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Reviewing Your Financial Plan: 20 Circumstances That May Need A Review

Today being World Financial Planning Day, now is the time to review your financial plan. A financial plan is a living, fluid document that needs to be flexible enough to change and adapt to your personal and financial circumstances. While it’s always advisable to review your financial plan at least once a year, there are other circumstances that may require a more frequent review of your plan. In this article, we explore 20 life events that may cause you to revisit your financial plan:

A change in your income: Your income is the foundation of your financial planning because your goals can only be achieved by allocating your income appropriately. If your income changes in any way, it’s always a good idea to revisit your financial plan. An increase in income may allow you to meet some of your financial goals sooner or start funneling funds to a goal you haven’t started funding yet. This may mean that you can devote a larger amount to your retirement pension or afford a more comprehensive medical assistance plan. The danger of earning more is allowing a lifestyle drift – buying more home, vehicle, or physical assets than you actually need – without first determining how your extra income can be used to fortify your future. financial.

Purchase of a fixed asset: If you’ve bought a fixed property, whether it’s funded or not, it’s always a good idea to revisit your financial plan. Keep in mind that acquiring real estate may require updating your will. Additionally, if you have taken out a mortgage, you may need to adjust your life coverage to make sure there is no shortfall in the event of death or disability. Additionally, there are additional monthly costs associated with owning a property, and it is always advisable to adjust your monthly budget to account for these costs.

Receive an inheritance: Receiving an inheritance will likely mean that you will have to make investment decisions regarding the inherited funds. This is also a good time to revisit your goals, keeping in mind that a significant inheritance can give you the financial freedom to plan a different path and pursue different lifestyle goals.

Job change: Switching from one employer to another can lead to a number of discussions about financial planning, especially when it comes to funding your group retirement and covering risks. As a first step, you may need to make investment and / or withdrawal decisions regarding your group retirement fund and the various tax implications that apply to it. Second, you’ll need to understand how well your new group life and disability coverage meets your needs and whether additional solutions need to be put in place.

Entrenchment: Getting fired will undoubtedly come with a number of key decisions that need to be made, and it’s almost always advisable to seek financial planning advice – preferably at the start of firing negotiations. You’ll need to make critical decisions about your severance pay and severance pay, while making sure you understand the tax implications of each decision. In addition, the loss of your group risk coverage may cause you to have to take out coverage on a personal basis in order to ensure adequate protection. Depending on the decisions you make regarding your termination plan, you may need to make investment decisions and update your retirement plan accordingly.

Business creation : Deciding to start a business usually means seeking start-up capital, withdrawing from investments to finance the business, replacing group risk coverage with personal insurance, tightening your budget, and preparing business cash flow projections for the future. support of its business plan. You may even need to realize an asset to help fund your business idea or take out a loan to help finance the start-up, in which case a financial planning review is a must.

Consider retirement: Retirement is an important step to take, and it is always advisable to seek financial advice several years before formal retirement. There are a number of crucial decisions to be made in the years leading up to retirement, so avoid waiting until after you retire for professional advice. In the years leading up to your retirement, you’ll want to make sure that you are adequately funded and invested appropriately for retirement, and that your post-retirement goals are realistic and achievable. If there are retirement funding anomalies or deficits, at least you give yourself time to change course and update your retirement plan.

Addition of financial dependents: Any new dependents, such as the birth or adoption of a child, or the financial support of an aging parent, may require you to reconsider your planning. The arrival of a child will require updating your will and estate plan and reviewing your life coverage to ensure your child is well provided for. You will also need to review your budget, start funding education, and incorporate the costs of raising a child into your financial plan. You may also need to change the beneficiary designations on your policies and investments.

Consider emigration: Before making the decision to migrate, it is advisable to review your plan to make sure that you fully understand the financial impact of such a decision. No matter where you intend to settle, emigration is an extremely expensive business that requires careful planning. Moving your assets abroad is a complex and time-consuming process, and it is advisable to plan your emigration with an experienced advisor.

Modification of financial objectives: The financial plan you have in place should be fully aligned with your stated goals and objectives – and any changes to your goals should require review. For example, if one of your goals were to fund a trip abroad in five years, your investments would be focused on a five-year investment horizon. If circumstances change and a trip abroad is no longer in sight, you will need to redefine your goals and adjust your investments accordingly.

Wedding: Marriage almost always requires a consideration of financial planning, as there are significant financial implications for both couples, regardless of which matrimonial regime you choose to implement. Not only do each of you want to update their wills, but chances are you will need to develop a joint household budget and update your risk coverage to protect each other in the event of a disaster. This is also a great time to embark on a common goal setting exercise and begin the process of joint financial planning.

Divorced: Likewise, a financial planning exam is almost always required in the event of a divorce, although it is best to seek advice from your financial planner before signing a settlement agreement. Depending on how your assets will be divided in the event of a divorce, a number of key decisions will need to be made, many of which have tax and CGT implications.

Diagnosis of serious illness or disability: A diagnosis of disability or critical illness is likely to impact your income and future earning potential, which, in turn, will require a fully updated financial plan. If you have severe health and / or disability coverage, your advisor should be able to walk you through the claims process and ensure that all payments received are invested appropriately. Depending on the diagnosis, you may also want to make sure that your will is updated and that you sign a living will or an advance health care directive.

Retirement: Formal retirement from your retirement funds requires critical decisions about your investments, purchasing an appropriate life annuity, choosing an appropriate withdrawal rate, possibly downscaling your primary residence and reinvesting capital, preparing a post-retirement budget and determining future cash flow throughout your retirement years, and this process is best managed with the guidance of an expert in retirement planning.

To make donations : If you plan to help your adult children financially, give financial gifts to your grandchildren, or donate to your charity, make sure these intentions are included in your financial plan so that you don’t do not have to pay tax on donations. Make sure your financial plan is updated to include your donation or money donation intentions and that it is supported by a tax-efficient schedule.

Purchase of offshore assets: If you intend to buy assets abroad, talk to your advisor about the financial implications of this transaction. Depending on the jurisdiction in which you intend to purchase your asset and the nature of the asset, you may need to have a foreign will drawn up to deal with those assets. It’s also important to understand the tax implications of buying and selling offshore assets, and how this will affect your estate planning.

