What Does a Life-Centered Financial Plan Entail?

Lewis Walker |

Flying from Chicago to Atlanta, a conversation ensued with the young woman seated next to me. She was a lawyer and a prosecutor and that led to a discussion of her experiences. She asked what I did and when I told her I was a financial planner, she proclaimed, “Oh, I know what you do. You talk to people to find out what you can sell them.” When asked why she thought that, she replied that her ex-boyfriend was a financial planner and that’s what he did.

Unfortunately, that may be a common perception. So, what can an experienced and dedicated financial planning professional really do for you? For your family and those you love and care for? For your business if you’re a closely-held business owner?

Financial planners are regulated by various federal and state agencies. Under the “Know Your Customer” rule, guidelines are promulgated to require financial services professionals to verify your identity, suitability, and risks involved in maintaining a business relationship.” The Certified Financial Planner Board of Standards (CFP Board) sets and upholds standards of practice for Certified Financial Planners (CFPs) that should be applied to all client engagements by all financial planners irrespective of the academic and professional credentials that they possess.

Often a person encounters a challenge in life and money questions are part of the equation, and they seek advice. Or they have financial assets and want to manage them better. Here’s where the “Know Your Customer” rule comes into play beyond governmental interest in fighting money laundering and other considerations. CFP Board defines “personal financial planning” as “the process of determining how an individual can meet life goals through the proper management of financial resources.” That indicates that the ideal relationship with an advisor and his or her team should be personalized and long-term. “Know the client guidelines” acknowledge that the advisor cannot offer advice in your best interest without knowing what you want to achieve and what challenges you face in goal attainment.

If you ponder advertisements in various media, you’d think that all financial planning is about is retirement. Lots of things go on in your life well before retirement, as well as after. Life is a series of “ups and downs,” challenges and setbacks, changes in goals and objectives, and varying demands on your time, mental bandwidth, and financial resources. To craft a comprehensive plan in sync with your concerns, challenges, resources, and expectations, the advisor must get your story, how you got to where you are, the challenges that you face, and the outcomes you seek. That process requires extensive data gathering. The advisor needs to know your story and that of a spouse or partner, as well as the status of children, and that of other family members that may depend on you now or in the future.

Risk management is part of the planning construct. The highway of life is full of potholes such as illness, injuries, disability, death, lawsuits, and family challenges such special needs children, aging issues, divorce, and separation. Insurance is a consideration, including health, accident, disability, life, and liability. Key legal documents require planners to work with lawyers regarding powers of attorney for assets and health care, advance directives, wills, trusts, operating agreements for closely-held business entities, and other legal matters. Planners who are not lawyers cannot render legal advice. They can, however, engage you in conversations to determine what may be needed, including obtaining copies of all legal documents and insurance policies for review by qualified professionals. Planners should gather information on all investment assets, including real estate property. You need to determine current values, tax basis, as well as ownership forms, balancing debt versus equity in calculating current net worth. A qualified CPA should be part of the advisory team.

Once current status is determined, a discussion of goals, objectives, and future plans or dreams, ensues. The plan is highly personalized, not cookie cutter. Perhaps in the future AI robo-advisors may come to the fore, but color me skeptical. Face-to-face will always beat cyberspace. Conversations, perceptive questions and thoughtful answers, are the basis for true life-centered planning, problem solving, and goal attainment. Progress toward goals must be tracked and plans revised to deal with “what’s happening now” in your complex life. Periodic reviews and plan revisions are required as life is not a straight line.

Diversified fee-based asset management may be part of the process. An experienced planner may work with independent asset managers in a variety of equity or bond-based disciplines as well as cash management. While many advisors advertise retirement planning, a focus on attaining financial independence may be a better goal. This includes prudent debt management as well as becoming debt free, whether working in some capacity or completely retired.

Nurturing a marriage, raising children, success in your field of employment, or building an enterprise, is a team effort. Often when a challenge arises, it takes team input to engineer a successful response. Creative advisors often work with teams inside of their practice as well as with outside resources to solve problems and meet expectations. True client-centric planning is a classic consulting exercise designed to meet your expectations, including for those who may not have money to invest, but who, nevertheless need advisory help.

Walt Disney counseled, “The way to get started is to quit talking and begin doing.” Take control of your money and life? Switch jobs or professions? Grow a business? Have enough money to sleep well at night but have a purpose to wake up to in the morning? These are just “thought bubbles” until you take action!