The Soft Side of Financial Planning Drives Decisions

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

For planners to help clients identify and articulate their values, goals, and purposes planners need a deep understanding of the interplay between technical and personal decision-making factors.

Did you ever make financial decisions for nonfinancial reasons? It happens all the time because emotions are part of the decision-making process. The process of financial planning is both technical and personal. The personal side gets more credit and respect these days, but we’re still anchored in the thinking that it’s subjective, squishy, inconsistent, and tough to measure. Furthermore, there is a perception that their feelings are thier’s, making it the client’s responsibility. The technical is easy to define and measure; it’s where a CFP® professional can claim expertise.

Skill on both sides is necessary; neither is sufficient on its own. Continued development of both sides fulfills the mandate of a financial planning engagement.

The CFP Board’s definition of financial planning

The definition of “financial planning,” as outlined in the CFP Board’s code and standards (hereafter referred to as the Standards) is, “A collaboration process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.” The technical competency requirement for serving a client is met through the rigorous testing and ethical standards when obtaining the CFP mark.

The CFP mark benefits and protects the public, provides standards for delivering financial planning, and advances financial planning as a distinct and valuable profession. But it assumes that an individual has had adequate training on the personal side.

But where is everyone getting their personal-side training?