Divestment: Divesting any investment will have tax implications that you should be aware of before making a transaction to avoid paying unnecessary taxes. Depending on whether you invest in stocks, bonds, real estate, or cash, it is important to understand the tax implications of doing so before you divest.

Setting up a trust: If you intend to set up a trust to house certain assets for the benefit of your children or other beneficiaries, be sure to review your financial plan, as moving assets into a trust will significantly affect your planning, especially your estate plan. It is important to be clear about your intentions to create a trust, the implications of moving assets into a trust, what it means to lose control over those assets, and how the trust should be structured to best achieve your goals.

Death of a spouse: Losing a spouse will require a complete overhaul of your financial plan. Ranked among the most traumatic events in life, the financial implications of losing a spouse cannot be understated. Every element of your financial planning, including income, expenses, budgeting, money management, risk coverage, retirement funding and estate planning, will be affected by the death of your spouse, and the sooner you revise your financial plan, the better.

Market fluctuations: Fluctuations in the market can leave long-term investors feeling jittery and nervous and can cause them to make instinctive decisions about their investments. If the investment markets are particularly volatile and you need to understand the implications for your long-term investments, allow time to meet with your advisor before making rash decisions. Short-term market fluctuations are normal, and sometimes you just need the reassurance of an experienced investment advisor to refocus on your long-term goals.


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The MPC has so far taken a cautious stance on rate decisions given the difficult economic scenario presented by the Covid-19 pandemic. But there is some comfort this time around due to easing inflation and resuming economic growth.

Five things to note as the RBI prepares for Friday's rate policy decision


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  • Karnataka Gambling Law: MPL and other gaming startups prevent users from playing real money games

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  • “The customer first” should not be reduced to a simple slogan

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Snapshot of the IPO

Equity Type Issue price Size of the problem Lot size Open problem Problem Close
DK Enterprise See profile SME IPO 40 7.99 3000 07-10 12-10
Equity Issue price Registration date Open announcement Announcement Close % quotation gains CMP Current earnings%
Paras Defense 175 01-10 475.00 498.75 185 577.25 229.86
SBL Infratech 111 28-09 130.00 125.00 12.61 111.20 0.18
Markolins 78 27-09 62.20 65.30 -16.28 68.00 -12.82
Prévest Denpro 84 27-09 180.55 0 218.15 159.70
Scheme Fund Category Info Purchase order Opening date Closing date
No NFO details available.
Equity Type Issue price Size of the problem Lot size Subscription Open problem Problem Close

Paras Defense See profile

Initial Public Offering 165 170.78 – 181.13 0 150.07 09-21 23-09

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SME IPO 69 5.18 0 27-09 30-09

Jainam Ferro View profile

SME IPO 70 19.61 0 28-09 30-09

Aditya Birla Su View profile

Initial Public Offering 695 2702.16 – 2768. 0 2.43 29-09 01-10

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Harshvardhan Roongta
Harshvardhan Roongta

CFP, Roongta Securities

October 07 – 4:00 p.m.

Financial planning and asset allocation



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Harshvardhan Roongta
Harshvardhan Roongta

CFP, Roongta Securities

October 07 – 4:00 p.m.

Financial planning and asset allocation

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country = India page generated = 2021-10-06 13:42:12


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A fair and efficient agricultural financial plan for all

A 63-year-old grain farmer we’ll call Owen grows 1,000 acres of grain near the Manitoba-US border. He has three children aged 35, 34 and 29. The eldest, Jack, wants to take over the farm. His two siblings, who we’ll call Max and John, have jobs in town and don’t want to farm.

Owen’s dilemma is how to transfer the farm to Jack, earn an income of $ 50,000 a year at age 65, and provide a living income or compensation for the two children who do not want to farm. The problem is both a question of fate, that is to say to ensure the sustainability of the farm through the management of Jack, and to ensure a fair settlement for Max and John.

Owen enlisted the help of Colin Sabourin, a Certified Financial Planner from Harbourfront Wealth Management in Winnipeg, Manitoba, to prepare for the farm transfer.

We need to look at the basic finances of Owen’s farm. The farm company has current assets of $ 6.5 million, current liabilities of $ 1,013,000 and net worth of $ 5,487,000. There are also non-farm assets, including a $ 450,000 house, Owen’s Registered Retirement Savings Plan (RRSP) of $ 245,000, and his Tax-Free Savings Account (TFSA) of $ 90,000. $. Non-farm assets total $ 785,000. Total net worth is $ 6,272,000.

The best solution – do an estate freeze at age 65, then buy back $ 60,000 of the preferred shares of the farming company for the rest of Owen’s life, suggests Sabourin.

The company is worth $ 5,487,000. Assuming it grows by five percent a year, it will be worth $ 6,049,420 in two years when Owen is ready to retire, notes Sabourin. He can then issue new ordinary shares to his farmer son. Any future growth of the company will be in the hands of his son.

In the first year of retirement, Owen can buy back $ 60,000 of preferred stock and do so annually, increasing the funds withdrawn from the company by 2% per year to slow inflation.

This process is expected to generate an annual income of $ 60,000, and there is $ 6,000 from the Canada Pension Plan and $ 7,380 from Old Age Security (OAS).

After tax, this cash flow would generate $ 58,768 per year. There would be a deficit of $ 1,232, which Owen can cover by drawing on his RRSP or TFSA, explains Sabourin.

OAS clawback could be problematic as it is triggered when net income exceeds $ 79,845. The repurchase of preferred shares is treated as dividend income, so there would be a loss of a few thousand dollars on clawback. This process will leave Owen with sufficient retirement income until he is 90 years old.

The estate freeze will allow Jack to avoid having to shell out money for the buyout. Owen will continue to control his farming company. If the oldest son Jack doesn’t run the farm well, Owen can step back and regain control, warns Sabourin.

In two years, in 2023, farm assets before inflation adjustment would be $ 5,487,000. Assuming Jack withdraws $ 60,000 from the farm in the first year of the transition and assuming 2% inflation going forward, the preferred stock would generate a lifetime payout of up to 90 years of 1,960,254 $. At 90, the farm would have an undistributed value of $ 4,089,163, Sabourin estimates.

