre wrote: [t]he totality of my possessions reflects the totality of my being. I am what I have.

6.      See, e.g., Hood, L. Paul, Jr., From the School of Hard Knocks: Thoughts on the Initial Client Interview, 27 ACTEC Journal 297 (2002).

7.      Hood, L. Paul, Jr. and Bouchard, Emily, Estate Planning for the Blended Family (Self-Counsel Press 2012) (hereafter, Hood and Bouchard), pp. 10-18.

8.      See, e.g., Sprott, James A., Psychological Aspects of Estate Planning, 5 Journal of Forensic Psychology(1973), pp. 25-39.

FINANCIAL PLANNERS AND THE PLANNING PROCESS

CHAPTER 2

WHO IS A FINANCIAL PLANNER?

Every individual’s finances are planned, some by inaction, lack of concern, or failure to appreciate the multitude of problems standing between the individual and his or her goals. (In effect, having no plan is a plan!) These individuals allow fate to do their planning. The results are often disappointing and sometimes tragic and disastrous. Others take a careful, calculated, and systematic approach to financial security. Their peace of mind is justified by the existence of a judicious mix of assets producing both adequate income and sufficient capital to safely meet their goals.

In this most general sense, anyone who earns, spends, saves, invests, owns, manages, marries, shares ownership, buys, sells, gives, protects what is theirs, inherits, or retires can be said to be a financial planner. This book, however, is designed for use by the planner who earns the right, by the acquisition of knowledge and dedication to the financial security of others (rather than merely by charging a fee or commission) to call himself or herself a professional.

It is foolhardy, even negligent in some cases, to expect that any adviser, no matter how bright or knowledgeable will know everything necessary to properly execute a comprehensive financial plan. For this reason, a financial planning team should include several other advisors: a CPA (for tax matters), a tax/estate attorney (for legal matters and drafting), a CFP®, ChFC®, or CPA/PFS (for specific financial advice), a CLU® (for life insurance), and a CPCU (for property and casualty insurance advice). The term team implies more than the sum of its parts and requires constant interaction and cooperation among the members to the extent necessary to achieve the client’s goals.

Who should lead the financial planning process? In practice, financial planning typically will be initiated by one member of the team. Others will contribute in varying degrees. The extent to which each will participate will be determined by the circumstances of the particular case, the experience, skills, and personalities of the parties, and their relationship with the client.

Since the client is the ultimate planner, he or she should always be considered the single most important member of the financial planning team. The professional must:

1.    uncover and describe the nature and extent of the client’s problems and professionally impress the client with the urgency and significance of action;

2.    discuss the viable alternatives;

3.    explain what should be done and why;

4.    match the plan to what the client really needs and wants, and can understand and is likely to accomplish;

5.    match the plan to the client’s risk taking propensity, investment philosophy, and order of priorities;

6.    explain in understandable terms why present arrangements fail to accomplish the client’s objectives or maximize the utility of his resources.

Absent any one or more of these, it is likely that the client’s present plan will continue.

The College for Financial Planning performed an extensive study of the professional responsibilities and knowledge requirements of financial planners. The survey, conducted by Dr. Larry Skurnik, a Measurement Research Specialist, covered a large number of CFPs® and ChFCs® as well as others in the field. The broad categories of inquiry are instructive as to what you must do and know as a practicing financial services professional.

What you must do is:

1.    evaluate client needs;

2.    explain financial planning concepts;

3.    clarify client goals;

4.    analyze information;

5.    prepare comprehensive financial plans;

6.    implement comprehensive financial plans;

7.    monitor comprehensive financial plans;

8.    establish and maintain accurate records and perform other professional functions;

9.    establish a procedure for periodic reviews and updates of the financial plan.

What you must know are:

1.    communications skills;

2.    risk management;

3.    investment planning;

4.    tax planning;

5.    retirement planning; and

6.    estate planning.

