When you are hunting, a dog is a wonderful asset. Companion, scout, court jester and retriever. However, you do not let the dog decide what, when or where to hunt. Most importantly, when it comes time to shoot, you do not give the gun to the dog.
And so it should be with financial planners.
Most financial planners are good company and have a lot to contribute. Their defect is that if you do not know what you want to do, they will decide for you. It will make sense for a little while.
The error is missing the distinction between strategy and tactics.
Strategy is yours and tactics belong to the planner(s). If you do not have a strategy, you cannot understand fully what a tactic is for and you cannot tell what to do if anything changes.
In simplest terms, strategy is the answer to all the “W” questions. What am I trying to do, what do I have to get it with, what changes can I anticipate, what level of uncertainty will I accept, when do I need it, who is involved, where will I be and so on. A planner can help you be complete, but they cannot derive the strategy for you.
The planner can help prioritize the strategic parts and set up a time frame to accomplish the parts that are not completely solved in the beginning. Most clients do not have the unlimited resource needed to do everything. 10-Year Term life insurance is a good example of this. You will not want it at year 11 so the solution is a temporized one. It works when you must allocate your scarce resources to currently pressing matters.
Tactics all answer a different question. “How?”
Do not get involved with tactics. They exist in a complex and ever-changing world. Taxes, law, economic and investment background, politics, family law, various products that encapsulate several of the parts, and more. You could not keep up to enough of the pieces to have a hope of getting it right over a long period. Don’t try. Buy help.
Tactics can fail in two ways . One is that the product or technique does not work. Markets fell for instance. The second is that the tactic works but it is the solution to no known problem. That happens when you have no strategy.
If you have a sound strategy you can easily say no to things that don’t fit. If you know what you are looking for and have communicated it, it is likely that no one will ever recommend them to you. An added time-saving bonus.
The world conspires against you. You will see advertising that confuses rather than clarifies. For example, I recently saw an ad that trumpeted “a unique RRSP strategy.” There is no such thing as an RRSP strategy and anyone who uses the term does not get planning. An RRSP is a Tactic. The strategy is to have money to spend when you retire. What and when, maybe who. The RRSP is “HOW” you get it.
In the end, your job is to select among tactics presented by the planner. You should not even look at one unless it is presented in the form, “Given what you are trying to accomplish with this decision, any of these three options can work for you. Let me show you how they differ, the advantages and disadvantages of each, and how they may integrate with other parts of your plan.”
Your role is to decide and supply the resources. The planner’s job is to help you cover all the strategic ground and discover tactical options to achieve your plan. Eventually help you implement the options. And even further down the time line, revisit the strategy and review and revise the methods. It helps keep you on track if they are your conscience.
If you start with how, you will likely miss the reason you are doing it. For all you know, the tactic does not apply to you.
If you do not know where you are going, any road is a good enough.