Add $ 250,000 in personal investments and the farm house of $ 450,000, Owen’s total life equity would be $ 5,089,163. A million dollar life insurance policy Owen bought ten years ago will fund an inheritance of $ 500,000 for each of the off-farm children. They will have to sell the preferred shares they hold to the farming company, Sabourin explains. The farm child will have to buy these shares along with the $ 1 million life insurance policy that will be paid to the farm corporation tax-free. This money will allow the child farmer to buy his siblings’ shares at $ 500,000 each.

With all of this done, the non-farming children will have received $ 1 million each, while the farming child will have inherited the $ 3,089,163 of preferred stock.

Is it equal and fair? The child farmer is going to have $ 3 million in preferred stock while the two brothers will only get $ 1 million each. But the farm child will have to sweat for their income, get up to feed the animals each morning and run the farm, while the non-farmer siblings will each receive $ 1 million in passive inheritance. The million dollars per child at an assumed rate of return of five percent per year will provide them with $ 50,000 per year each for life. Overall, it’s a fair and effective plan, concludes Sabourin.

This plan sounds complex, but it’s really just a tax-free, tax-free distribution of life insurance payouts to keep the operation going and provide a means of reorganize the social capital of the operation. It is open, fully compliant with tax legislation, and not difficult to administer once the plan is in place. Most of all, it allows Owen to treat his three sons fairly, with the farm going to Jack and a good chunk of the money to his two nonfarming brothers.


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What to ask clients to start their financial plan

Clients are often concerned about the past, such as filing last year’s tax returns, rather than the future. Accountants can be of tremendous benefit to these clients by providing them with cutting edge services. It means financial planning.

There are many reasons why clients often think they don’t need financial planning services. They may think the good times will last forever, that retirement is too far away, or that they should focus on immediate concerns rather than future events like college education or weddings. Even if your client thinks they don’t need financial planning, you can take a proactive approach that shows you are invested in your client’s future success.

Showing your client that financial planning is critically important begins by asking them the following questions:

How confident are you that you will have a comfortable retirement?

You can also ask them how long they plan to work or if financial independence is a goal.

Why: The bottom line is that most people are unprepared for retirement. According to Synchrony Bank, the average retirement savings for an American aged 50 to 54 is $ 146,068. The 80 percent rule is often used to determine retirement income based on a person’s current income, while four to five percent is often considered a prudent level to mine retirement assets.

How? ‘Or’ What: You can use Monte Carlo simulation programs to examine your client’s current retirement assets as well as planned future savings and growth and compare it to planned spending, adjusted for inflation over time. This will give you a good idea of ​​how long your customer’s money will last.

What is your plan for eliminating credit card debt?

Many Americans have revolving credit card debt. According to creditcards.com, the average credit card interest rate is 16.2%. Now compare that to what your customer is making in cash, which is next to nothing.

Why: According to valuepenguin.com, the average credit card debt for Americans aged 45 to 54 is $ 7,670, and 51.7% of people in that age group have revolving credit card debt. Personal interest is not tax deductible. Many people make minimum payments while increasing their balance. If the Fed raises its interest rates, those rates will rise as well.

How? ‘Or’ What: Start by determining the extent of the problem for your customer. How many cards do they have? What rates do they pay? Look at their monthly statements showing how they could pay off the balance quickly using the examples provided. Can they make balance transfers to other cards with lower introductory rates? Help them develop a debt reduction plan.

How much will it cost to prepare your child for a career?

Most people ignore the overall cost of raising a child to college age. Some assume that their child’s school fees will cost the same as what they paid for their own education, but they may not be wondering if their child’s career will require a graduate degree.

Why: According to the most recent USDA figures, the average cost to raise a child to age 17 is $ 233,610. US News & World Report says the average cost of tuition for in-state students at a public school is $ 10,338, while outside students pay an average of $ 22,698. Private college tuition fees average $ 38,185.

How? ‘Or’ What: As the costs of a university education will continue to rise, your client needs a tax-efficient savings strategy. They should also develop a thorough understanding of how financial aid programs work.

What would happen if you suddenly suffered a career setback?

While this question can be difficult to ask, it is important to think about it. What would happen if your client lost their job due to the downsizing of the company? Even if their spouse is employed, they might need two incomes to make ends meet.

Why: Millions of Americans have been made redundant during the pandemic and businesses have closed. Many companies are looking to rehire, but often for low paying positions. Maybe your client realized that his “permanent job” might not be that permanent.

How? ‘Or’ What: Your client needs a reserve fund, which is usually made up of six months of income. Since this can be difficult for many customers, they should consider what they have on credit. Having a home equity line of credit is a good idea. Your client should also understand the rules governing retirement account loans. Most importantly, they need to plan ahead and have a strategy for finding a new job.

How would your family be fed if you were no longer in the picture?

You may have young clients who are just starting their careers and married life. Often they have young children. They may own a home and have mortgage debt. When we are young, we assume that we will live forever. What if we don’t?

Why: CNN reports that a young family should purchase insurance that covers at least 10 times their annual income, while 20 times is even better. Your client will need a reserve of cash to generate income to replace lost income.

How? ‘Or’ What: Start by discussing the importance of being able to replace income. Think about “what if” strategies and discuss the pros and cons of term and whole life insurance.

What are your long-term plans for your business?

If your client owns a business, most of their wealth is likely tied to the business. Their children may not want to continue their legacy, so they need an exit strategy.

Why: In 2015, the Vancouver SW Washington Business Journal reported that 90 percent of US businesses are owned or controlled by families. Of these, 30 percent belong to the second generation and 12 percent belong to a third generation. Your client must either prepare the business to move on to the next generation or plan to sell it.

How? ‘Or’ What: Let your customer do the talking. Will their family inherit the business and, if so, how are they preparing for this day? If the business is to be sold, it must be put in optimal conditions to get the best price. Start talking about ratings and how they’re calculated.

By itself, financial planning does not appear to be an immediate need. But the more in-depth and specific the discussion, the more pressing the need becomes.


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Vancouver Island Regional Library adopts 2022-2026 financial plan – BC Local News

The Vancouver Island Regional Library (VIRL) Board of Trustees adopted the Financial plan 2022 – 2026: reorganized, relaunched, ready! .