The College for Financial Planning Study indicates that aside from a necessary must know common core of skills and information, what you, as a planner, must be able to do or know depends on:

1.    your background;

2.    personal characteristics;

3.    whether you are a sole practitioner, a member of a firm of planners, or an employee with a narrower range of responsibilities;

4.    the major tasks, duties, and scope of your client engagement; and

5.    the market in which you work.

In short, the planner must have competence in many areas and compassion and concern for the financial and emotional well-being of others.

THE CO-OP APPROACH TO FINANCIAL PLANNING

As noted above, no single financial planner can possibly know all that needs to be known or do all that needs to be done for every client. Nevertheless, no transaction should ever be recommended to a client until the planner acquires a working knowledge of how that recommendation will affect and be affected by:

•    taxes (income, gift, estate, and generation-skipping) at both the federal and state level;

•    retirement and education planning, including a practical understanding of Social Security, inflation, and the psychological dynamics of retirement planning;

•    estate planning, which encompasses property law, domestic relations law, and other state laws as well as tax law;

•    wealth and asset management, which requires, aside from knowledge of various products and their alternatives, an understanding of cash flow implications and present and future value and rate of return computations; and

•    risk-reward principles, both economic and psychological.

Since no one person can be adequately knowledgeable in all of these areas, a truly professional financial planner must view himself or herself as part of a financial planning cooperative with the client and with other professionals, with each professional adding to the efficiency and effectiveness of the plan.

The first step in working as a member of this cooperative is to become aware of:

1.    the client’s long, intermediate, and short range goals;

2.    the problems faced by and opportunities available to the client in the quest to achieve those goals;

3.    what each of the other professional advisers has already done for the client; and

4.    what each of the other professional advisers may be able to contribute to the improvement of the client’s plan to achieve his goals.

It is extremely important to note that, no matter which advisor is the coordinator of this cooperative effort, each member of the cooperative should be offered the opportunity to participate in the process.

Most importantly, the client, the principal member of the cooperative, must never be forgotten. Clients who are not given an opportunity to express their desires or thoughts or who do not understand a suggestion or the rationale for it will not implement or continue the plan and will resent paying what the planner feels is a reasonable price for the service rendered.

PROFESSIONAL FINANCIAL PLANNING EDUCATION AND CREDENTIALS

The professional adviser who does not continue his or her education is both a fool and a thief. So here’s a list of some of the sources for gaining knowledge.

The major organizations involved in the education of financial services professionals are the College for Financial Planning, the Certified Financial Planner Board of Standards, the Financial Planning Association, The American College, and the Financial Service Professionals Center. These are separate organizations in separate locations with separate governing bodies. We suggest that you write or email the College for Financial Planning and the American College for information about their courses.

Other professional financial planner credentials of comparable merit include the Personal Financial Specialist (PFS) designation granted by the American Institute of Certified Public Accountants (AICPA) exclusively to CPAs who meet and maintain stringent requirements, and the National Association of Personal Financial Advisors (NAPFA), the largest professional association of fee-only comprehensive financial planners in the United States.

Certified Financial Planning (CFP) Board

The Certified Financial Planner Board administers the comprehensive exam that leads to the Certified Financial Planner™ (CFP®) certification. The CFP certification has grown to become one of the most widely recognized certifications in the financial planning industry. As of the end of 2015, there were more than 73,000 registered CFP professionals worldwide.¹

This certification is available to students who successfully compete a specified number of classes at an accredited academic institution, satisfy the Board’s character requirements, and are able to pass the CFP exam. The CFP Board requirements for certification as a CFP® include subscribing to a Code of Ethics and Professional Responsibility (see Chapter 5). The Board is empowered to discipline CFPs who violate that Code.

Financial Planning Association (FPA)

The Financial Planning Association (FPA), is the financial planning membership organization created when the Institute of Certified Financial Planners (ICFP) and the International Association for Financial Planning (IAFP) merged. Members include individuals and companies who have contributed to building the financial planning profession and those who champion the financial planning process.

