These are all questions that a client and planner will seek to answer when preparing or reviewing a financial plan. As the son of a maths teacher, and the holder of a maths degree, this was probably a significant factor in me choosing this as a career.
However, the real essence of financial planning is not about the numbers. Rather, it is about how you wish to live your life, what you want the future to look like, what is important to you, and what are the risks to that happening. Only then are you in a position to "crunch the numbers".
This is what makes the job of a financial planner so enjoyable and satisfying. Whilst it only took me a few years to gain the relevant technical skills, I would happily confess that it took a decade to build up the experience and maturity to feel able to begin to confront and address all these subjective and emotional perspectives with clients.
As part of this, a financial planner can often end up fulfilling a myriad of roles in the eyes of their clients. Many of these are not explicit, but I do believe that clients consider them to be valuable.
These roles include:
- Reassurance that you are "not making any silly mistakes". This is perhaps the biggest nagging doubt that people have as they go through their financial planning life. By working with a financial planner you can be assured that no such mistakes are being made. This doesn't automatically mean that nothing will ever go wrong, but rather that any such risks are taken in a manner that is understood in terms of their scale and potential impact.
- Devil's advocate. It is important to have your opinions or perspectives challenged. This may be in order to avoid making the above mistakes, but it is more often simply by ensuring that all options have been considered, all pros and cons taken account of, and thereafter a fully informed decision is made.
- A sounding board for ideas. Should you give some money to your children? Should you keep working or retire? Should you go on that large holiday that you have been promising yourself for many years? Having an objective person to discuss these with can be immensely helpful.
- Mediating a couple. This isn't a reference to any form of conflict resolution, but rather simply encouraging a conversation. It is well known that money problems or issues are a frequent source of stress within a relationship, and discussing these on a regular basis can hopefully reduce that stress that can build up in the absence of communication.
- A licence to be kind to yourself. Sometimes the person we find it hardest to be kind to is ourselves. A frequent perspective I come across is clients who are in a strong position but are reluctant to spend money - it can be hard to change the habits of a lifetime that have contributed to ending up in this strong position. However, what if the luxury of employing a gardener allowed you to stay in the home that you love? Or what if you held more money as cash to have funds available for those impulse purchases or spontaneous activities, to spend on yourself or your friends and family? "But my money in the bank isn’t earning any interest". Indeed, but money tied up in investments isn't going to buy you (and perhaps your family, if you're feeling generous) a nice meal at your favourite restaurant.
- A catalyst for action. Many of the things we help clients with aren't top of their bucket list, so sometimes motivation can be a problem. What a financial planner brings, aside from their technical knowhow, are time and energy to dedicate to getting your plan in place. This will involve some chasing of you for input, particularly at the start, but the vast bulk of the leg-work will be done by the planner and their team. It isn't telling any secrets to say that the planner won't get paid until the work is done, so they're motivated to get you to that point!
- Peace of mind. Ideally, this is the ultimate goal of any financial plan. To provide reassurance that you know where you are, where you're going, and that things are in place to get you there safely.
Clearly the above has a potential for being somewhat airy-fairy. Indeed, some financial planners positively embrace this to the point of taking on additional training in Life Planning.
I haven't gone that far, but I would like to think that with the accrual of many years' experience, and perhaps a modicum of wisdom, that I can at least facilitate discussions on all of the above points with my clients.