At the September 25 meeting, the board adopted a balanced budget of $ 31,274,714 for 2022. Municipal and regional taxes will contribute $ 25,440,431 to the library budget, an average increase of 3.84% over until 2021.

Since the board approved a one-year hiatus on all new capital projects for 2022, the total budget has grown from $ 39 million in 2021.

The budget was seconded by all the directors present.

“Budget 2022 recognizes the persistence of the global COVID-19 pandemic and also reflects VIRL’s remarkable ability to adapt our services to support our communities during this difficult time,” said Joel Adams, VIRL’s chief financial officer. “By taking a long-term view and recognizing the important role our libraries can play in helping our communities recover, our board of directors signals their confidence in our people, our services and our ability to innovate and grow. “

In adopting the 2022 budget, the board agreed to a one-year hiatus on all new capital projects in 2022. This follows skyrocketing construction and material costs following the pandemic, and offers VIRL the opportunity to reassess capital priorities as costs begin to rebound.

Some projects will continue in 2022 as the projects were well advanced by the time the hiatus was enacted. For more information on VIRL’s capital projects, visit the website Capital projects page.

“If 2020 has shown anything to the board, it’s that VIRL has the resilience and responsiveness to overcome the challenges of the pandemic,” said Gaby Wickstrom, VIRL board chair. “From the ongoing resumption of the pandemic to the pursuit of true and meaningful reconciliation, serving marginalized community members to ensure families have spaces to interact, this budget reflects the board’s commitment to library services.” on Vancouver Island, Haida Gwaii and the Central Coast. ”

For more information on the 2022-2026 Financial Plan, visit www.virl.bc.ca/about/reports-and-plans/.

– NEWS Staff, subject

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Community House’s financial plan leaves some Birmingham groups in shock

The Community House, an iconic Birmingham nonprofit, has cut grants to some well-known civic and community groups, forcing around half to find new hangouts.

The Rotary Club of Birmingham, the Senior Men’s Club and the Women’s Club have been notable departures from the meeting space for a long time.

“It’s just prohibitively expensive,” said Bryan Frank, president of the Rotary Club. “We have no way of absorbing these kinds of costs. He’s a service club killer. They are clearly oriented towards profit. ”

Nine clubs that once met regularly downtown at 380 S. Bates St. were officially notified in September 2020 that the free meeting rooms were no longer available. Instead, clubs should pay 50% of the room price. All nonprofits would buy a food, drink, and auxiliary staff tab at a 25% discount. Overall prices would still vary due to the various types of services provided.

While officials at The Community House have said they need to generate more revenue to stay afloat, Frank said the budget measures are tough. A Monday lunch at the community house typically costs around $ 19 for a Rotary club member. With the changes, the individual tab has grown to around $ 45, according to Frank.

“They clearly don’t care about the community,” said Frank, whose club meetings have been moved to the library for now. “This would have been our 95th meeting at The Community House. For us, this is quite devastating. It has completely changed the way we do things.

Following:Kids can help name Birmingham vehicles, design the calendar cover

Following:Community Sharing is building a new home to feed the hungry in Huron Valley

Breakfast with Santa has been a popular tradition at The Community House for 25 years.  Not this year, however.

The Community House was founded in 1923 to be a “non-partisan, non-sectarian, non-exclusive community center”.

The establishment is known for its camps, courses, daycares and enrichment events. It is also a location for weddings and social and corporate events.

Tough decisions

COVID-19 could turn out to be its albatross. Operating at full capacity ahead of the pandemic, The Community House closed to the public on March 13, 2020.

Most of its staff have been laid off or on leave, and annual revenues have fallen to about $ 2.7 million from about $ 4.3 million. Disinfection and new cleaning protocols, combined with labor costs, represented a new expense of nearly $ 70,000 for a six-month period in 2020.

After meeting with the members of the board of directors, William Seklar, President and CEO of The Community House, sent his letter in September 2020 regarding the Lion’s Club, Optimist Club, Women’s Club, Senior Men’s Club, Newcomers Club, Storytellers Guild , Rotary Club, Birmingham Bloomfield Chamber of Commerce and Birmingham Shopping District.

Bill Seklar, President and CEO of The Community House, sits in TCH's Ginger Meyer Room.  This room is popular with brides as they prepare for their weddings.  It has a welcoming fireplace.

“We are writing today with a tremendous sense of sadness,” Seklar said in his letter. “Although historically The Community House has been blessed with abundance – more than enough to share our bounty with others, COVID-19 has changed our world forever.”

He announced that The Community House was ending separate agreements with the nine groups “which over the years have come under The Community House”.

There was also his stated intention to treat outside groups and nonprofits more fairly. While all nine clubs received the 50% discount, Seklar reserved a 20% room discount for other outside nonprofits.

The clubs, for the most part, were still in hibernation and also wondering how to survive. As members received their immunizations, they began to take the letter to heart.

Maynard Timm, the president of the Senior Men’s Club, wrote members a note in July telling them they would resume meetings in person on Friday, but not at The Community House.

“TCH has been our home for 64 years and remains a favorite place for our meetings,” Timm wrote. “We will continue to work with TCH management for a possible return in 2022. (But) TCH has not come up with acceptable terms for our needs.”

Seklar said the past two years have been probably the most difficult for him and his team at Community House. Some of his staff remain on leave and he does not know how long the operation will be able to handle salary increases.

“We would love for all the bands to come back,” Seklar said. “As a business, because a charity is always a business, we have to pass these costs on to our customers, but it’s up to each customer.

“I am a Birmingham kid. I grew up here. I know my community and I want this place to survive and I want to turn the page in 2023 into the next century. I think we are taking prudent and prudent steps. “

Seklar stressed that donations and volunteers are always welcome. He invites those interested to call La Maison Communautaire, 248-644-5832.

The Community House has been a unique treasure serving the Birmingham area with a wide variety of programs for all ages.

Contact reporter Susan Vela at [email protected] or 248-303-8432. Follow her on Twitter @susanvela.



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Financial plan

What is a financial plan?

