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Every Financial Plan Needs a Solid Foundation

Posted by Mark Triplett on Wed, Apr 19, 2017 @ 05:29 PM

Every home needs a solid foundation. The same holds true for financial plans. When it comes to constructing a new home, one of the first crews on sight is the excavation team. They dig and lay the foundation. The foundation determines the long-term stability of the home to be built on top of it. A weak foundation results in costly, and potential irreversible, structural problems many years after the home is finished. Cracked walls, leaky basements, windows that don't open or close not only result in safety issues, they deteriorate resale value.

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The House on the Rock

Many people are familiar with the parable of the house on the rock. If you're not, the message tells of one builder who built his house on the rock, and another who built on sand. When they were finished, they each had built homes they were proud of. Then, a storm hit with heavy rains and strong winds. It lashed both homes. The house built on the rock weathered the storm. Whereas, the house built on sand washed away. 

Different Professionals with Different Plans

The story doesn't say that one was a good builder and the other a bad builder. It also doesn't say that one was benevolent while the other evil. There's no mention that one had a formal education and great experience while the other lacked any formal education or experience. It's really quite simple, there were two builders who made very different choices on which foundation to build their homes.

Preparing Your Clients for the Storm

While I can't predict the future, it's safe to say that at some point in the future our economy will be hit with a massive financial storm. Economic crises happen, even small ones cause significant damage. Market volatility, inflation, and other factors erode your client's financial house. The impending financial storms will test the structure of your client's financial plan. As an advisor, did you build your client's financial foundation on rock, or on sand?

Financial Plans for a Solid Foundation

Market-based investments, such as stocks and bonds, are exposed to the ebb and flow of economic tides. Like a sand beach, severe systemic economic storms like recessions and other major market corrections may wash away a foundation constructed of market-based investments. Even seemingly historically less risky investments like bonds may not be immune. Rising interest rates negatively impact the value of bonds within a portfolio and may erode a well-intentioned asset allocation.

Social Security, pensions, and other forms of lifetime income are the solid foundations on which you can build your client's financial strategy. They may insulate their retirement lifestyle from external economic pressures. These tools are a solid choice for covering many essential spending items in retirement, such as food, clothing, shelter, transportation, healthcare and so on. Your clients may want their non-negotiable expenses backed by these sources of income as well. Your client's non-negotiable items are the expenses beyond basic necessities, but that they won’t want to give up if economic conditions sour.

Every client has their own financial wants and needs. Make sure to choose the foundation that is the best fit for your client's financial plan.


Download our free IUL client presentation to show your clients and prospects how IUL can be a support beam in their financial house. 

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Tags: planning, consistent advisor

FOR PRODUCER USE ONLY. NOT FOR USE WITH CLIENTS.