What planning topics does “Comprehensive Financial Planning” include?
The core elements of our comprehensive planning reviews include:
- Investment Portfolio Management
- Tax Planning & Optimization*
- Estate Planning*
- Insurance Risk Management
- Social Security Planning
- Employee Benefits Reviews
- IRA and Small Business Retirement Plans (401(k), Defined Benefit Plans, etc)
- Creditor Protection Considerations
- Asset Registration and Beneficiary Designation Reviews
- Retirement Savings and Retirement Spending Stress Testing
- Education Planning and Funding
* While no part of our review or findings should be construed as specific tax or legal advice, and important element of our review is to raise awareness of potential tax and legal risks and opportunities. We encourage clients to share these insights with their CPAs and/or attorneys are willing to facilitate those discussions upon request.
What is your financial planning process?
The generally accepted 7-step financial planning process is as follows:
Step 1: Learn the client’s background information and financial circumstances.
Step 2: Identify client’s specific financial planning goals and objectives.
Step 3: Analyze the data that has been gathered in relation to the goals and objectives
Step 4: Develop a written plan and recommendations
Step 5: Present the plan
Step 6: Implementation
Step 7: Ongoing monitoring
Our one-time fee-only planning reviews encompass steps 1-5. Clients may elect to engage us over time to cover steps 6 & 7 under a separate agreement if they choose. See also - Client Services.
Are there any unique services you offer?
Yes. While many financial planners present a document as a financial plan, in addition to our written summary, analysis, and recommendations, all FPH clients receive access to an online platform that enables them to centralize and organize all aspects of their financial lives. The platform is free for all asset-based clients. Access to the platform is free for 90-days for our fee-only clients and is available for $25/month thereafter.
Additionally, all clients have permanent access to our free proprietary password management software, Password Guru, and our own interactive retirement spending and retirement saving software. We also offer a unique service that helps clients expeditiously and inexpensively get their estate planning documents drafted and implemented.
For more details, visit our Client Services page.
Do you manage the investment portfolios at your discretion?
No. While many asset-based wealth managers and financial planners take discretion over their client portfolios and manage all client portfolios the same way, we do not ever take discretion. Since we are financial planning-centric, we want our clients to be educated and engaged in the planning process. We do not ever make purchase or sell decisions without discussing the recommendations with you first. This approach also necessarily means that all client portfolios are uniquely customized/personalized.
What is your approach to investing?
An important element of comprehensive financial planning is the recognition that each individual and family is different. With respect to portfolio construction, every clients investment mix is different and we want our clients to be educated about and engaged in the investment planning process. That said there are common principles that we apply. These include recognizing that tax efficiency and minimizing total expenses important elements of investment planning. We also believe all investment recommendations should be rooted in academic/empirical research. On this score, we are proponents of Random Walk Theory and the Efficient Markets Hypothesis. In terms of the types of investments, we generally prefer CDs and treasuries for the fixed income portion of clients’ portfolios to bond mutual funds. For the equity portion of client portfolios we frequently use index funds/ETFs. We also have a direct indexing strategy for investing in rising dividend stocks. We consistently avoid products with high internal expenses and/or opaque commissions. We also eschew all forms of market timing.
To get to know us better, please see the videos on our "ABOUT" page.
Do You Include Cryptocurrency in Portfolio Construction?
No. We do not include Cryptocurrency in our portfolio construction. We do not regard it as an asset class because there are no tangible underlying fundamentals that may be used to judge present or future values. Similarly, we do not include alternative investments such as venture capital, private equity, or hedge funds in portfolio construction, as we believe these investments are better suited in terms of cost and risk characteristics for institutional investors rather than the individual consumers we serve.
Do You Recommend Annuities?
The short answer is rarely. This is a subject on which we are extremely well read. In fact, we have published three journal papers on annuities (two on variable annuities with living benefit riders and one on single premium immediate annuities). To summarize our position, while we acknowledge that there are situations in which annuities and annuitization may make sense, we find that the products are often more complex than they are marketed to be, and the number of client situations in which they are optimal is relatively small. We have traditionally entirely avoided fixed index annuities.
What’s the difference between Financial Planning Hawaii’s asset-based financial planning and fee-only financial planning service models?
At Financial Planning Hawaii, our asset-based pricing model is best suited for clients who want ongoing portfolio management included as part of their comprehensive financial planning platform.
Consumers who elect Financial Planning Hawaii’s fee-only planning model are generally seeking a one-time comprehensive review that includes investment guidance but does not entail ongoing portfolio management. Fee-Only clients may still work with us over time but tend to schedule subsequent review meetings on an ad-hoc basis.
NOTE: For our asset-based clients, access to our online financial planning platform (eMoney) is included in the platform. For our fee-only clients, it is available on an ongoing basis through a $25 monthly subscription.
Please also visit our Pricing page.
How does Financial Planning Hawaii’s asset-based fee billing work?
Our asset-based pricing model follows a tiered structure that begins at 75 basis points (.75%) on the first $500,000 of household assets under management and declines to a flat 8 basis points (.08%) on combined household portfolio values under management above $5,000,000.
