By Lou Davis and Allen Davis, CFP®
“Do you have an accountant to do your taxes?”
You can probably answer with a definite yes or no. There’s nothing ambiguous about the question. Everyone knows what an accountant is and everyone’s familiar with filing taxes.
But “Do you have a financial planner?” is a trickier question. What, exactly, is a financial planner? Does that mean the person who manages your investments? The agent who sold you life insurance? Or the advisor from your firm’s retirement plan with whom you occasionally review your retirement portfolio?
Each of these professionals can help you plan for a specific aspect of your financial future.
A financial planner’s role is much broader. Those practitioners who follow the CFP Board of Standards or the standards of their own Advisory firm collaborate with their client―whether it’s an individual, a couple, or a family―to address their financial well-being in a more holistic way. Depending on your needs, that may include:
- The Big Picture Clarifying your objectives for achieving financial well-being.
What do you want to accomplish? That’s probably a combination of things
such as preserving or increasing your financial resources, preparing for
retirement, paying for education, managing the “what ifs” of life, or
supporting the institutions and causes you care about.
- The Practical Matters: This part outlines your pathway to achieving those
things―for example, your cash flow, assets and liabilities; your health issues
and tax considerations; your wishes and hopes for leaving a legacy.
It's Not Just about Money
All of these factors are important to your future well-being. But that’s only one facet of a planner’s work. Financial planning isn’t a purely rational exercise. Your emotions are as important as the numbers. They’re slightly different for every individual, couple, or family we work with.
For one person, it’s an aversion to dealing with money; for another, it may be fear of outliving their savings, or shame about past decisions. Couples might avoid talking about what will happen when one of them dies. Parents may worry about the future well-being of a disabled child. Solos―clients without a partner or children to support them as they age―may be embarrassed to have no idea who might serve as their healthcare proxy or power of attorney.
An essential part of the planner’s job is to help clients sort out the emotional issues related to financial well-being and untangle them from the rational choices they must make. By understanding the relationships and feelings that influence your financial plan, the planner becomes a sounding board, coach, and teacher in helping you achieve your goals.
You Already Have a Financial Plan
New clients often tell us, “I (or we) don’t have a financial plan.”
In fact, we tell them, you do have one. You just don’t know what it is yet. Your current financial plan is the sum total of your financial actions: paying bills, discretionary spending, choosing to buy a or rent a home, buying or leasing a car, your retirement and other saving, and how you’re managing debt and the risks in your life.
Based on that, we can show you the future outcome if you continue doing exactly what you’re doing now. What will your financial picture look like five, ten, or 40 years from now? Could that be improved? If so, how? What combination of protection, investment, retirement planning, tax planning, and estate planning will get you where you want to go?
Our professional practice is called financial planning, but it’s really life planning. Good financial planning involves working at the intersection of the empirical and the emotional to provide the context to ensure the plan reflects who you are, the specifics of your life and the things that matter most to you. The result? You’ll be more likely to achieve your desired outcomes and gain peace of mind.