Financial planning knowledge to help you better serve your clients.

A core aspect of the financial planning process for many planners is not just the analysis and development of recommendations for clients, but the embodiment of that work into a written financial plan document. In the plan presentation meeting itself, some planners use this written document as a guide to walk the client through the analysis and recommendations, although many simply focus on key recommendations and points for the client to understand, and let the clients simply take the written document with them.

Yet once the clients leave the office, written financial plan in hand, how many of them ever crack the spine open and take a look at it sitting at home? Anecdotally, it seems to me that most planners agree on the answer to that question: virtually no one ever opens up their financial plan document at any point after they walk out of the planner's office.

Which begs the question: if "no one" ever reads the written comprehensive financial plan that's being delivered, why do we keep producing them?

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For most financial planners, the focus of college planning advice is accumulation based. After all, it seems that almost by definition, "planning" for college means acting in advance by saving up money ahead of time so that the costs can be funded when the child is ready to matriculate. If you just pay as you go when the tuition bills show up, you may be funding college, but that doesn't really constitute "planning" does it? Yet the reality is that many actions can be taken in the final high school years leading up to college beyond just long-term accumulation planning; however, most planners seem to skip these client conversations about so-called "late stage college funding planning" opportunities, despite the potential for a high impact on the actual client costs to fund college. For the most part, it seems this is by no means willful negligence, but simply a lack of awareness about the strategies that really do exist. We've just never had much opportunity for training about how to do this effectively. Until now.

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Although so many financial and economic models take as a fundamental assumption the idea that we are all rational human beings, the emerging research from the field of behavioral finance clearly illustrates this is a false assumption. In reality, we have some pretty strange financial behaviors, that do not appear to be at all consistent with a purely rational decision-making process. Fortunately, the world of behavioral finance is showing us that at least some of our irrational behavior occurs in a consistent manner that we can predict, so while our actions may not be rational at least they can be anticipated. But that in turn begs a fundamental question: when faced with a client making an irrational financial decision, is the rational (for the planner) solution to try to change the client to be more rational as well, or to change the recommendation to fit the client's irrational behavior? Read More...

Almost by definition for many, the essence of financial planning is that it's comprehensive. Financial planners don't just look at a particular problem or product; they account for everything holistically to arrive at a recommendation and solution that fits in with the big picture. In other words, they don't just plan for a slice of the pie; they plan for the whole pie. Yet it seems that for many planners, the "whole pie" is the client's balance sheet; we plan for all the different assets (and liabilities?) that the client has, not just a particular account. What about the OTHER pie, though? Not the asset one; the INCOME pie.Read More...