How involved do you want to be with your financial plan? If you want to acquire the information, do the complete plan, and monitor it by yourself you could, but that is typically a fool’s game.
With a little guidance most people can get strategy right, but tactics and implementation both pose problems
The tactics in a financial plan are off the normal playing field for most people. Tactics are complicated and ever changing. Even specialists have trouble keeping up to date. The rest of us are in a situation where we not only do not know what is available or prohibited, but rather that we cannot know. The flaw lies in that we think we should know.
Years ago a mechanic friend noted that I was old enough to remember when you could change the fuel-air mix on your carburetor by yourself. It was eventually manufactured so you could not. “They are almost to the point where they will weld the hood shut so you cannot tinker with anything in the engine. If it is not liquid, don’t touch it.”
My current strategy is if it is not running the way I want I take it to a qualified person. I do almost nothing tactical. I did check the power steering fluid recently and was quite proud of myself.
I suppose I could buy an engine analyzer and do it myself but the cost, aside for the analyzer, is I would need to learn how, have the parts and do the repair. That time is better used in some other ways. It is manifestly cheaper for me to have others do it.
Like maintaining a car, financial plans require some help. Not every day, but sometimes. The trick is to know how the relationship with the tactical person should work.
Comparing to car maintenance:
There are regular and expected checkups. 5,000 km for some things, 50,000 for others. Like your financial plan. Quarterly a brief update, annual review and perhaps a more thorough review every two or three years. The warranty is no good without these.
When I notice something unusual, I call the mechanic. With a financial plan, that is a bit harder because most clients have no way to tell when is either right or wrong. They should have developed a strategic vision that they understand. With that they can know what the tactical pieces do to advance that plan. With that template they can know earlier that something is different or amiss.
If they lack the template, the advisor should work at helping them create it. It will be financial literacy at two levels.
Strategic literacy means you understand money, how it is created and stored, what reasonable needs are and will be, what risks exist with what probabilities, how time and compound growth works, how emotion gets in the way and more.
Tactical financial literacy merely means you know enough about the products that address your need to make a decision. For example, knowing you might need life insurance, how much, how it may change in the future, and the need for good health allows you to turn the task of best fit and maximum price over to a specialist and expect a good answer. If you have difficulty falling asleep, you could do the research yourself.
Same deal with tax plans, portfolio design, wills, powers of attorney and other legal documents.
Find your template. Find people who understand you and their specialty, who communicate well. They learn, review performance and expect to revise as necessary. The helpers need to know “your meaning.”
Hiring a cheap helper is foolish. It is likely buying a factory second parachute. Find people who add value to you. Then learn enough to know how to use them effectively.
It is not a one way deal.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772