A financial plan is at the heart of the financial advice process. It is in a way the card of your customers …

A financial plan is at the heart of the financial advice process. In a way, it’s your customers’ money map, there to guide them financially from where they are today to where they want to be. Without a plan, investors are just paddling the open sea, hoping their direction and speed will be enough to get them to their destination.

Given the importance of the financial plan in the planning process, advisers and clients need to understand what a financial plan is and the key elements that make it a good one.

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What is a financial plan?

A financial plan is a document that takes a holistic look at a client’s entire financial situation and shows how to achieve their financial goals, says Dan Keady, chief financial planning strategist at TIAA in Charlotte, Carolina. North. It will integrate the “needs, wants and wishes of your client, while taking into account her level of comfort in the face of risk”.

Financial plans are typically created using financial planning software and can integrate many facets of planning. For example, the retirement plan element often includes an analysis showing the impacts of taking money from different accounts, qualified and unqualified, on income and a comparison of the tax implications of each scenario, says Kelly Campbell, planner. chartered financier and president and CEO of Campbell Wealth Management in Alexandria, Virginia.

“Many plans will also look at the required rate of return a person needs to meet their goals,” Campbell said. “It can give someone a good indication of how to invest their portfolio.”

[READ: 10 Best Financial Certifications]

Create a financial plan

A financial plan requires the right elements to reach its full potential. To create a good financial plan, be sure to include the following:

A statement of net worth or a detailed cash flow analysis. Financial planning begins with understanding your client’s current finances. “This may mean that a plan needs to include, among other things, a net worth statement or a detailed cash flow analysis to understand how funds come and go,” says Martin Schamis, manager of wealth planning at Janney Montgomery. Scott in Philadelphia.

Your client’s assets and liabilities. A good financial planning strategy includes documenting all investable assets that can be used to meet a client’s goals as well as detailed liabilities and current and planned expenses, says Tammy McKennon, financial advisor at Edward Jones at Newport Beach, California.

A strategy for achieving short and long term goals. “Most plans only think about retirement and the future, but a good financial plan thinks about your life goals from present to future,” says Aditi Javeri Gokhale, Chief Commercial Officer and President of Products and Services at investment at Northwestern Mutual in Milwaukee. “Too often, consumers see financial planning as something that sets the stage for the future, which is abstract. Financial planning should also include how people can live their dreams today, whether it’s buying a new car, planning a family vacation, or financing school fees, all while getting ready. long-term goals like retirement.

Hypothetical simulations and risk assessment. The challenge of connecting the dots on your client’s financial roadmap is that a lot can happen between today and tomorrow. “This is where what-if scenarios, Monte Carlo simulations, risk assessments and other common tools come in,” says Schamis. By running these simulations, you can test a financial plan to determine its chances of success.

Use conservative assumptions. “I always ask clients to project their anticipated spending, and then we use conservative assumptions about their asset growth to document a very realistic expectation of results,” McKennon explains. “We are adding additional layers of ROI sequencing, which gives additional confidence to our results. “

A holistic review of your client’s finances. During the entire financial planning process, you will often find other aspects of your client’s finances that need to be considered, says Greg Wells, regional director and partner at EP Wealth Advisors in Torrance, Calif. This can include checking to see if your client is saving enough and performing a tax analysis to ensure that what is set aside is being saved in the most tax efficient way. You may need to review the estate plan to ensure that future wishes will also be taken into account.

“A financial plan should help people protect themselves and prosper,” says Javeri. “In other words, both protecting what someone has with insurance while increasing wealth through investments.”

After all of this, a financial plan may seem like a purely analytical endeavor, but financial planning isn’t all about numbers, says Daniel Crosby, director of behavior at Atlanta-based Orion Advisor Solutions.

“A good financial plan relies on a thorough understanding of a person’s psychology and includes choosing sufficiently motivating goals, achieving those goals over time, anticipating behavioral barriers to success, and creating contingencies. when life doesn’t go as planned, ”Crosby says. “Even the best-designed financial plan will encounter obstacles along the way, and at that point an understanding of investor psychology becomes essential.”

[Read: Private Wealth Manager vs. Financial Planner]

How to make a financial plan

Financial planning begins with active listening and often ask deep questions to really understand what matters to your customer, says Javeri. “Financial plans cannot take a one-size-fits-all approach. During the conversation, it is important to identify the life goals that are most important to the client, so that a financial roadmap can be designed to achieve them.

You can follow these steps to create a personalized financial plan:

1. Get to know your customers : Getting to know your customers is critically important when creating the financial plan, says Keady. “A client’s family, culture, environment and career will help the advisor navigate the client’s views and relationship with financial planning. “

2. Ask questions to understand your customers and their goals: Keady tells advisers to ask about estimated retirement age, pay down debt, college funding goals, or plans to leave a legacy. You should be as thorough and detailed as possible when gathering information. “It’s often cumbersome, and most customers say we’re asking for more information than anyone has ever asked,” Wells explains. “But the more data we have, the better the output we can provide. “

3. Use a form to collect information about the customer: Keady recommends having a form to help you collect all of this information as well as your client’s financial data, such as risk tolerance, income, estimated expenses, insurance policies, and bank and investment account statements.

4. Be systematic in your data collection: Despite the highly human element of financial planning, collecting data as part of creating a plan should be done systematically, Campbell says. “Ad hoc planning is not very useful for the client or the advisor. Having a systematic planning process usually uses certain software packages, and the process is usually streamlined.

5. Communicate how you create the plan with the client: After you have gathered the necessary data, you can create the financial plan. “Make sure you understand and communicate all of the Monte Carlo assumptions and results,” says Wells. “Keep the details in place for future reviews and comparison plans. “

6. Provide the final plan with a list of actions to accomplish: “Tracking what action to take is also very important to ensure that the plan is followed and continues to move forward on track in the future,” says Wells.

Tracking is essential, because the financial plan is just the start of your client’s financial journey – and it might not be an easy journey, even with that plan in place.

“With the current level of financial fragility that we are seeing, clients are unlikely to be able to meet all of their financial goals,” says Keady. “The best advisor will be able to examine when a client fails (and, more importantly, explain to a client the steps they can take to move on a successful financial path.”

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What is a financial plan? originally appeared on usnews.com

Update 9/23/21: This story was posted at an earlier date and has been updated with new information.