Local Chapters: FPA has a nationwide network of local chapters. The FPA’s official publication is the Journal of Financial Planning. FPA’s web presence includes articles, forums, online networking, and substantive information of interest to those who support the financial planning process.

The FPA offers services and resources designed to help the public understand the importance of the financial planning process and the value of objective advice from a CFP® professional. Consumers can visit www.fpanet.org to access this information or call 1-800-282-PLAN.

The American College

The American College was founded in 1927 and is fully accredited by the Middle States Association of Colleges and Schools. The American College is located in Bryn Mawr, Pennsylvania (phone [phone]). American College courses are developed by resident faculty in Bryn Mawr and are studied for independently or in local classes. Testing is administered at local examination centers.

The American College offers the Chartered Life Underwriter (CLU®) designation for persons principally interested in the life insurance services (more than 95,000 have graduated from this course) and the Chartered Financial Consultant (ChFC®) for those principally interested in providing financial planning services (more than 40,000 have graduated from this course).

The American College offers graduate level courses for continuing education requirements or as a preliminary to enrollment in the Graduate School of Financial Sciences. The Graduate School of Financial Sciences at the American College offers the course leading to the Master of Science in Financial Services (over 3,000 MSFS degrees have been awarded).

The Society of Financial Service Professionals

The Society of Financial Service Professionals (formerly the American Society of CLU and ChFC), headquartered in Newtown Square, Pennsylvania (phone [phone]), was established over eighty years ago. It has nearly 160 chapters nationwide, and about 15,000 members. Membership is limited to individuals holding certain professional designations or licenses, such as CLU®, CFP®, ChFC®, CPA, J.D., and others. Its functions include providing continuing education, promoting the Code of Ethics to which its members ascribe, and providing other professional services to members and to publicize the profession to the public. The primary publication of the Society of Financial Service Professionals is the Journal of Financial Service Professionals, published bimonthly.

AICPA – Personal Financial Specialist (CPA/PFS)

The PFS designation is granted by the AICPA exclusively to CPAs with extensive personal financial planning experience who want to validate their expertise by complying with the requirements of this credential. To qualify for the designation a CPA must complete a comprehensive personal financial planning education requirement and attain a specified level of personal financial planning experience, as well as pass the PFS examination. To maintain the credential, the CPA/PFS must also comply with the regular recertification requirements. For more information, contact the AICPA by phone at 1-888-777-7077 or email at [e-mail].

National Association of Personal Financial Advisors (NAPFA)

NAPFA members, of whom there are about 2400, are fee-only financial planners required to maintain high standards of professionalism. NAPFA can be contacted by phone at [phone] or by email at [e-mail].

THE FINANCIAL PLANNING PROCESS

People don’t plan to fail; they fail because they don’t plan.

It is important to understand the concept of financial planning as a process, not a product or a service. It is a series of interrelated activities that a client engages in on a continuing basis. It is not something that the client completes, even successfully, and then puts away or forgets. Financial planning must be done regularly and continually in order to take into account changes in the client’s personal circumstances, the availability of new products, and varying conditions in the financial markets.

The professional chosen by a client to guide him or her through the financial planning process can be as crucial as the plan itself. Finding someone with the appropriate professional credentials is important. However, a planner with whom the client feels comfortable as well as one who has been recommended by satisfied clients is just as important. Personal financial planners, including Certified Financial Planners (CFP®), Chartered Financial Consultants (ChFC), Chartered Life Underwriters (CLU®), Personal Financial Specialists (CPA/PFS) and stockbrokers, are each trained in different areas of financial planning and consulting, so it is in the client’s best interest to research the background of the planner chosen to make sure the planner’s training is best suited to the client’s needs. The best financial planner will take all relevant information into consideration and offer advice and implementation techniques that are reasonable to meet the client’s goals and objectives.

