Who Should Prepare The Financial Plan?

Financial Planning has three parts and when clients do not know, there can be serious mistakes.  Responsibilities and actions become misaligned.  The three parts are strategy, tactics and logistics.  They can be examined separately and the process for developing a plan can become obvious.

A well-developed plan will be efficient and effective because the duties are properly delegated.  Begin with the idea that the client is always the planner and everyone else is an assistant.  That will tend to keep things moving towards a good solution.

The planner’s duties are strategic.

Strategic looks like a “W” question.

  1. What am I trying to do?  There will likely be several of these.  Get out of debt.  Save for education costs or retirement.  Build a safety fund.  Insure unaffordable losses.  Provide instruction so others can help if needed.  Create a system to keep track.
  2. Who else must be considered.  Spouse, children or other dependents, the mortgage company or other lenders.  What can they contribute if anything?
  3. When do I need the result.  Retirement is a long way off.  Insurance could be needed later today.
  4. What do I have to get these with?  Accumulated financial resources, ongoing accumulations like government and employer pensions, income that I can expect to earn, inheritances and gifts I can expect.

When the list of what am I trying to do compares to what do I have, there will be a discussion around priorities.  Priorities are an important part of strategy.  So are standards, like I will never do that and always do this.

The assistant financial advisor appears here and assesses the strategy for completeness and to identify conflicts or unreasonable goals.  When the completeness, conflict free assessment is achieved, the move is to tactics.

Tactics are “How” questions.  They are the ways that get the what. 

Tactics are where the do-it-yourself plans break down.  Without a lot more information that a typical person has, there is little chance of finding an efficient solution.  People don’t know what is available and a lot of what is available to professionals is unavailable to them.  They certainly do not know enough commercial, tax, family and estate law to make it work.  When you do not know details,
but do know the purpose, delegate.

The question of delegations solves easily if you notice one thing.  As Henry Ford once said, “The question of who should fly the plane is easy.  The one who knows how.”  Investment advisors for investment.  Insurance advisors for insurance.  Lawyers for agreements and such.  Accountants for record keeping and tax.

The only thing the client needs to know are the questions.  Once they have that, they can assess the options the advisor makes available.  A good strategy makes a sound device for measuring tactics.  It outs solutions, needs, priorities and duties together.

Logistics is the “Just Do It” part.  Again there is risk in do-it-yourself.  You probably could do a lot of it yourself.  Like design and create your own will or power of attorney.  The problem is you do not know what you do not know.  That can come back to hurt you later.  Do-it-yourself is the win small/ lose big when it is wrong, option.

The last phase of logistics involves the 3 R’s of financial planning.  Record, review and revise.  No plan remains efficient for long.  Five years maybe.  Without review it will gradually fail.  An advisor is nearly mandatory here, because most change has emotional context, (it did not work out) and people are easily de-motivated.

Eventually, financial planning is an exercise in organized common sense.  If it seems complicated or complex, you are doing it wrong or the wrong person is driving the plan.

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.  don@moneyfyi.com 

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