I have written a few times about the question, “What is financial planning for?” I have since come to discover that there is another question that must be part of that conversation, “What are financial planners for?”
I asked a few people who I thought might know an answer and their answers synthesize to:
- Understand the client,
- Help the client to have a vision
- Help the client to set realistic financial goals,
- Know and recommend the most appropriate financial tools to help the client reach those goals.
The people I talked to are professionals outside the financial planning field and I was intrigued that they came up with these. They are good. Financial planners do those.
The list can be a little more complete and some of things that are missing are things these people would have taken for granted.
- Understanding the client has another dimension that is important. The client should understand themselves. That understanding should connect to the understanding held by other important people in their life. Think spouse and business partners. None of us act in a world so narrow that only we are affected.
- Help the client to have a vision. I would rather think about that more specifically as developing a complete strategic vision. That includes personal standards, an understanding of their abilities, and the way they would decide when compromise is needed. These ideas are hard to come to and usually we start with the “W” questions. What are you trying to do? What do you have to do it with? Who is involved? When do you need the answer? There will be several, what am I trying to do parts and the quantity creates a need for priorities.
- Realistic goal setting is always a little treacherous because many people think the planning can be done to them instead of done by them. Planners should be assistants in the process. They are not principals. Realistic goals automatically includes a survey that says we have all the reasonable goals on the list and they do not conflict. Complete and conflict free is just the beginning of realistic.
- All realistic goals have a time dimension and all good plans recognize that you cannot do everything at once. The planner should recommend imperfect parts because the limited resources should be first used elsewhere. It is difficult to see how that will fit in the “best interests” standard but maybe common sense will prevail. Appropriate is the key, but you cannot see it one item at a time.
- Missing from the list above is the need for continuing followup. Circumstances change for an individual. The world and its many rules change nearly constantly. Every plan should have the 3R component. Record, review and revise. This part keeps client focused and realistic. Review clarifies. Why this choice? Why motivates and it is seldom clear in the beginning.
Financial advisors have more problems with clients who have not understood the process. They should do their best to educate those.
Ideally clients will learn what financial planning means, not just what it is. But only if there is an advisor guide.
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