13 7 Freedom™ Advisory Process – An Introduction

Hi! My name is Ken Haycraft, founder of Haycraft Wealth Management of Raymond James. Where our motto is to be “Always in Service”. Please see my short introduction blog/video to learn more about our formation and story on how we came to be “Always in Service”. If you believe your purpose in life is to be of service to create a better world, then join us as we “strive to serve those who serve”. We’d love to have you as a client.

So what is my trademarked 13 7 Freedom™ process? Let’s start with FREEDOM, which can mean many things. Here, Freedom means Confidence and free from worry. Of course, one never stops being responsible and prudent with one’s own financial affairs – we simply help clients lead a more worry free life, a financial life that is well informed, utilizing public policy to their benefit, as they see fit, according to their values. We help you use the tax code wisely, to maximize tax planning during your lifetime, and ideally for generations. Why else would one work with a holistic wealth manager, who works closely with your CPA and Estate tax professional? We firmly believe the 13 7 Freedom™ process provides our clients the freedom to then do their part in creating a better world.

The breakdown:

At Haycraft Wealth Management, we employ the 13 7 Freedom™ process for those clients seeking a disciplined, -thorough, comprehensive approach to managing their wealth. To be clear, not all clients elect to engage in this process; so, we meet them where they are and engage in a more traditional approach of conversations and engagements. Our goal is to help you achieve a long, successful financial life for generations, after all it’s your families’ wealth and free will.

We begin the process with a four- step interview, to fully understand your current financial situation, future goals, and feelings regarding risk tolerance and market conditions, and any family dynamics that could affect financial decisions. We identify gaps or issues, or, at a minimum, let you know your financial health is satisfactory.

We at Raymond James are the custodian, and primary source of research and investment due diligence. We utilize third party resources such as Value line, Morningstar, and Goldman Sachs for investment ideas, analysis, and research opinions. We use a modern portfolio theory approach to selecting investments, and professional money managers in order to build portfolios to suit each client’s particular needs and risk tolerance.

The practice is structured in a way that we are able to deliver personalized service that is unique to your situation. We provide customized reporting that allows you to see the progress of the entire portfolio. Your dynamic asset allocation is monitored to avoid overlap and conflicts. The checks and balances we provide are unparalleled in that the asset allocation is rebalanced according to an investment policy agreement that has clear stated objectives.

The 13 represents the range of wealth management issues we focus on to help maintain clear financial health as we employ the Certified Wealth Strategists (CWS^®) processes with Cannon© Institute guidance.

The 7 represents the seven- step Certified Financial Planner™ (CFP^®) fiduciary planning process.

The 13 Wealth Management Issues Summary:

1. Investment Planning
2. Insurance Planning & Risk Management
3. Banking & Credit Management
4. Retirement Planning
5. Executive Compensation
6. Business Succession Planning
7. Planning for Incapacity
8. Education & Family Support
9. Charitable Giving
10. Titling & Beneficiary Designations
11. Executor / Trustee Selection Issues
12. Distribution of Estate
13. Tax Planning

The 13 Wealth Management Issues is like balancing scales. Once you do something to one side, it impacts or tips the other. It is vital your advisor (we) have a thorough understanding of your overall financial picture and intentions. After all, would you tell your new primary care physician only half of your medial history?

Investment planning may be the single biggest issue for affluent and wealthy individuals. If this were not the case a few years ago, it certainly is now. Recent events have caused many people to rethink their investment plans; and they have even changed their basic philosophy. When reviewing investment planning issues with clients, we try to make sure to gain information on all of your assets for a consolidated view. The word all is emphasized because you want complete knowledge of all the assets, without regard to the individual advisors. You will want to divide the investments into three basic categories: equities, fixed income, and cash. And you may have surplus capital that needs attention a well. Other pertinent investment information we will need to gather from clients includes the expectations of income, risk tolerance, time horizons, feelings towards income and capital gains tax, constraints, attitude and expectations for communication, and liquidity needs. We help identify the issues in our client’s consolidated portfolio that, if not addressed, could be detrimental to the client and his/her family.

Insurance is a unique financial tool. In addition to allowing protection of assets from loss or damage, it can also be used to solve both personal and business financial problems. For example, life insurance alone can potentially be used for liquidity for taxes, funds to transfer a business, replacement of a charitable gift, reduction of debt, and equalization of inheritances, just to name a few. When discussing insurance issues and providing an Efficiency Review of our client’s overall risk management plan, we cover four types of insurance: life, disability, long-term care, and liability. All four types need to be assessed from three distinct vantage points; adequacy of coverage, appropriateness of policies, and cost effectiveness.

Banking and credit management issues with clients. There tend to be four broad categories we as advisor’s need to focus on. First, helping the client understand how credit can be used to effectively leverage their wealth. Second, the coordination of credit management with the accumulation or investment plan the client maintains. Third, is the relationship between tax efficiency and utilization of credit. Fourth and last, is the better understanding of how credit can be utilized to mitigate cash flow crunches that tend to perpetuate poor decision making in other areas of a client’s financial life.