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Financial plan

What is a financial plan? | Financial advisers

A financial plan is at the heart of the financial advice process. In a way, it’s your customers’ money map, there to guide them financially from where they are today to where they want to be. Without a plan, investors are just paddling the open sea, hoping their direction and speed will be enough to get them to their destination.

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Given the importance of the financial plan in the planning process, advisors and clients need to understand what a financial plan is and the key elements that make it a good one.

What is a financial plan?

A financial plan is a document that takes a holistic look at a client’s entire financial situation and shows how to achieve their financial goals, says Dan Keady, chief financial planning strategist at TIAA in Charlotte, Carolina. North. It will integrate the “needs, wants and wishes of your client, while taking into account her level of comfort in the face of risk”.

Financial plans are typically created using financial planning software and can incorporate many facets of planning. For example, the retirement plan element often includes an analysis showing the impacts of taking money from different accounts, qualified and unqualified, on income and a comparison of the tax implications of each scenario, says Kelly Campbell, planner. Certified financier and President and CEO of Campbell Wealth Management in Alexandria, Virginia.

“Many plans will also look at the required rate of return a person needs to meet their goals,” Campbell said. “It can give someone a good indication of how to invest their portfolio.”

Create a financial plan

A financial plan requires the right elements to reach its full potential. To create a good financial plan, be sure to include the following:

  • A statement of net worth or a detailed cash flow analysis. Financial planning begins with understanding your client’s current finances. “This may mean that a plan needs to include, among other things, a net worth statement or a detailed cash flow analysis to understand how funds come and go,” says Martin Schamis, manager of wealth planning at Janney Montgomery. Scott in Philadelphia.
  • Your client’s assets and liabilities. A good financial planning strategy includes documenting all investable assets that can be used to meet a client’s goals as well as detailed liabilities and current and planned expenses, says Tammy McKennon, financial advisor at Edward Jones at Newport Beach, California.
  • A strategy for achieving short and long term goals. “Most plans only think about retirement and the future, but a good financial plan thinks about your life goals from present to future,” says Aditi Javeri Gokhale, Chief Commercial Officer and President of Products and Services at investment at Northwestern Mutual in Milwaukee. “Too often consumers see financial planning as something that sets the stage for the future, which is abstract. Financial planning must also include how people can live their dreams today – be it ‘buy a new car, plan a family vacation, or finance school fees – all while preparing for long-term goals like retirement. “
  • Hypothetical simulations and risk assessment. The challenge of connecting the dots on your client’s financial roadmap is that a lot can happen between today and tomorrow. “This is where what-if scenarios, Monte Carlo simulations, risk assessments and other common tools come into play,” says Schamis. By running these simulations, you can test a financial plan to determine its chances of success.
  • Use conservative assumptions. “I always ask clients to project their anticipated spending, and then we use conservative assumptions about their asset growth to document a very realistic expectation of results,” McKennon explains. “We are adding additional layers of ROI sequencing, which gives additional confidence to our results.”
  • A holistic review of your client’s finances. Throughout the financial planning process, you’ll often find other aspects of your client’s finances that need to be considered, says Greg Wells, regional manager and partner at EP Wealth Advisors in Torrance, Calif. This can include checking to see if your client is saving enough and performing a tax analysis to ensure that what is set aside is being saved in the most tax efficient way. You may need to review the estate plan to make sure your future wishes are taken into account as well.

“A financial plan should help people protect themselves and prosper,” says Javeri. “In other words, both protecting what someone has with insurance while growing their wealth through investments.”

After all of this, a financial plan may seem like a purely analytical endeavor, but financial planning isn’t all about numbers, says Daniel Crosby, director of behavior at Atlanta-based Orion Advisor Solutions.

“A good financial plan relies on a thorough understanding of a person’s psychology and includes choosing sufficiently motivating goals, bringing them to life over time, anticipating behavioral barriers to success, and creating contingencies when life is not going as planned. Crosby said. “Even the best-designed financial plan will encounter obstacles along the way, and at that point an understanding of investor psychology becomes essential.”

How to make a financial plan

Financial planning starts with active listening and often asks probing questions to really understand what matters to your client, Javeri explains. “Financial plans cannot take a one-size-fits-all approach. During the conversation, it is important to identify the life goals that are most important to the client, so that a financial roadmap can be designed to achieve them. “

You can follow these steps to create a personalized financial plan:

  1. Get to know your customers : Getting to know your customers is critically important when creating the financial plan, says Keady. “A client’s family, culture, environment and career will help the advisor navigate the client’s views and relationship with financial planning.”
  2. Ask questions to understand your customers and their goals: Keady tells advisers to ask about estimated retirement ages, debt repayment, college funding goals, or plans to leave a legacy. You should be as thorough and detailed as possible when gathering information. “It’s often cumbersome, and most customers say we’re asking for more information than anyone has ever asked,” Wells explains. “But the more data we have, the better the output we can provide.”
  3. Use a form to collect information about the customer: Keady recommends having a form to help you collect all of this information along with your client’s financial data, such as risk tolerance, income, estimated expenses, insurance policies and bank account statements and shift.
  4. Be systematic in your data collection: Despite the highly human element of financial planning, collecting data as part of creating a plan should be done systematically, Campbell says. “One-off planning is not very helpful for the client or the advisor. Having a systematic planning process usually uses some software packages, and the process is usually streamlined.”
  5. Communicate how you create the plan with the client: After you have gathered the necessary data, you can create the financial plan. “Make sure you understand and communicate all of the Monte Carlo assumptions and results,” says Wells. “Keep the details in place for future reviews and plans to compare. “
  6. Provide the final plan with a list of actions to accomplish: “Tracking what action to take is also very important to ensure that the plan is followed and continues to move forward on track in the future,” says Wells.

Tracking is essential, because the financial plan is just the start of your client’s financial journey – and it might not be an easy journey, even with that plan in place.

“With the current level of financial fragility that we are seeing, clients are unlikely to be able to meet all of their financial goals,” Keady said. “The best advisor will be able to examine when a client fails (and, more importantly, explain to a client the steps they can take to move on a successful financial path.”


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read more
Financial plan

How exactly do you test your financial plan?

