Suppose someone appeared at your door with a large bag of not necessarily connected jigsaw puzzle pieces. They want you to build the puzzle for them. What should you do?
Assuming you have not run them off with a pitchfork, the process could be fairly straightforward. Sort the pieces into those specific to one puzzle or another, find the edge pieces and gradually put it together. Difficult in the absence of any other guidelines.
The client might think you wasted a lot of time because the third one you put together is the one he wanted all along. Fee issues, right?
Building financial plans is sometimes like that. Better to say to the client, “What do you want to have happen here? Ideally a picture from the top of the puzzle box, but a good description would be acceptable. The strategic result.
When you know that, automatically many of the pieces, think of these as possible techniques or financial tools, become irrelevant and can be safely set aside. Sometimes knowing what you are not doing is as valuable as knowing what you are doing.
Once you know the end, you can find the resources, puzzle pieces, and begin to assemble them. The tactical part. Ideally with you as the guide and the client as the doer of deeds. Putting the puzzle together involves process, corner pieces, edge pieces, clear differentiated colors pieces, the rest.
Usually sub-assembly makes things easier. Same with an estate plan that includes a retirement plan, an education plan and a succession plan. Knowing the process makes it easier to assign priorities and find missing resources. Maybe there are some pieces still in the bag with all the others. I didn’t notice that dark blue part before. Eventually the promised picture appears.
Notice that financial planning is different than the jigsaw puzzle.
In financial planning you must not take your puzzle and glue it to a backboard and put it away in the done once, done forever file. Financial plans are dynamic. Review, revise and refit are important concerns. The client’s world changes, limits change, and the tools to address their needs change.
Always keep in mind.
- The client gets to define the picture. The client supplies the resources to build it. The client sets a deadline for completion and the client helps put it together.
- The advisor helps sort the pieces, defines a methodology to reach the goal and assists in implementing. Their further role is to assess the plan and the u resources to be sure there are no parts missing, nor are there conflicts within the objectives. The advisor never gets to pick the picture. If the client does not know how to do that, there should be an education focused approach before going further.
The education will involve how money comes available and how it is disposed of after that. Financial planning is the process of allocating resources over time to satisfy known needs, obligations and wants.
Advisors that start putting the puzzle together too soon sometimes end up in the position of creating a solution to no known problem. That is deleterious to your reputation as a useful confidante.
Don Shaughnessy is a retired partner in an international public accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.