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In my career as a financial advisor, I have struggled with how people view our profession. The way some have commoditized such a complex idea belies the realities of planning and the difficulties a planner faces.
Financial planning is a fickle beast layered with monetary and emotional complexities. To be able to plan appropriately, one must self-actualize and recognize that every decision is not always about the dollar. But every decision has a tradeoff. Some decisions can be over-analyzed or rationalized, and others may have an impact only years later. The fickleness of planning drives people to avoid it or to fall back on the rationale of “I just don’t understand money,” leading to no plan at all.
There is a reason why finincial advisors should be seen as a profession. It has so many moving parts. To truly understand how to optimize and effectively plan for the unknown takes time, patience, research and a specific skill set. One must understand the technical side of planning, human nature and our subconscious tendency to be irrational. From there, one must recognize the complexities of decision trees and the multiple scenarios that could unflold depending on decisions made. A planner must recognize that everyone is different and that the blueprint for one individual may rhyme but will not match another individual’s plan.
Only then can a planner boil down the key points of a never-ending puzzle to calibrate a plan that lives well past the individual's life.
Planning is a mixture of science and art – a beautiful and complex puzzle that will never be complete. However, for an individual to see the steps and process needed to achieve their goals is nothing short of difficult. We know this because we recognize the difficulties to plan for our own unknown futures. Planning is not living in the future or dwelling on the past. It is living for today with a grasp on the future and true respect for the past. It is the ability to recognize that what lies ahead is the blackness of space, but knowing we have a jet pack to move us forward.
Planning is uncomfortable, time-consuming hard work, and, at times defeating. How does someone know when they will get fired from a job? When their house will flood? When they will pass away? The only consistency within planning is inconsistency.
Understanding one’s self and grasping the future is only one of the difficulties in planning. Another is when we attempt to measure the success of our plans. That is subjective and depends on how success is defined. The typical metric is to compare to others. This can derail a plan. However, a good planner should not underestimate the difficulty of “keeping up with the Kardashians.” Our society lends itself to this measurement stick. To get away from it, a planner must understand and be comfortable with the goals and objectives set forth for their clients and celebrate their accomplishments, regardless of size, when they have been achieved.
Financial planning lives in the grey; it does not know black or white. There never is a right answer, because it changes over time.
Instead of being focused on the outcomes of decisions, it is paramount to think about the decision-making process. For example, a family may have taken a trip to Alaska and, in order to do so, took money out of their emergency fund. A few months after the trip their water heater broke, and they did not have enough to buy a new one. They used a credit card with a 0% interest rate but had to pay $700/mo. in order to pay it off in the appropriate time frame. That $700 came from their savings. In order to fund their savings after the card was paid off, the parents had to cut back on date nights, an important time for them to work on their relationship. The decision to go on the family trip seems irrational and not worth it a few months later. On the other hand, they had a fantastic, once-in-a-lifetime trip with their kids. They were able to catch king salmon and halibut. They saw humpback whales and were splashed by their tails – it was truly priceless. But was it worth it? That depends on when the question was asked and who was asked. However, the question we would want to ask is “did you understand the tradeoff when going on the trip?” If the answer was “yes,” then how could we argue it was a wrong decision?
Financial planning addresses a complex web of our everyday decisions. It evolves over time. It can be comforting, frustrating, exhausting, humbling, devastating, or completely satisfying.
As we make decisions, we gain a new perspective on the world and ourselves. Life is grey, and it always will be. If we grasp this, we control our destiny. It’s in our control to have hard conversations with ourselves and our loved ones, not compare our goals to others, find comfort in our decisions because we recognized the tradeoffs, and make decisions knowing the possible outcomes in the future. If we do this, then we can plan and make sure the puzzle never takes a disastrous path.
Tim Bickmore, CFP®, CPWA®, is the director of financial planning and co-founder of LBW Wealth Management, an Independent Registered Investment Advisor. He holds a Series 65 license and is a Certified Financial Planner™ and a Certified Private Wealth Advisor®.
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