Four Things Financial Planning is Not!

What is financial planning? It’s interesting to hear what people think financial planning is all about.  Many times the perception is wrong, and sometimes we have to hear what something is not to get a better understanding of what it truly is.

Here are four things that financial planning is not:

1. Financial planning is not a panacea to solve poor financial behavior.

No matter how well the advisor does his or her job, poor financial habits, such as overspending and incurring debt, will derail the best laid plans.  The advisor can not solve these issues for the client. This needs to come from the client.  Now, a good advisor can certainly help the client by imparting sage wisdom and leading the way, but again the work has to come from the client.

There is certainly a bit of psychology wrapped into a good advisor’s role, and the understanding that financial planning requires some effort and choices from the client is imperative for success.

2. Financial Planning is not turning your investments over to a money manager or investing with a broker.

This is another misconception about my job. Financial planning is much more than managing investments. While investments are a very important piece of the pie, it’s only a piece.  I’ve seen perspective clients brag about what great returns they captured and not notice the taxes lost due to inefficient investing.

An investment plan should be specifically developed for the uniqueness and needs of each investor. Investing is not simply trying to make as much money as possible. While this may sound appealing, misguided investing leads to poor risk management, overexposure to risk, and often loss.

Another key aspect that often gets over looked when investing with a money manager or broker is the big picture.  Every piece of the financial puzzle has to work hand and glove with each other.  If the right hand doesn’t know what the left hand is doing, problems can occur.

3. Financial Planning is not always easy.

Clients learn that financial planning pivots around choices.  As I mentioned above in point number one, sometimes these choices are not always easy.  If we were all making the right choices financially, I wouldn’t have a job doing what I love.

Even though my job is often to relieve stress in my client’s lives, my clients must engage and complete their required tasks.  While the tasks are usually small and quite simple, finding the time to get the job done is a necessity for success.   A positive to engagement is accomplishment, and accomplishing the tasks required for financial planning can lead to a good night’s sleep!

4. Financial planning is not event based.

This may sound confusing, but financial planning should not be based on a static picture in time. Our lives change everyday, hopefully for the better, and our financial plans need to have flexibility to adjust with our changing lives.  Death, divorce, unemployment, the birth of a child, car accidents, home repair, vacations, and so on, are just a few examples of how life changes our financial needs.

Some planning firms create beautiful, leather bound financial plans. These plans are usually event planning with data based on a static picture. The sad part is when life changes (and it always does) and the plan is no longer relevant.  Life throws us curve balls, and our financial plan needs to step up to the plate.

So we now understand what financial planning is not and can hopefully get a better picture of what financial planning should be.  The importance of working with an advisor who understands the client’s needs and works to plan in a comprehensive manner gives the client the best chance for success.

Have I missed anything? Are there other things that financial planning is not?

About the author

Troy Von Haefen, CFP®


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  • Roger,

    I feel there are advisors out there who would be able to help you with your situation. It might take some searching to find the right one though. There are many who contribute to this great site that may be able to help. Some advisors still do things the old fashion way and use spreadsheets. If I can help, feel free to reach out to me.


  • Troy,
    Many financial planners use some sort of software to assemble a plan. I have a need to develop a draw-down plan for taxable assets consisting of CD’s, Stocks, and Mutual Funds. This plan is outlooked to cover the next seven years. Taxes are a minimal consideration. Are there financial planners that will do this, as I suspect there is no software available, since the situation is highly customer specific. Also is it reasonable to expect that this situation may be more costly in personal hours spent than developing a long range retirement plan from software?

  • Hi Denice
    While I am usually not proponent of Universal Life policies, I can’t say without knowing your situation. It sounds like it would do you some could to speak with a fee-only advisor regarding life insurance and have your policy reviewed.. As a fee-only advisor, your life insurance needs can be reviewed in an unbased fashion…..which means no one is going to try to sell you something you don’t need. I’d be happy to speak with you aboput this, or you can find a large list of fee-only advisors Figuide’s great site.

    Thanks, and good luck!

  • I have a life insurance through Met life. Are they a good and solid company and should I look at maybe getting out of this universal life insurance altogether? I feel like I would be wasting my money if I pulled out but I don’t think I really need this.

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