Financial Planning Yields a Sense of Direction

A recent survey finds that households that have put into place a comprehensive financial plan tend to experience greater confidence during times of market uncertainty than those that don’t. These households also are more likely to be actively pursuing behavior that enhances the likelihood of financial success.

The Financial Planning Association (FPA) recently held its national meeting in Boston and released the results of a study that it conducted on the financial attitudes and behaviors of about 3,000 adults who have more than $50,000 in either annual income or investable assets.

Survey respondents were divided into three categories:

1.) “Self-Directed” – People who neither work with a professional financial planner and don’t pay anyone to advise them.
2.) “Advice-Supported” – Those who work with a paid professional but don’t have a comprehensive written financial plan.
3.) “Comprehensive Planning Participants” – Individuals with an ongoing relationship with a paid professional financial planner and a written, periodically reviewed comprehensive plan that covers at least three key aspects of their financial lives.

The results suggest that those who’ve entered into a comprehensive planning relationship are much more likely to be doing the things needed to help them achieve their families’ financial goals:

Comprehensive Planning Participants plan are more than twice as likely to report taking actions such as rebalancing their portfolio (42%) and investing in low-priced stocks (15%) than self-directed respondents (16% and 10%, respectively).

46% of respondents with a comprehensive plan report regularly saving the amount needed to meet their financial needs in retirement, vs. 25 percent of those without a plan.

Almost half of those with a comprehensive plan (46%) report regularly saving the amount needed to meet their retirement needs, versus only 25 percent of those without a plan.

Remarkably, those with a comprehensive plan are nearly 10 times as likely to have college savings included in their personal plans than those who work with a planner but who don’t have a comprehensive plan (29% versus 3%).

Two-thirds (67%) of comprehensive planning participants report that they save of at least 8 percent of their annual gross income.  Fewer than half (45 percent) of those who are self-directed are saving at least this much.

Seventy-three percent of comprehensive planning participants report they have improved their ability to save versus five years ago compared to 58 percent of those who have a planner but don’t have a comprehensive plan.

Gen Xers who take part in comprehensive planning with a professional are twice as likely (60% versus 27%) as those who are self-directed to report being on track with saving for education.

The study also found greater levels of confidence among adults who have a professional comprehensive financial plan.  75% of these individuals feel that their goals are financially secure versus 49% of the self-directed respondents.  88 percent of those who have a comprehensive financial plan feel they have a clear financial direction, a number nearly 50 percent higher than those without professional support.

Obviously, the survey’s sponsors have an interest in promoting the value of comprehensive financial planning, but even so, these results speak to the benefits that people obtain from a good financial planning relationship.

This year’s FPA national meeting has been chock full of interesting presentations.  When I can catch up, I hope to recount some of the most valuable ones here.

About the author

Thomas Fisher, CFP®

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