Isn’t it refreshing when experts make complex subjects understandable through stories or practical examples, without making us feel like we’re getting the dummies’ version? They seem to effortlessly guide us through what were before, mysterious mazes of confusion, with ease and clarity, and without a bunch of Latin, high-level math, or complex technical mumbo jumbo.
They understand that we naturally and effectively learn through example, not abstraction and take no pleasure lording their knowledge over us. Rather their goal is to share the benefits of their wisdom and experience in a language and style that their listeners will understand and employ for their own benefit.
There are few industries with more arbitrary lingo than the financial services industry. Compounding the problem is that there are dozens of sub-industries contained in the larger, with their own terminology and complex strategies. There are RIAs, stockbrokers, insurance agents, mortgage lenders, investment bankers, mutual funds, exchange traded funds, hedge funds, futures traders, 401Ks, Roths, SEPs, annuities, pensions, then there are trusts, estates, taxes.
Above the fray is the financial planner who serves as both coach, helping clients develop effective game plans, and quarterback, executing those game plans while adjusting to the threats and opportunities that dynamically unfold along the way. Clients of financial planners aren’t that interested in knowing all the elements and considerations that go into the daily processes behind the scenes; they really just want to trust that they are on track to meet or exceed every goal they value, opportunities and threats are being managed, and when changes are required, their advisor will equip them to make good and informed decisions.
While simplicity for understanding sake is important, there is danger in oversimplifying the financial planning process. Consider a current television ad that features people walking along a path of lighted blocks toward their retirement goal. As long as the block under their next step lights blue, they can continue advancing toward their goal of retirement. But when it flashes red, they must stop. Those stopped along the way endure lighthearted humiliation (in surprise and laughter) as their fellow travelers pass them by. A not-so-subtle message is the competitive element suggested as clients of the featured company will be the passers, and not the stoppers.
But a good financial plan involves so much more than a fixed retirement date and amount of money required to get you there. Life is much richer and more dynamic than that – you have more goals than just retirement, and your goals will vary in size, name, and importance over time.
What if today you wanted save less money toward retirement for the next five years in order to travel more with your children while they were young and available for it? You might opt to retire later in this scenario, or push some other goal out a few years? Simple, fixed goals and saving strategies don’t allow for priorities-based dynamic goal-setting. There’s no unbiased quarterback watching the field either for threats and opportunities either.
Excellent financial planning strikes an effective balance between having and understanding a plan that represents the important aspects your life as well as processes on the advisor side that are sufficiently robust, thorough, and effective. A good financial advisor strives for clarity and acceptance every step of the way, even when navigating the complexities of taxes, insurance, market volatility, inflation, risk, long-term care, and so many other assaults on your life plan. He or she is the extra pair of eyes ensuring that all the components, experts, and strategies employed in your financial life fit well together and are additive.
As complex as the financial services industry is, abstract explanations serve only to confuse the process and potentially make it ineffective. We believe effective financial planning produces clear and actionable wisdom from an ever-changing sea of information to facilitate, quite simply, better decision-making.