Retirement Planning. With life expectancies increasing and some individuals wanting to retire sooner, rather than later, the need for sound retirement planning is crucial. When gathering information about your retirement and life income plan, we need to examine the results of using distributions from the plan during life versus distributing to descendants at death. Issues related to qualified retirement plan and/or IRA distributions that are important include timing of distributions, income taxation, estate taxation, and amount of control. Each client’s unique situation and needs will determine the recommended solutions. We help you answer the three most common questions in the retirement income planning discussion

• Do you have enough to retire or are you on track?
• How the assets are invested and where are the assets?

When distributions are needed to meet an income stream, which pools of funds will be pulled from first versus last to generate that income?

Executive Compensation. When gathering information regarding executive compensation issues, you need to look for the main types of executive compensation including cash, deferred compensation, life insurance, qualified retirement plans, nonqualified retirement plans, incentive stock options, nonqualified stock options, and lastly restricted stock. Each and every one of these areas is very important for us to better understand your overall plan.

Business succession planning is time consuming, complex, and often emotional for the party that is exiting the business. There are typically two options for a business owner to consider:

1. To transfer to children/descendants (family)
2. To sell the business to employees or a third party entity

Both of these options are available to business owners during their lives or after their deaths. The timing of the transfer or sale, and the resulting transfer tax or income tax issues, need to be addressed in each business owner’s wealth management plan. Not only is this decision financially related, but the emotions are often a key ingredient in succession planning for not only the current owner(s) but the buyer(s).

Planning for incapacity is a crucial component of any wealth management plan. Most people would prefer to choose someone to act on their behalf, rather than have that person appointed for them by a court. Since this is a significant decision, when discussing this topic with clients, we make sure to bring up three issues with regard to their Power of Attorney:

1. Who is named?
2. Is this person knowledgeable of where the pertinent documents are located?
3. Who the incapacitated person has confidence in and should be consulted by the Attorney-in-Fact

Education and Family Support. The opportunity for clients to provide education and family support often drives most of their financial gifting in some manner. It is critical for us to understand and attempt to maximize the benefits of these tax-efficient gifting strategies. Giving to children, grandchildren and great-grandchildren is common, however, some clients often gift to many other family members. It is very important to better understand your family including parents, grandparents, and great-grandparents as the need for support and elder care issues are potentially on the horizon.

Charitable giving is of great importance to many wealthy people. When reviewing this topic with our clients, it is important to address tax-efficiency and control issues. You can gift with direct transfers or indirect transfers, and both come with many advantages and potential disadvantages. Also, our clients can structure gifts during their lifetimes and after their death for targeted reasons. It is our responsibility to understand you, the client, and your desires for making these charitable gifts. Our role as your advisor is to better understand the intent and the motivation of you, the client. The more effectively and efficiently we help manage gifts during your lifetime and/or facilitate them through transfers at death, the better the job we are doing for you and your family.

A titling and beneficiary designation review is one of the most important discussions we could ever have with a client and their family. How the assets are owned and titled is the key to proper planning. If this is wrong, the plan will be wrong. It is crucial we understand the many ways an asset could be owned/titled, and then, as we get to know you, we can advise you, on potential areas of concern. Likewise, proper beneficiary designations are imperative for you to have your wants, wishes, and desires followed. This area of the 13 Wealth Management Issues is one of the most important. When done accurately, the plan design and execution is much more efficient and effective.

Executor/Trustee: Death is something many people are uncomfortable talking about, but in the case of wealth management, the inevitable must be addressed. One of the most important decisions a person must make is who to name as executor under their will or trustee selections. Trustees may be nominated under a Revocable Living Trust or maybe other documents, but it is important that your advisor know and form relationships with these critical individuals/firms during our client’s lifetime. Designating this position helps ensure continuity in the investment process and the utilization of advisors the decedent used during life. We need to be heavily involved with this step to help ensure not only full coordination of assets, but maximum control being maintained by you, the client, and your wishes.

Distribution of the Estate: Maximizing after-tax benefits for client’s heirs and other beneficiaries is best planned in advance. There are various solutions we can implement based on your desires in distribution of the estate, either outright or through a trust that allows the decedent to maintain some level of control and minimize estate taxes. Many choices are involved, but things such as outright, strings attached, incentives, spend thrifts, and special needs are some of the areas of most importance.

Tax planning is a vital part of nearly every aspect of wealth management for the client. In many cases, taxes represent the largest single expense for the affluent and high- net- worth client. Structuring your investments, and your personal and business transactions to minimize this expense is critical in helping you achieve your goals and objectives. There are nine specific areas of opportunity where an advisor can surface issues with clients, NOT as a tax specialist, but to work with clients and their professional tax advisors to help ensure long- term success.

Remember, we are not acting as the expert in all of the areas, and we are definitely not making any kind of recommendation or solution as we discuss each issue with our clients. Our goal is to simply collect information to take back and analyze. Only after this will we return to you, the client, with a solution or a recommendation to meet with other specialists or the tax and/or legal advisors.

