Advisors make a serious mistake when they assume their client knows the answer to the question. “What’s it for?” Not just at the overall financial planning level.
What is a life insurance policy for should be simple, but seldom is.
If people do not know what something is for, there is little expectation that buzzwords, repetition and summaries will add value.
You might want to try this with your clients, friends, and even yourself. Write out an answer to, “What is financial planning for?” Point form will be fine.
I think we can agree that the answer most people come up with is filled with complexity, generalizations and other even less useful things. Waving hands for example.
This is the definition I have used since 1984. Maybe it can give you some insight.
“Financial planning means to effectively and efficiently allocate today’s income and wealth to your obligations of the past, to your lifestyle needs and preferences in the present, to your expected needs and preferences in the future and finally to the demands of the government and others in such a way that the financial resources for a) desired lifestyle, and b) accumulated wealth, are both secure and predictable.”
The important parts are:
The planning engagement should begin with the what’s it for question. It keeps the discussion of the strategic, tactical and logistical universe focused. We need to do this because ……… follows easily when the what’s it for connection is known.
Hand waving, buzzwords and colored pie charts on good paper won’t work. For long.
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.