What is the most significant structural problem in creating a workable financial plan? Strangely, professional have more trouble with this than people who do it themselves. The DIY crowd have other problems, but those are tactical not structural.
Professionals have trouble with conflicts and limits. Some of them, like trying to be “the guy,” are of their own making. Trade-offs are difficult when faced with limited resources and many needs.
The solution is to enroll the client in the process. Their priorities matter. Their acceptance of limits matters a lot. Their understanding of time and process is important. Client and professional together can find a sound plan. There are, or should be, no plan creationists among the professional crowd. Evolution is the rule.
Focus on the trade-offs among desirable objectives. Notice that the objectives are often mutually incompatible. Solutions require understanding, priorities and standards. Defining those belongs to the client. The advisors role is to call attention to conflicts and to raise points the client has not yet considered.
Sometimes, asking about them is simple. I recall a talented salesperson addressing the life insurance versus disability insurance question where there was a very limited budget and two needs. His explanation of the problem is interesting.
“We have too little budget to solve both problems perfectly, so will need to compromise the solutions. We recommend that it is usually better to solve one problem well and put a stop-gap solution together for the other. Compromising both usually let’s people forget that neither is really solved. The better approach is to solve one and work on the other another day.”
“When you wake up in the middle of the night thinking about these, which problem scares you the most?”
And so there appeared a BMW disability plan and a used-Lada life insurance plan that has the ability to convert to something better when the business debts are repaid.
Recognize the client’s idea of the limit. Do not force premium when there is a realistic solution, albeit with a time delay. Do not compromise on the quantum of need. Leaving a product problem to solve is not a blemish. Make the best of limited situations and revisit the under-solved problem later.
Involved clients have little trouble making this kind of decision. Not so professionals.
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