Financial planning is really about maximizing long-term happiness – or what an economist might call maximizing ‘utility’ – from a limited amount of financial resources.
Financial planners should guide clients through an infinite range of financial decisions each day, week, month and year with a view to increasing long term happiness and financial wellbeing.
The decision range is infinite because it includes all the things the client consciously or sub-consciously decides to do, as well as the things they decide not to do. The decision to work or not work Saturdays, to retrain or not re-train, to buy or not buy a new car, to borrow or not borrow money, even to go or not go out for dinner are all financial planning decisions. These decisions all affect the financial resources available to the client, and the pleasure the client derives from those resources.
Every decision has an opportunity cost. Opportunity cost is the value of the next best option that could have been taken. Financial planning involves helping clients understand the opportunity cost of their decisions.
In short, financial planning is really about helping clients to be happy.
This e-book – 101 things that financial planning is really about… helps financial planners help their clients to be happy.
This e-book – 101 things that financial planning is really about… helps financial planners understand that financial planning does not mean financial products. Financial products are the planner’s servant, not his master.
This e-book – 101 things that financial planning is really about… is not a complete list. More good ideas will come. The eventual list of good ideas that a financial planner can implement is endless.
There is one single good idea that trumps and includes all the others. This is the idea that financial advisers are there to help their clients be happy. Once this idea makes sense, the rest follows naturally.
When meeting with clients never control the early agenda and, in particular, never stress financial products.
Encourage your clients to tell you about themselves, and listen carefully to what they say. Prompt your clients with gentle targeted enquiries.
Ask about their work, family, travel, the home, concerns, regrets, and aspirations. Get a handle on who they are, where they come from and where they want to go.
These conversations will define the scope and content of your advice.
Is your client stressed about job security? Talk about re-training options. Coach them through a career change. Encourage them to start a new business.
Is your client concerned about retirement? Talk to them about increasing their super contributions, reducing their living costs, investing more astutely, postponing the day they leave work.
Is your client worried about how their children will own a home? Introduce home ownership strategies, including soft loans, parental guarantees, and other intergenerational financial planning ideas.
Listen carefully to what your client says and make sure your advice is relevant, in their best interests and appropriate to them.
And if your advice to your client is not what you would say to your mum, your brother, or your child, you have a problem.