Financial planning addresses three important areas of thought and practice. Clients often avoid their part.
The first is the area of dreams and intentions. Standards, expectations, fears and hopes define this region. It encompasses strategy and the answers to the “W” questions. What do I want? When do I want it? Who else is involved? Where will I be then? What do I have or will I have to achieve these dreams? Advisors should only help you find areas you have not thought about, voids, and areas of your thought that conflict.
The second region is tools, concepts, and technique. Tools are distilled experience. They evolve as people learn more about their purpose and use new methods to create them. Even simple tools, like saws, are immensely different from what they were a hundred years ago. One of my great-grandfathers was a carpenter. I imagine he would have enjoyed a 9″ circular saw or a cordless reciprocating saw. Clients need to notice knowing how to do it is not as important as knowing what they should do. Let professionals keep up to date with the tools and inform you of the implications for your plan.
The third reason is possibilities. The things that you may actually do. The first two regions provide some ideas. Wanting something and knowing there is a tool to get it does not imply that it is doable. There are limits on implementing. Someone diagnosed with a terminal disease will find their love of life insurance has increased. Loving it and having the tool in the toolbox does not make it available. Implementation imposes some new limits. Professionals can help navigate the maze.
So, where useful planning takes place is within the overlap of all three regions. I want something, there is a method, I can and will do it.
Problems arise when the regions are not fully addressed. Later problems arise with there are changes in either wants or tools and the plan and its methods remain untouched. Record, review and revise is the ongoing part of implementation.
Someone finds a technique the wrong way. Usually by advertising or from a presentation by someone whose job it is to deliver that tool. They become involved before they know if there is any reason to do so. Lyman MacInnis once called this, “The good solution to no known problem.” I doubt it is possible to do an effective cost/benefit analysis on such a condition.
For most people, financial outcomes come at a cost. What you save, or use for protection, cannot be consumed. Introducing methods that are not specific and focused on real needs and wants loses time and money. Except under one condition.
A provider has attracted you to a product or service that you need and you would know you need it if you had ever thought about the “W” questions. So a good solution? Maybe.
You can never be sure it is good because you do not know how it all fits together, You don’t know what the other choices may have been. You don’t know how the problem/opportunity is likely to change. A large share of insurance and investment product sales fit into the “It’s good for you” category, but without anchors to underlying circumstances.
Whose fault is that? The advisor to some extent because they did not understand or try to understand the fit. Maybe isolated the description of the need to a single variable. Possibly sought the most lucrative sale.
The client is the ultimate planner and they have done too little to participate well, so must accept some blame. No strategy means no ability to compare possible tools or techniques.
The complexity and inexperience excuses don’t wash. The client’s role is to provide strategy. What am I trying to do here? There is no complexity in that. I want to be secure. I want to be able to retire. I want to help my children. I want flexibility. I want to be healthy. I want to live well. These are not complicated, but if you don’t articulate them and put them into some sort of priority order, it gets harder.
Your most valuable asset is your ability to work. You will have trouble allocating resources and making timely decisions unless you understand that.
As a client, do yourself a favour and get your objectives sorted out. Tools and technique are the complicated part, but you can hire helpers for those tasks. You make their job harder and your probability of success lower by not doing your part.
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