As new products appear, as market conditions and personal circumstances change, even the best-prepared financial plan will tend to become obsolete and out of date. Births, deaths, marriage, divorce, or a new business can have a great impact on personal planning.

The following activities in the process of financial planning should be carried out and, where necessary, may involve qualified professional advisers:

1.    Establish and define the relationship

2.    Gathering background information

3.    Establishing financial objectives

4.    Developing financial plans

5.    Executing and controlling plans

6.    Measuring performance

The flowchart shown in Figure 2.1 provides a summary of the individual activities involved in the process and shows the relationships between them.

Figure 2.1

Establish The Relationship

The first step is that the client has agreed to meet with the planner, either through the planner’s marketing efforts, or because the client sought out the planner on his own. The relationship should start by outlining the responsibilities of both the planner and the client. Conflicts of interest, compensation arrangements, length of the agreement period, and the products or services to be provided should be fully disclosed and agreed upon. Certain professional practice standards (e.g., the CFP Board Practice Standard 100-1: Defining the Scope of the Engagement) and regulatory agencies outline the expectations of this step. For example, the Securities and Exchange Commission requires that all Registered Investment Advisors (RIAs) distribute part two of Form ADV (the Uniform Application for Investment Advisor Registration) to clients and prospective clients. In short, step one considers the regulatory, legal, contractual, and professional expectations of the planner-client relationship.

Gathering Background Information

Effective planning requires comprehensive information on all aspects of the client’s financial program. Such information includes a record of income and expenditures as well as the client’s individual or family financial position.

In setting his or her objectives, the client will need to take into account the sex, health, age, lifestyle, tastes, and preferences of individual family members. Much of this information is subjective, and attitudes may shift considerably over the years. Such changes make it important that the client, generally prompted by the financial planner, update his or her plan regularly. Keeping the client’s records on a personal computer will enable you to revise your data and add new information whenever necessary.

Another important area of background analysis has to do with the client’s attitudes toward the degree of risk he or she is willing to accept in the financial plan. Feelings about investment risk, personal financial security, and independence are just as important as their income statement or net worth. An awareness of these feelings enables the client and planner to establish realistic, acceptable objectives. By ignoring these feelings you may develop a good plan that is simply out of touch with your client’s personality. Such plans are not likely to be implemented, and a great deal of time and effort will have been wasted.

Unfortunately, attitudes toward risk are very difficult to measure for a number of reasons. First, defining the nature of risk is highly subjective and will vary considerably from one person to another. Second, attitudes about risk are likely to change dramatically over an individual or family’s life cycle. What seemed perfectly reasonable to the twenty-five-year-old bachelor may be totally unacceptable to the forty-year-old father of four high school age children. Finally, risk attitudes are a function of many personal psychological factors that may be difficult to deal with. Yet you, as the planning professional, should try, through discussions with family members and other advisers, to determine their feelings about risk and be alert to significant changes that may occur over time.

Establishing Financial Objectives

The process of articulating the client’s financial objectives in a concrete way is a difficult but essential part of the planning process. One reason many plans fail is that financial goals are not described in operational terms. Objectives often are presented in vague language that is difficult to translate into action.

Each of the objective statements should have the following characteristics. First, it should be well-defined and clearly understood by everyone involved. Unless you and the client really know and understand what you are trying to accomplish, the plan probably will not succeed.

Asking the client to write down his or her objectives is one way of working toward a set of clear and useful statements. Comments such as I want a safe and secure retirement income do not provide much guidance for financial planning. They merely express a wish that may be very real to them, but is hard to put into effective terms and plans. In contrast, a statement such as I want sufficient savings to produce a retirement income level equal to 70 percent of my preretirement income, invested at no more than a moderate risk level that produces an average return of 6 percent per year, is a measurable, concrete goal that can be quantified.

In other words, good financial objectives are generally stated in quantitative terms. Only by attaching numbers to the client’s plans can both you and the client know when the objective has been accomplished. This is a particularly important factor in regard to long-term objectives, such as those concerning education funds or retirement. It is desirable to measure progress toward your goals at various points along the way.

