by Andrew Haley
The more clients I meet, the more I realise financial planning is all about people. Managing money isn't all that difficult. Remove the human element and quite honestly, money management would be a little dull. It's the individual stories that keeps things interesting. I feel privileged to be able to sit with down with people and discuss something so personal as their finances. After all, we're notoriously uncomfortable sharing this part of our lives.
But trust must be earned. No matter how welcoming, relaxed or professional the experience is, we must acknowledge there will often be barriers to creating a collaborative financial plan. Rather than retreat to taking the easy road, I feel it's our duty to try and overcome these barriers as it is ultimately for the benefit of those we serve.
It's common for clients to have a specific issue in mind when we first get together. It may centre around a single policy, or something more general like pensions. Clients' initial questions tend to focus around granular aspects such as fund performance or taxation.
I won't criticise anyone for assuming that the solution to their financial questions will be in a new fund or product. After all, the wider financial services industry operates a marketing machine cleverly designed to push such a message.
But I'm a strong believer in the ‘plan before portfolio' approach. Holistic planning offers far greater opportunities for long-term success.
When it comes to discussing money with couples, things can turn difficult. In my experience one half of the couple usually takes the financial lead. It tends to suit one person more than the other, and they may then go decades where they take care of mortgages, savings, budgeting, perhaps even spending decisions to a large degree. I fully appreciate why this happens and don't judge it.
However, when it comes to a long-term life focussed financial plan, if there isn't joint buy in, it just won't work. Financial planning isn't really about the money itself, it's about designing a life facilitated by the money. Whilst not everyone is interested in the nitty gritty financial detail, I can't think of anyone I've met that isn't interested in their quality of life, making sure they're secure or supporting their wider family.
When creating a financial plan, don't let the assumptions be a barrier to making decisions. The one thing we can all agree on is that any future financial forecast is an educated guess from a standing point in time. Planning is an ongoing process, not a one-off event.
From the individual's perspective, the most common objection I encounter surrounds longevity assumptions. For some reason, not many of us want to accept that we might make it into our eighties or beyond.
From a planner's perspective, I think we can be guilty of getting caught up in insignificant details. From geographical asset allocations to in-depth inflation predictions, at a certain point you have to stand back and question whether you're really adding anything but complexity.
Regardless of the specifics, the key is not to lose faith in the wider plan because of individual assumptions. Of course, we want to use reasonable evidence-based assumptions for a best estimate, but don't lose that big picture focus. We can explore ‘what if' scenarios forever and a day, but inaction due to paralysis by analysis won't help anyone.
Breaking down the barriers can be a difficult path to tread at times, and it may feel far easier to answer the technical question at hand, take instructions or simply sell a product solution. When we start to ask questions about things that may be perceived as off topic, it's normal to come up against a little resistance, but this is key to long-term success. I don't see financial planning as a transaction, but rather an ongoing collaborative project that needs genuine buy in to be effective.
Hopefully we can continue to broaden the conversations. Invite couples to jointly engage and achieve genuine buy in from both parties. Avoid stressing the assumptions and plan to a best estimate. Ultimately, we will revisit the plan, realign as needed and keep moving forward.
Andrew began his career in financial services during 2011 and has held positions in a number of independent firms in the Teesside area. Andrew is now a Chartered Financial Planner with Active Financial Planners covering all aspects of financial planning, with a specialism in investment and pension planning. Committed Middlesbrough FC season ticket holder, Andrew is also proud father to two daughters.
