At some point in life, most people will need a financial plan. Now whether they will admit it or not, and whether it is formalised or not, is another issue – but without some type of financial structure, those who fail to plan, are planning to fail.

Comprehensive Financial Planning is the provision of a service to assist the client in developing specific financial strategies designed to achieve targeted financial goals that are then implemented through financial processes using financial products. What on earth does that mean? To understand all of the elements that now comprise financial planning, we need to go back to the beginning. It used to be back in the good old days that cash, when available, was the first medium of choice. Bills were paid in cash, purchases were made in cash, savings were often hoarded in cash in the proverbial cookie jar, or under the mattress. If cash was not available to buy goods, or due to bad weather, the latest ship did not come in from Australia with butter, mutton, a few frozen foods, lumber and more mutton, then people resorted to barter. Of course, one ship does not a fleet make and I over simplify, but the sense of isolation is there. If I assign a manpower value to fixing your roof, then fair enough, you can buy my labour for a boatful of fish. A lot of fish (and whatever else was native) was eaten back then, but disliking fish, you might sell it off for cash, ingenuity being every Bermudian’s middle name. Or you might trade the fish for a cow, sell the milk, grow the herd and invest in farmland, assuming that in a perfect world, your herd does not get sick and die. So if your survival instincts helped you not only eat but earn a few extra coins, you might actually try to plan for more than a subsistence level in the future. The opportunistic among us who were willing to take a risk, prospered and accumulated assets.

Others who did not need that tangibility (feeling those coins always in your pocket) were willing to take the extra cash to the bank and watch it grow. The concept of interest earning power, long before banks and lending institutions arrived to promote it, has been around since the time of the Greek empire (or even earlier). Banking was conducted in Athens near the Acropolis where a brisk centuries old business was done providing both money-changing and accepting deposits that lent out at interest (usually 12 percent), thus forming the classic basis of banking profits since.

Regrettably, it is pretty difficult to command that sort of interest today without getting the feeling there’s some risk involved there somewhere. However, the lure of higher returns and compounding your money has spawned a modern trillion dollar a year complex investment industry. Insurance existed in the form of credits, or a futures-like market, 4,500 years ago in Babylonia when traders bore the risk of the caravan trade shipping luxury goods, by fronting loans. Successful delivery meant interest (gains) on their investment. Ship owners obtained loans from investors to finance their trading expeditions, protect them against loss, and ransom from pirates. Even facing these sorts of horrendous dangers (as well as believing that the world was flat), enough ships returned safely, and lenders profited handsomely. At the dawn of humanity, life was fleeting for the average person. You were born, you grew up, you got old (rather quickly) and you died; nothing to mark your passage, nothing to leave to your heirs, if they had not already predeceased you. By the time of sophisticated Roman Empire, citizens formed burial clubs to meet the funeral expenses of their members as well as helping the survivors.

Trusts have evolved from as far back as ancient Egypt or Roman law, but it was in mediaeval England that the legal entity, the Trust, came into its own. Arising out of the legal principle of equity rather than common law, the English Trust prevented persons who became temporary holders of property for legal convenience from usurping the rights of the true owner, i.e. the beneficiaries.

From these humble beginnings to a quantum jump about 35 years ago, there were still distinct divisions within the financial services industry.

You went to banks to save your money or to get a loan. You bought stocks and bonds from a broker. You purchased insurance from an insurance agent and mutual funds from a mutual funds sales representative. You sought legal help to structure title changes, trust and estate matters, and contracts. If you were lucky, you had a pension at the end of your working life. No financial person talked to or compared notes with any other financial advisor about their common client’s financial issues and needs.

Enter financial planning. There are six major planning modules that impact almost every person’s financial life. It is extremely difficult to consider anyone of them separately because they are all interrelated making it almost impossible to make financial decisions in isolation.

They are Assets, Liabilities and Cash Management, Investments, Risk Management and Insurance, Retirement and Employee benefits, Taxation, and Estate & Trusts.

In the following weeks, we are going dissect these – module by module, along with the subgroups related to them. You may be surprised at the amount of information covered, and what you know, and what you don’t.

Funny, in all planning literature, Trust and estates are always listed last, appropriate I suppose for the end of your life. But consider this, if you planned for the end of your life first, you’d be able to enjoy the in between far more, wouldn’t you?

It is time to plan for the future.Martha Harris Myron CPA/PFS CFP? is a VP and Senior Sales Manager at The Investment Centre, Bank of Bermuda member HSBC group where she provides investment advisory services and financial planning, especially for clients contemplating lifestyle / career changes and retirement.

She can be reached at 299-5578 Confidential email can be directed to marthamyronnorthrock.bm

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell investment products or financial plans.