Try thinking of this process as one that positions us, Haycraft Wealth Management, as a general practitioner, with the exception of our functional expertise. A good analogy is a general practitioner medical doctor with an expertise in internal medicine. He does all the diagnosis on your general health and the deeper work-up on physiology. He then refers your allergic reactions to the Ear, Nose and Throat specialist as symptoms are indicated.

The 7 step planning process CFP^® Board standard - Summary

1. Establish and Define the Scope of Work

This step is essentially the icebreaker between the client and the Certified Financial Planner™ (CFP^®) professional. The CFP^® professional collects qualitative information such as client’s health status, life expectancy, and family circumstances to begin identifying and evaluating the client’s specific needs, wants, goals, and expectations. From this point, the CFP^® professional and the client agree upon the scope of the plan.

2. Gather Information, Identify Values, and Set Goals

The second step of the process entails digging deeper into the “nitty gritty,” if you will. The CFP^® professional will collect quantitative information, including income and expenses so they can put a pen to paper and begin crunching numbers. This is when the CFP^® professional and client will discuss the client’s values and attitudes towards planning to select and prioritize goals in accordance with current financial information. Our CWS^® 13 Wealth Management Issues discovery process creates the foundation upon which our professional fiduciary requirements are fulfilled.

3. Analyze and Evaluate the Current Status

During this step, the CFP^® professional will use the information collected during Step 2 to gauge where the client stands in terms of investments, insurance coverage, risk management, employee benefits, retirement planning, and estate planning. The significance of the aforementioned items will vary based upon the client’s personalized financial plan, but analyzing the status is important to determine whether the client is on track to meet his/her goals. If the client is not on track, then the CFP^® professional may decide to brainstorm or implement alternative courses of action. During this step we use the 13 Wealth Management issues process as our means of thoroughly understanding a client’s situation and needs as required by the CFP^® standards board.

4. Develop Recommendations and Create Plan

At this point, the CFP^® professional will begin making recommendations and drafting up the client’s financial plan. The CFP^® professional will forecast the plan, taking different lifestyle and economic scenarios into consideration. This plan is designed to maximize the client’s potential to meet his/her goals, addressing any Wealth Management issues that need attention.

5. Review and Amend the Plan

During this step, the CFP^® professional will sit down with their client and discuss the proposed plan. The CFP^® professional addresses observations and recommendations, then offers feedback to the client. From here, the CFP^® professional and client discuss any changes to be made to the plan. We also work closely with your other advisors, such as your CPA or Attorney. We of course defer to their standing with respect to specific Tax and legal advice. We do not draw up legal documents nor file tax returns.

6. Implement

The key component to implement a financial plan is communication. The CFP^® professional and client must clearly define who is responsible for what and establish a clear timeline delineating deadline for each party. Coordination with your other advisors to implement is critical, your CPA and Attorney for example would then assist. As a CFP^® professional does not draw up legal documents nor file tax returns.

7. Monitor and Review

The final phase may last years or even decades. This is when the CFP^® professional is responsible for monitoring the client’s plan at regular intervals to watch for success and make any necessary changes. Certified Financial Planners are bound by the CFP^® Boards regulations. This certification is the Gold Standard in the financial planning industry. I act as a fiduciary for advisory relationships and follow a fiduciary standard throughout the financial planning engagement. As such, I place your interests ahead of ours when providing professional services, this does not mean that there may be conflicts of interest – those most also be disclosed. For the duration of the engagement, they will continually account for the significance of any new information or life changes. The CFP^® professional works closely with the clients other advisors to ensure coordination of changes, responsibilities, and actions that may be needed.

At Haycraft Wealth Management our goal is to be “Always in Service” helping families’ preserve, protect, and grow their wealth for generations. We wish to facilitate our client’s ability to serve not only their families, but their community, their businesses, and their nation, as they strive to create a better world. Our process helps clients achieve the Freedom to focus on their personal mission. If you’re curious to learn more please call me, Ken Haycraft, at Cell: 480-225-8972, Office 615-645-6729 email: ken.haycraft@raymondjamnes.com. Or schedule appointment please click here.

Ken Haycraft, MBA, MS, CFP^®, CWS^®

Vice President, Wealth Management

Ken Haycraft

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP^®, Certified Financial Planner™,   and   in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Ken Haycraft and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.

Insurance policies have exclusions and/or limitations. The cost and availability of life insurance depend on factors such as age, health and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Guarantees are based on the claims paying ability of the insurance company.

In a fee-based account clients pay a quarterly fee, based on the level of assets in the account, for the services of a financial advisor as part of an advisory relationship. In deciding to pay a fee rather than commissions, clients should understand that the fee may be higher than a commission alternative during periods of lower trading. Advisory fees are in addition to the internal expenses charged by mutual funds and other investment company securities. To the extent that clients intend to hold these securities, the internal expenses should be included when evaluating the costs of a fee-based account. Clients should periodically re-evaluate whether the use of an asset-based fee continues to be appropriate in servicing their needs. A list of additional considerations, as well as the fee schedule, is available in the firm’s Form ADV Part 2 as well as the client agreement.