EDITOR'S NOTE: As Americans continue the uphill climb to economic recovery, deciding where to invest is only part of the battle. In our special report, "Build Your Financial Life Plan," we offer a complete strategy for all aspects of your financial well-being. We've also developed an interactive tool to help you create your own plan. To get your customized strategy, go to www.smartmoney.com/lifeplan.>
In architecture, there's> a big difference between a sketch and a plan. A sketch sets out the broad aspirations for your project -- it's a picture of what your dream house will look like when it's finished. A plan, on the other hand, lays out the structural details that will bring that house into existence, down to every last window, rain gutter and light socket. And over the past couple of years, many Americans learned the hard way that when it came to getting their financial houses in order, what they thought was a plan was much more like a sketch. Today, with unemployment stubbornly high and the stock and housing markets wobbly, these folks are finding that the devil is in the details you ignore.
But there's growing evidence that, as the economy slowly recovers, consumers are getting serious about drawing up a financial life plan -- not just a new approach to investing, but a strategy that covers it all, from health care to taking care of the family legacy.
That shift is making itself felt in the financial-services industry. In the three-year period ending at the close of 2009, independent advisers attracted more investor assets than big Wall Street brokerages for the first time ever, according to the consultancy Tiburon Strategic Advisers; indeed, despite lingering uncertainty in the markets, more than 60 percent of advisers reported actually gaining clients in the past year. Bing Waldert, a director at research firm Cerulli Associates, says at those firms "you're more likely to see a comprehensive financial planner" who can offer broad-ranging advice about taxes, insurance and other details beyond the investment portfolio. At the same time, big mutual fund companies are recasting themselves as big-umbrella advisers, including Charles Schwab, which just finished a huge expansion of its "money-management education" Web site, and T. Rowe Price, which has unveiled a slick new tax-planning center.
It's all part of a recognition, by clients and companies alike, that well-being stretches far beyond a person's portfolio. "If we don't talk about much more than just investing decisions, plans can easily get derailed," says Elaine King, a wealth manager at the Coral Gables, Fla., wealth-management firm Gibraltar Private.
To be sure, many people have good reason to seek the extra help, as they face not only lower expectations for the stock and housing markets but also bigger expenses over the horizon.
Almost all the tax cuts passed in the first part of this decade are due to expire this year, and in an era of massive deficits, most are unlikely to be renewed -- while other, new levies could stick taxpayers with an even bigger bill. With profits expected to stay modest, many onlookers expect companies to be increasingly stingy with employee benefits, whether it's raises and bonuses or 401(k) matches and health plans. Still, the pros we've tracked down say a detailed life plan that includes the right financial steps can overcome the challenges of a postcrash economy. Here are some places to get started.
Rebuild Your Life Plan: