Financial Planning

Clive Financial Services, Inc. specializes in investment planning, portfolio design and implementation. There is no one particular investment portfolio structure that is appropriate for all individuals. Portfolio construction takes into account many factors including the client’s time horizon, risk tolerance, and marginal tax rates just to name a few.

The Financial planning process is the process of meeting your short term and long term life goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement.

What areas are addressed in a comprehensive financial plan?

While every client, and therefore every plan is unique, the following are the main subjects that may be addressed in a financial plan:

  • Tax Reduction Analysis
  • Estate Planning
  • Retirement Planning
  • Education Planning
  • Risk and Insurance Analysis
  • Investment Allocation & Analysis
  • Other specific client needs

Why is a comprehensive plan important?

All of your financial decisions are interrelated. Each financial decision you make can affect several areas of your life. For example, an investment decision may have tax consequences that are harmful to your estate plan. Or a decision about your child’s education may affect when and how you meet your retirement goals.

So how do we make financial decisions?

There are several steps in the prudent planning process. The process is a constant evolution and each step should be revisited periodically. The fiduciary and investor who follows these steps can substantially improve their investments performance and additionally their satisfaction in the overall process.

Step 1 – Analyze Current Positions

Information is gathered and analyzed on the client’s current position, including legal constraints, written policies, many management structures, custodial and brokerage relationships, and accounting assumptions. Careful consideration should be given to the goals of the client as well as the objectives for the overall portfolio.

Step 2 – Design Optimal Portfolio

The key to a successful investment portfolio is diversification. This is fundamental to the management of risk, regardless of the level of safety an individual investment offers. Asset allocation decisions are the critical aspect of a sound investment strategy and the starting point of formulating a plan of diversification.

Step 3 – Implement Plan

Once a strategic plan is in place, it becomes necessary to implement the policy with specific vendors or products. Since most individuals do not have the assets or experience to research and purchase individual securities, it is prudent to delegate management of individual securities. Proper selection of professional money managers provides clients with an additional layer of investment management.

A prudent search follows a formal, multi-step approach which provides documentation and insight required to make informed implementation decisions. Investment managers and funds should meet rigorous qualitative factors such as manager style, assets under management, length of track record, performance history, quality of track record, fees, and risk statistics and correlation.

Evaluation of managers must be performed in an objective and unbiased manner. It is equally, if not more important, to find a manager that is a good fit with all of the other pieces of the portfolio – as well as the preference of the client. Some common mistakes made during the implementation process include:

 

  • Interviewing and selection managers without due diligence checklist
  • Placing too much emphasis on recent performance
  • Developing unrealistic performance expectations
  • Hiring managers without taking peer analysis into consideration

 

Step 4 – Monitoring and Supervising

Regular review of investment performance is vital. Performance evaluation measures the absolute and relative performance results of the portfolio structure. Summaries relate performance to similarly constructed portfolios comparing every manager’s performance with that of his peers and state benchmarks. In addition, the portfolio’s overall performance should be measured relative to state investment objectives. The review enables the fiduciaries to determine why results were achieved and to identify adjustments which periodically become necessary to maintain performance and manager volatility.