How do we make progress with financial plans?
The first step is to recognize no plan is ever finished. Military theorist, Field Marshall Helmut von Moltke, the Elder has said, “No plan survives first contact with the main body of the opposing force.”
So it is with a financial plan. In this case the opposing force is the real world. The reason plans do not survive is that plans are approximations using only a few variables. The real world is not so confined. Consider the Yiddish proverb, “Men plan; God laughs.”
That no plan is ever finished does not imply that a later plan must have the same limitations as early plans. Plans evolve. It is as physicist Freeman Dyson, sees science.
“The progress of science requires the growth of understanding in both directions, downward from the whole to the parts and upward from the parts to the whole.”
In financial planning, the idea is the same. It is the whole view (strategy) and the parts view (tactics) working together. You must have both. The whole view keeps everyone on the track towards the desired result. The parts view helps to discover more efficient ways to do it.
Absent a whole view, dealing with parts is futile, although common. How could you tell if a particular part was useful for you with nothing to attach to it? Because it is generally useful does not necessarily make it useful for you. Despite the wonders of tax sheltered retirement plans, they do not make sense for everyone.
People need the whole-view context to make parts decisions possible. If a helper tries to present a part without the context of the whole, they are henceforth to be avoided.
All part recommendations should sound something like this,
“Given what you are trying to do, the time you have to achieve it and the resources available, either of these options can work. Which feels most comfortable to you.”
For future reference it will be good to know why they chose as they did. That is part of the depth of knowledge idea.
An advisor who motivates a client by tactics will eventually find that the client did not understand how it worked, what its limitations were, or what unintended outcomes were possible. Who will be to blame when it fails? Not the client.
Alternatively when the client decision is approached through the strategic door, there will automatic reviews and the advisor and client will behave as a team. Not to say that the client will accept any responsibility for a bad result, but there is a chance they will. If nothing else ongoing review of the strategy and the chosen tactics will discover variances earlier.
Strategically founded plans have meaning to the client. Put in your mind that a well-informed client is a better client. All good clients know, with some clarity, what they are trying accomplish and how they are doing it.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.