The Inherited Plan and the Refinance Deadline
Mei has taken on a married couple, ages 52 and 49, with combined gross income of $185,000, investable assets of $420,000 and a $310,000 mortgage. They arrive with a 40-page plan prepared by a previous adviser whose engagement ended eight months ago. They want Mei to 'update the numbers and sign off' within two weeks because their mortgage refinance is conditional on submitting a financial plan. Mei's firm offers modular engagements. At intake she sees the old plan assumed an 8% return, 3% inflation and retirement at age 60 for both spouses, with no pension and no emergency fund. The clients decline to complete a risk-tolerance questionnaire or supply insurance details, saying the old plan already covered this. They also ask Mei to date the engagement letter before the refinance application date. The old adviser cannot be reached for verification.
1. Identify the professional and process issues raised by the request to 'update and sign off' and by the backdating request, and explain how Mei should respond.
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Core issues
- Backdating is falsification. Dating an engagement letter earlier than the actual engagement misleads the lender about when advice existed. Mei should refuse plainly, explain that she cannot be party to a document that misrepresents the timing, and offer a current-dated letter instead. If the lender needs confirmation of a plan, the honest route is a newly prepared plan or a letter describing the work actually done.
- Adopting another adviser's work without verification creates a false impression of diligence. Mei would be signing her name to assumptions she has not tested: an 8% return, 3% inflation, retirement at 60 with no pension and no emergency reserve. Those are not facts to inherit; they are hypotheses to validate.
- The deadline is client-created, not adviser-created. Mei should not let a refinance timetable compress the data-gathering and analysis into a 'sign-off' that is really a rubber stamp.
- Consent and scope. The clients are entitled to limit scope, but Mei must document what is excluded and what conclusions therefore cannot be drawn.
Response Mei should separate the request into three parts: (1) refuse backdating outright; (2) explain that she can prepare an updated modular plan, but only on verified data and her own assumptions; (3) explain that she cannot 'sign off' a prior adviser's plan as if it were hers. She should put the refusal and the reasons in writing, keep a contemporaneous record of the clients' instructions, and give them a realistic timeline. If they insist on backdating, she should decline the engagement.
2. What is the minimum information Mei needs before issuing any recommendation, and how should she proceed if the clients continue to refuse?
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Minimum data set
- Goals and priorities, including retirement ages, desired spending, housing and legacy intentions, and the reason for the refinance.
- Balance sheet: assets, liabilities, ownership titling, and liquidity of each asset.
- Cash flow: at least 12 months of income and spending, distinguishing fixed from discretionary.
- Insurance: policy types, death and disability benefits, definitions, waiting periods, exclusions, ownership and beneficiary designations.
- Tax and retirement arrangements: tax returns, pension statements, contribution room and projected benefits.
- Risk profile: tolerance, capacity for loss and time horizon, documented through a questionnaire and a conversation.
- Estate documents and beneficiary forms, because they override intentions in a will.
If the clients refuse Mei should explain the consequence of each missing item, not simply demand paperwork. For example: without insurance details she cannot assess whether the family could survive a disability; without a risk profile she cannot recommend an asset mix. She can then offer a written limited-scope engagement that states the missing inputs, the assumptions used, and the conclusions that are expressly not provided. The engagement letter should say the clients accept responsibility for the completeness of information and that the plan will be reviewed when data is supplied. If the clients want a 'sign-off' that implies comprehensive advice, Mei should decline. The key judgment is that limited scope is acceptable when transparent; implied comprehensive advice based on unchecked data is not.
3. Draft the scope language Mei should use if the clients accept a limited modular engagement.
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Suggested scope language
Services included: preparation of a retirement projection and cash-flow review using client-supplied and verified data; review of the existing investment allocation against the clients' stated risk profile; identification of emergency-reserve adequacy; one meeting to present findings and one revision.
Services excluded: insurance needs analysis, estate and beneficiary review, tax return preparation, product replacement recommendations, and any certification to a lender beyond a factual letter describing the work performed.
Client responsibilities: provide complete and accurate information, including insurance policies and tax returns; complete the risk-tolerance questionnaire; notify the planner of material changes.
Assumptions: the plan will state inflation, return and retirement-age assumptions and identify them as assumptions, not guarantees. Prior plans and third-party documents will not be relied on unless independently verified.
Limitations: the plan is not a comprehensive financial plan and should not be relied on as one. No responsibility is accepted for the accuracy of the prior adviser's work.
Fee, review and termination: state the fee, the review trigger, and either party's right to terminate.
The wording should be specific enough that a reader can see exactly what was and was not done. The purpose is not to disclaim all responsibility, but to align the clients' expectations with the actual service.