What Is Financial Planning?

August 28, 2015
Scott McDuffie

Financial Planning is this term that is thrown out into the public eye but which very few people actually agree on the true definition.

We’ve found that most clients, at first, mentally-account for the term financial planning in terms of implementing something:  a budget, investments for your portfolio, applying for life insurance because you’re expecting or determining how much you’ll need for that beach house you want to enjoy while in retirement.  Yet, this acceptance that you’re going to implement something also sets the stage for being sold something that may, or may not, actually help you. 

Most advisors use the term “financial planning” in their marketing activities because it’s the current buzz word.  So the question remains:  “What is Financial Planning?”

Financial Planning should represent the culmination of your entire situation:  personal, financial, family, religious, etc. incorporating all of aspects of your life which are meaningful and might impact your financial situation.  Your plan along with the projections generated by it, coupled with your advisor’s recommendations, should provide the framework for all of your financial decisions.

Your plan should be customized to your situation.  You are unique and have your own goals, values and priorities.  On the surface, your friend’s situation is similar to yours until you dig deep and uncover the many differences which separate you.  As people, we may have commonalities but, we’re all uniquely individual; your financial plan should be as well.

True financial planning starts with developing an understanding of who you are, what you’re about, your family, goals, dreams and aspirations.  It should account for your values and priorities, your professional status and trajectory, the people directly tied to your life and many additional factors. 

Your actual plan should provide you with a detailed (current) projection of how you’re doing.  It should also acknowledge that your situation will change over time:  your goals, values and priorities will change; so the projections have limited long-term benefits without being monitored and updated. 

Your plan should talk to you by saying:  
     “Here is where you are compared to where you want to be.”
     “These are the things which you should consider changing, and this is why.”
     “Here are financial concepts to consider which will help you to improve your overall situation.”

True financial planning is not a set of pre-built solutions for you to implement. 

True financial planning backs into ideas, guidance and recommendations only after analyzing your situation in totality.

As a financial professional genuinely concerned about my profession’s public perception, I am deeply concerned about the mentality that financial planning is merely the implementation of something.  It is my humble opinion that your financial plan is much more important than individual, sales-based implementations.  It’s the key to unlocking your potential for success.

At FWI, we believe that financial planning, and each client’s financial plan, provide the framework from which we make purposeful decisions for our clients.  Our plans are developed using our clients’ goals, values, priorities and desires…not products.  Our plans are individual, unique and thoughtful. 

We strive to ensure that our clients are comfortable with our ideas, guidance and recommendations because we take the time to understand their complete financial circumstances.  Our clients know that we’ve done the analysis based on their goals, values and priorities.  The partnership we share with our clients is founded in mutual understanding - to help bring them to a better place.