A good way to think about a financial plan and the process of financial planning (as these are two different things) is using a metaphor of a map and a guide.
When, as financial planners, we have a clear idea of what our clients want to achieve we build a financial plan to work towards this. Think of this as a map.
In life most humans want certainty and dislike uncertainty. In financial planning and advice ‘selling’ certainty is easy – “We can get you a return of X% on your money”, for example, whereas achieving this certainty is nigh on impossible. For us, real financial planning is about accepting the uncertainty and having a plan to navigate it.
In the same way that real life maps take considerable effort and time to research and draw, the financial ‘map’ is also a comprehensive process looking at all facets of our financial situation. This takes time and effort to build using current facts and the very best guesses we can make today (using reasoned and reasonable assumptions).
Once complete the financial ‘map’ shows what direction we should be heading in to achieve our objectives.
However, in real life maps change rarely whereas financial plans have an ever-changing landscape and are out of date almost as soon as they are built.
What is the point then, you may ask?
The point is the financial map provides a setting off point and a direction to head in – this is crucial. As the saying goes – “if you don’t know where you are going any road will do”.
Once the journey starts – the guide takes over. This is the role of ongoing financial planning.
The guide is not there to defend an outdated map, but instead to navigate the ever-changing landscape.
The value of the guide is to help the person being guided to enjoy the journey, to look at the scenery and take in all the experiences without worrying about what lies around the next corner.
This is really important as for many people the end of the financial plan is the day they die. Few people I have met want to hurry towards this – they want to enjoy their life. Life is not a rehearsal.
When course corrections are needed as the landscape shifts (stock market temporary declines being a good example), the guide provides reassurance that whilst each landscape shift is unique they have seen plenty of them and know how to navigate them.
If the person being guided, suddenly wants to change course completely (perhaps a career change) then the map is redrawn and a new course is plotted – it is a dynamic and ongoing process.
We want our clients to achieve financial independence, financial security and financial peace of mind and believe this can happen through the use of a financial map and a financial guide.
Neil Rossiter APFS, Chartered MCSI, CFPCM
Chartered & Certified Financial PlannerCM, Chartered Wealth Manager