The goal of having a particular sum for retirement in twenty years can be reviewed each year to see if the necessary progress has been made. If earnings have been lower than anticipated, you may have to encourage the client to make larger contributions in future years. If a higher rate of return has actually been realized, contributions can be reduced; or you can consider the excess as a safety cushion against years when returns are not as high as anticipated. Such fine tuning is impossible unless numbers are associated with plan objectives. Adding numbers to objectives will also help to make them easier to understand by all members of the family.

Finally, each of the client’s goals or objectives should have a time dimension attached to it. When will a particular goal be accomplished? How much progress has been made since the last review? How much time remains until the goal is to be accomplished? These questions and similar ones can be answered only if you have helped the client establish a schedule with objectives listed at particular points in time.

Some parts of the plan, such as retirement objectives, will have very long time lines. Others, such as a change in savings, may be accomplished in a few months or a year. Whether long-term or short-term, the timing aspect of objectives is very important. Even long-term goals can be broken down into shorter time periods, which can be included in an annual review of the plan.

After the objectives have been identified, they should be ranked in order of priority. This ranking process is necessary since many objectives normally will compete for limited resources. It’s not likely that the client will be able to satisfy all of his or her wishes at the same time. Some goals will be more important, more urgent, than others. Critical short-term needs may have to be satisfied ahead of long-range plans.

Once certain goals have been reached, funds may be channeled to other areas. An example would be education funding for the client’s children. After this goal has been met, you may allocate money the client previously spent on education costs to building a retirement fund or some other long-range objective. Unless you have assigned specific priorities to these and other goals, it will be difficult for you and the client to organize and carry out an effective plan. Conversely, a set of well-integrated financial objectives can make the actual planning process a relatively easy task.

Individuals and families should have workable objectives in each of the following areas:

1.    Standard of Living. Maintaining a particular lifestyle generally takes most of a person’s resources. Setting an objective in this area calls for you to analyze required spending, such as food and housing costs, as well as optional spending (travel, vacations, and entertainment). If almost all of the client’s income is being spent in this area, it will be very difficult to accomplish his other objectives.

One widely used rule of thumb states that no more than 80 percent of gross income should be spent on maintaining a given standard of living. The remaining 20 percent of income should be allocated to the other financial objectives. Obviously, this guideline will vary from one person or family to another. But unless a significant portion of the client’s income can be directed toward the remaining objectives, you are not likely to be successful in helping him reach his other goals.

2.    Savings. Everyone recognizes the need for money that can be used to meet an emergency or other special need. However, determining the ideal level of savings can be a complicated problem. It will depend on the nature of the client’s income, personal risk attitudes, stability of employment, and other factors such as the type of health and dental insurance coverage he has.

Many experts recommend maintaining savings equal to at least three months’ disposable income. These funds should be kept in a safe and highly liquid form where the rate of return is a secondary consideration. A money market mutual fund or a bank money market account offers a good vehicle for emergency type savings. These investments offer a high degree of safety, and ready access to emergency money, as well as a reasonable rate of return.

3.    Protection. This objective covers life, health, disability, property, and liability insurance coverage. It should be designed to provide protection against insurable risks and related losses. Objectives in this area should take into account any coverage that is provided through public programs such as Social Security as well as group insurance offered as an employee benefit.

4.    Accumulation (Investment). This is the most complex objective in a number of ways. It relates to the future buildup of capital for significant financial needs. These needs can be as diverse as a child’s college education, a wedding, or a vacation home. The sheer number and variety of such goals makes it difficult to define this objective and to set priorities.

Adding to the difficult nature of this planning area is the generally long time involved, which may extend for twenty years or more. Finally, the wide variety of potential investments adds to the overall complexity. Regardless of the reason for building capital, the critical ingredients in this objective are the ability to quantify needed amounts and to state target dates for