Several eggs hanging from ropes in a straight line with a weight ready to crush them. Getty Images

If you’ve been investing for a while, you probably have a plan in place. Of course, these plans will vary depending on your specific goals, age, and tolerance for risk. But the key consideration is that some sort of achievable goal, along with a plan for how to achieve that goal, is common to most investors.

Along with that, however, comes a fatal flaw that is seen far too often: these plans are made in a vacuum. You might think if I keep earning my current salary, put in 10% savings, and invest 25% more, then I’ll be fine. Unfortunately, nothing happens in a vacuum, especially in the world of investing.

The point is, the circumstances in which you have drawn up your plan will most certainly change. Income may fluctuate (unexpectedly or unexpectedly), interest rates change, inflation increases or decreases, economies go into recessions and industries collapse.

This means that our immediate cash flow needs and the risks associated with certain investments can also fluctuate significantly. Their impact on our long-term financial plan is critical.

None of us can predict how the future will unfold. However, we can what would happen to our portfolio if some of these initial factors were to change. The basic idea is not too complicated: if your main source of income declines sharply, will your limited savings force you to liquidate long-term investments to generate short-term liquidity, thus derailing the economy. your entire retirement plan?

These are the events we want to avoid – and stress testing our financial plan helps us do that.

In practice, this process requires a great deal of knowledge and expertise. Most investors turn to financial advisers to help them with such a task. Whether you are looking to do it on your own or are considering turning to a trusted advisor, the following will give you a head start in either case.

Stress Testing Your Portfolio: Considerations

The first and most crucial aspect of a stress test is to start with a budget. Calculating your budget will allow you to forecast cash flow needs over time.

Understanding your cash flow needs, which are specific to your income, financial goals, and lifestyle, allows you to recognize the most important aspect of successfully managing a financial plan over time: your goal does. isn’t just about growing your assets; it is liquidity management.

Life happens – and we all end up with unexpected cash flow needs. The last thing you want to do in such a situation is liquidate a long term investment to meet short term cash flow needs. This will not only hijack your long-term financial plan, but you will likely incur additional immediate expenses through capital gains tax.

When most investors think about their financial plan, they think long term. And that’s great, but everyone needs to be prepared for a rainy day in the immediate future. The key to finding that balance between a long-term view and the immediate future comes down to liquidity management, which begins with setting a budget first.

If your budget isn’t clearly defined, you’ve already botched your stress test.

So once you’ve set a budget and projected cash flow, the focus then shifts to your portfolio. This is where things get a bit tricky. Most portfolios are built using tools that only professional fund managers can access. That is why it is always better to use a financial advisor.

Importantly, there are two main concepts at play in your stress test: asset appreciation and after-tax cash flow forecasting. This is very similar to strategies behind many great endowment fund managers – but just on a micro-scale.

In practice, this usually involves looking at risk ratios to calculate expected returns and volatility from modern portfolio theory. The obvious goal is to maintain the lowest risk ratio for the highest expected value. A key element is to maintain the balance between risk and reward, and one way to do this is the Sharpe ratio.

To put it simply, the Sharpe ratio adjusts the expected return on an investment based on its risk. Let’s say Jerome and Sarah are both traveling from point A to point B. Jerome takes his car, at a modest average of 45 mph. Sarah takes her motorcycle at an average speed of 75 mph. Of course, Sarah reaches point B first. But – she also took a lot more risks than Jerome – despite the fact that they both reached the same destination.

Was the risk Sarah took worth the benefit of arriving early? Of course, the level of risk you’re willing to take on will vary depending on your particular situation, but that’s the kind of idea the Sharpe Ratio aims to shed light on.

Then there are certain stressors that need to be added to the mix. The most important of these should be a loss of primary income. Many experts suggest having three to six months of your salary easily accessible in cash in a savings or brokerage account. Too often, however, this is simply not enough. More conservative savers aim for a figure closer to 12 months. Again, we see how starting with a budget – determining monthly expenses and managing short-term cash flow needs – plays a crucial role.

For most people, the end goal of this whole process is to properly prepare for your retirement, so that you can actually retire on time. For various reasons, the average retirement age continues to rise, especially for men and entrepreneurs over 65. Choosing to continue working is one thing, but feeling compelled to maintain a source of income is another. Testing your portfolio will help you better understand your preparation for life’s vagaries and hopefully help you sleep better at night.

Of course, the above steps are fairly easy to understand in theory, but are much more difficult to perform in practice. Budgeting, measuring risk and assessing expected value are difficult tasks. While not necessarily impossible to achieve on your own, the framework above – at the very least – should be used as a template when selecting a financial advisor.

One of the ways that financial advisors test different scenarios – and their subsequent impact on portfolios – is by using Monte Carlo simulation.

Monte-Carlo simulations

Dwight Eisenhower once said, “Plans are nothing, planning is everything. Although the first part of this sentence may be too harsh, one is forced to agree that the actual planning is more important than the plan. Plans depend on circumstances and circumstances change, but the ability to adapt – and build a plan – is invaluable at all times.

Monte Carlo simulations work by taking a financial plan and simulate how it would be under different conditions; the most important of which are the changes in your income and expenses, your savings, your life expectancy and the expected returns on long-term investments.

Some of these factors are in your control – the income, expenses and expected returns from asset allocation are largely up to you. However, market conditions such as inflation, your time horizon, and many other factors do not. Thus, in order to obtain a result, the Monte Carlo method assigns a random value to these uncertain factors. The simulation is then run thousands of times to obtain a probability distribution.

If this sounds complicated, there is no need to worry. Even if you are an experienced investor, this is a subject that requires professional experience in the field. The point is that even if the software used to run the stress tests were available to the general public (which it is not), you would still be worth the trouble to decipher the test results and use them.

Final thoughts

It is a daunting task to test a financial plan on your own. Bringing in a professional is the most popular route here. However, you can do some prep work yourself to better understand the process and select a financial advisor you trust. Most of these preparations will revolve around budgeting and making contingency plans for yourself – think of them as your own prelude to a stress test.

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Financial plan

How exactly do you test your financial plan?

