I’m a big fan of budgeting, planning and strategizing about what’s important in our lives. Part of this process is financial planning.
I recently read that a significant portion of financial planners either don’t charge for plans or don’t do them at all for their clients. I find this an amazing statistic. At the same time I spent a fair amount of time wondering why this is true.
The thought occurred to me that financial planning is often like business plans. The plans are too long, too complicated and have too many moving parts. As a result, clients aren’t interested in them and advisors get frustrated putting together complex and or complicated plans that their clients never really understand.
Instead, if we concentrate on talking about the really important things in ones life and how we’re going to fund those important items, we’re more likely to have more reception from our clients about the financial planning process.
Those of us in the financial planning world know that when we do a complicated plan based on past return rates that our plan is incorrect before it even goes out the door. If instead, we used a simplified tool that didn’t try to get the last dollar right, but gave the client an idea if they were on track or not, we would have more enthusiasm from our clients and more long-term compliance with staying with a plan.
At the end of the day, a financial plan is really more about having our clients take the right steps than it is about whether we’re going to be able to retire at 62, 63 or 64. Between now and then there are too many things we have no idea are going to happen that will impact the plan.
We do know that there are best practices and steps our clients need to take to reach their life goals. If we help our clients understand what those goals are, then it’s relatively easy to put together a simple plan that is short, to the point and lets the client know whether they’re on track or off track.
At the same time, it’s important for our clients to understand that all financial plans need to be reviewed at least every five years. The vast majority of us will have had changes happen during that period that impact our goals and needs. Making appropriate changes in a simple plan allow us to help our clients stay pointed in a direction that will help them reach their goals.
And, isn’t that what planning really is about? If we simplified the planning process would that make your life better?
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