Accounts are billed quarterly in advance. The billing relationship may be terminated at any time. Termination prior to the quarter will result in a refund that is pro-rated from the termination date to the end of the quarterly billing cycle.
Billing is only calculated based on the assets directly under our management. While we provide guidance and recommendations on all investments in the client’s portfolio, responsibility for implementing recommendations and managing/monitoring held away assets, rests solely with the consumer.
Why doesn’t your pricing model include hourly financial planning?
In our opinion, the conflicts of interest inherent in the hourly billing compensation model are incongruous with the practice of sound financial planning. The initial information gathering is typically the most time-consuming and most important element of the financial planning process. While all billing models have inherent conflicts of interest, hourly billing is the only model that creates a disincentive for the clients to take the time to share detailed background information necessary for sound, comprehensive financial planning.
See our Pricing page.
Is financial planning regulated?
Yes. All financial planners whose service models include advice pertaining to investment management and securities are specifically regulated under the Investment Advisers Act of 1940. This is explicitly spelled out in Securities Exchange Commission issued Interpretive Release IA-1092 The Applicability of the Advisers Act to Financial Planners.
In terms of specific regulatory oversight, ALL financial planners who are governed by the Advisers Act are required to registered with the SEC and to provide consumers with a copy of a plain English disclosure brochure (SEC Forms ADV 2A and 2B) that includes the planners service model, compensation structure, education and professional experience, potential conflicts, and regulatory and/or criminal disclosure histories. These documents are to be provided to prospective clients at or before engaging the planner’s services with updated versions provided at least annually. Consumers may also review the financial planner’s professional and regulatory disclosure history by visiting the SEC Investment Adviser Public Disclosure (SEC IAPD) website at https://adviserinfo.sec.gov/
Ongoing oversight and enforcement of financial planners whose business models do not involve direct portfolio management are provided at the state level by the offices of each state’s Securities Commissioner.
Is your financial planning guidance held to a fiduciary standard of care?
Yes. All financial planners whose service models include advice pertaining to investment management and securities are held to a fiduciary standard of conduct as described in the Investment Advisers Act of 1940. This standard includes an obligation to place the client’s interest above those of the financial planner, to disclose potential conflicts of interest and avoid them where possible, and to clearly present all material facts.
Under our financial planning agreement, we are transparent in our fee and conflict of interest disclosures as well as in explaining the rest of the terms of our engagement. All asset-based financial planning clients are provided a copy of JW Cole’s SEC Form ADV 2A &2B, and well as J.W. Cole’s “Customer Relationship Summary” (CRS). All fee-only planning clients are provided copies of Financial Planning Hawaii’s SEC Form ADV Parts 2A & 2B. These documents and all other client forms are uploaded to each client’s document storage vault in our financial planning platform.
Who is J.W. Cole and what is the company’s relationship to Financial Planning Hawaii?
Financial Planning Hawaii is a state of Hawaii Registered Investment Adviser. J.W. Cole Financial is an SEC-Registered Investment Adviser (RIA) and J.W.Cole Financial is a Financial Industry Regulatory Authority (FINRA) broker-dealer.
Financial Planning Hawaii and J.W. Cole are unaffiliated companies. However, whenever Financial Planning Hawaii offers comprehensive financial planning guidance that includes ongoing asset-based investment management, Financial Planning Hawaii personnel operate as investment adviser representatives (IARs) under J.W. Cole Advisors’ RIA. In this capacity, they fall under J.W. Cole’s compliance and regulatory supervision.
When offering fee-only financial planning services that do not involve asset-based investment advisory services or the establishment of a brokerage account(s), Financial Planning Hawaii (DBA Fee-Only Planning Hawaii) operates as its own unaffiliated RIA subject to the State of Hawaii’s Security Commissioner’s regulatory oversight.
While Fee-Only Planning Hawaii clients will not establish investment advisor or brokerage accounts with J.W. Cole Advisors or J.W. Cole Financial, occasionally, asset-based financial planning clients under J.W. Cole Advisors may also establish separate brokerage accounts with J.W. Cole Financial. In such instances, the appropriateness of this recommendation falls under the SEC’s “Best Interest” standard and benefits and potential conflicts of interests must be disclosed to the client in advance in SEC Form CRS.
For further details, please refer to the disclosure links provided on the PRICING page of this website.
What are the primary conflicts of interest in the asset-based and fee-only financial planning models?
Although it is not uncommon to read articles that refer to certain financial planning pricing models as being free from conflicts of interest, in truth the economics of all compensation models present certain unavoidable conflicts of interest.
With asset-based pricing, the financial planner has an obvious conflict to encourage clients to consolidate as much assets as possible under management and, conversely, to discourage clients from liquidating assets under management for other purposes. Our tiered pricing model effectively becomes a flat-fee pricing model once assets under management reach $5 million. The ongoing 8 basis point asset-charge represents our platform cost.
The primary conflict of interest under a fee-only/flat fee pricing model is that the financial planner has an incentive to get complete the planning agreement as expeditiously as possible with no incentive to provide ongoing guidance. Further, under the flat-fee pricing model there is no direct accountability for investment performance. Since implementation and monitoring of the recommendations is the responsibility of the client.