If you’ve been investing for a while, you probably have a plan in place. Of course, these plans will vary depending on your specific goals, age, and tolerance for risk. But the key consideration is that some sort of achievable goal, along with a plan for how to achieve that goal, is common to most investors.

Along with that, however, comes a fatal flaw that is seen far too often: these plans are made in a vacuum. You might think if I keep earning my current salary, put in 10% savings, and invest 25% more, then I’ll be fine. Unfortunately, nothing happens in a vacuum, especially in the world of investing.

The point is, the circumstances in which you have drawn up your plan will most certainly change. Income can fluctuate (either unexpectedly or unexpectedly), interest rates change, inflation goes up or down, economies go into recessions, and industries collapse.

This means that our immediate cash flow needs and the risks associated with certain investments can also fluctuate significantly. Their impact on our long-term financial plan is critical.

None of us can predict how the future will unfold. However, we can what would happen to our portfolio if some of these initial factors were to change. The basic idea isn’t too complicated: if your main source of income declines sharply, will your limited savings force you to liquidate long-term investments to generate short-term cash, thus derailing the economy. your entire retirement plan?

These are the events we want to avoid – and stress testing our financial plan helps us do that.

In practice, this process requires a great deal of knowledge and expertise. Most investors turn to financial advisers to help them with such a task. Whether you are looking to do it on your own or are considering turning to a trusted advisor, the following will give you a head start in either case.

Stress Testing Your Portfolio: Considerations

The first and most crucial aspect of a stress test is to start with a budget. Calculating your budget will allow you to forecast cash flow needs over time.

Understanding your cash flow needs, which are specific to your income, financial goals, and lifestyle, allows you to recognize the most important aspect of successfully managing a financial plan over time: your goal does. isn’t just about growing your assets; it is liquidity management.

Life happens – and we all end up with unexpected cash flow needs. The last thing you want to do in such a situation is liquidate a long term investment to meet short term cash flow needs. This will not only hijack your long-term financial plan, but you will likely incur additional immediate expenses through capital gains tax.

When most investors think about their financial plan, they think long term. And that’s great, but everyone needs to be prepared for a rainy day in the immediate future. The key to finding that balance between a long-term view and the immediate future comes down to liquidity management, which begins with setting a budget first.

If your budget isn’t clearly defined, you’ve already botched your stress test.

So once you’ve set a budget and projected cash flow, the focus then shifts to your portfolio. This is where things get a bit tricky. Most portfolios are built using tools that only professional fund managers can access. That is why it is always better to use a financial advisor.

Importantly, there are two main concepts at play in your stress test: asset appreciation and after-tax cash flow forecasting. This is very similar to strategies behind many great endowment fund managers – but just on a micro-scale.

In practice, this usually involves looking at risk ratios to calculate expected returns and volatility from modern portfolio theory. The obvious goal is to maintain the lowest risk ratio for the highest expected value. A key element is to maintain the balance between risk and reward, and one way to do this is the Sharpe ratio.

To put it simply, the Sharpe ratio adjusts the expected return on an investment based on its risk. Let’s say Jerome and Sarah are both traveling from point A to point B. Jerome takes his car, at a modest average of 45 mph. Sarah takes her motorcycle at an average speed of 75 mph. Of course, Sarah reaches point B first. But – she also took a lot more risks than Jerome – despite the fact that they both reached the same destination.

Was the risk Sarah took worth the benefit of arriving early? Of course, the level of risk you’re willing to take on will vary depending on your particular situation, but that’s the kind of idea the Sharpe Ratio aims to shed light on.

Then there are certain stressors that need to be added to the mix. The most important of these should be a loss of primary income. Many experts suggest that three to six months of your salary be readily available as cash in a savings or brokerage account. Too often, however, this is simply not enough. More conservative savers aim for a figure closer to 12 months. Again, we see how starting with a budget – determining monthly expenses and managing short-term cash flow needs – plays a crucial role.

For most people, the end goal of this whole process is to properly prepare for your retirement, so that you can actually retire on time. For various reasons, the average retirement age continues to increase, especially for men and entrepreneurs over 65. To make a choice continuing to work is one thing, but feeling compelled to maintain a source of income is another. Testing your portfolio will help you better understand your preparation for life’s vagaries and hopefully help you sleep better at night.

Of course, the above steps are fairly easy to understand in theory, but are much more difficult to perform in practice. Budgeting, measuring risk and assessing expected value are difficult tasks. While not necessarily impossible to achieve on your own, the framework above – at the very least – should be used as a template when selecting a financial advisor.

One of the ways that financial advisors test different scenarios – and their subsequent impact on portfolios – is by using Monte Carlo simulation.

Monte-Carlo simulations

Dwight Eisenhower once said, “Plans are nothing, planning is everything. Although the first part of this sentence may be too harsh, one is forced to agree that the actual planning is more important than the plan. Plans depend on circumstances and circumstances change, but the ability to adapt – and build a plan – is invaluable at all times.

Monte Carlo simulations work by taking a financial plan and simulating its evolution under different conditions; the most important of which are the changes in your income and expenses, your savings, your life expectancy and the expected returns on long-term investments.

Some of these factors are in your control – the income, expenses and expected returns from asset allocation are largely up to you. However, market conditions such as inflation, your time horizon, and many other factors do not. Thus, in order to obtain a result, the Monte Carlo method assigns a random value to these uncertain factors. The simulation is then run thousands of times to obtain a probability distribution.

If this sounds complicated, there is no need to worry. Even if you are an experienced investor, this is a subject that requires professional experience in the field. The point is that even if the software used to run the stress tests were available to the general public (which it is not), you would still be worth the trouble to decipher the test results and use them.

Final thoughts

It is a daunting task to test a financial plan on your own. Bringing in a professional is the most popular route here. However, you can do some prep work yourself to better understand the process and select a financial advisor you trust. Most of these preparations will revolve around budgeting and making contingency plans for yourself – think of them as your own prelude to a stress test.

Founder, Lakeview Capital

Tim Fries is co-founder of Capital of protection technologies, an investment firm dedicated to helping industrial technology business owners manage succession planning and ownership transitions. He is also the co-founder of the financial education site The tokenist. Previously, Tim was a member of the Global Industrial Solutions investment team at Baird Capital, a Chicago-based private equity firm.


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