To achieve my goals I need a team of strikers…..

In my last blog I explored the concept of financial planning and a change of mind set where the focus centres on goals rather than solutions. I was thinking of a sporting analogy – if all I want to do is score goals then what I want is a team of strikers, of course the risk is that I have no defence so as many times as my team are up there scoring goals then I am potentially losing goals because I have no back defence.

So the point being is that the goals have to be realistic before the solution is delivered. Whether you are doing it yourself or whether you turn to a financial planner, the financial planning process is crucial. In this part of the blog I want to focus on seeking advice from a financial planner.

Analysing and evaluating goals

Whenever we buy something we gather all the information we can before we make a decision. I always struggle when I buy a mobile phone, I want something robust that makes and receives calls and that I can text with.  Shock, horror I don’t want a smart phone. So I gather all the information and then finally come to some conclusion before buying the phone.

When we consider financial planning this should be no different, the first step has to be to have all the information to hand so an assessment can be made of the current situation and what both the short and long term goals are. Once this is done then an assessment can be made to determine what is needed to meet these goals.

In doing this I believe there are three things to consider:

1. Setting measurable goals – this I think is crucial. If I say I want a comfortable retirement what do I mean by this, i.e. we need to quantify what our goals are because only then can we assess whether they are achievable
2. Understanding the effect of each financial decision – when we look at the example of a team, there is a consequence of just having strikers, so whether we like it or not all financial decisions are interrelated so a decision around a child’s education may effect when and how retirement goals are met
3. Being realistic – interrelated with the first two the goals or expectations need to be realistic. We have a “need now” mind-set, if I have ten pounds in the bank I am not going to have £100,000 tomorrow. So the situation will not change overnight (unless I win the lottery (odds of 1 in 14 million for the jackpot and 1 in 3 million for £100,000)) but will be a lifelong process

Developing financial planning recommendations

Getting this right is so important and contrary to popular belief is a two-way process. This will take all the information, distil it down and provide a financial plan that addresses the goals. Why I see this as so important is because where someone has been paid to do this they provide an unemotional, detached recommendation.

When we go direct we are seeking information from that provider, and where in the past the information was very factual, now it is more geared towards selling. When we go direct we can be sucked into buying a fund because of advertising and promotions and have a belief that the manager will steer us away from the pitfalls. We need to apply a detached unemotional decision to this process and this is why I have always been in favour of paying a financial planner not only for goal setting but also for delivering the solutions at the end.

You see the idea of of selling product is blown away at this stage because this is the consultative stage where the recommendations are talked through so the client can make an informed decision. You see a financial planner will listen, and then assess and revise plans accordingly.

It is a two-way process but the client is in control. For this to work all the cards need to be on the table.

The financial planner can only do a full job if they have all the data to hand but once they have this then asking questions and playing an active role is really important.

Implementation and monitoring

I am incredibly frustrated when I hear people say financial advisers sell a product, take the commission and disappear. I would be naive to say there are not bad eggs as there are in all walks of life. But a financial planner takes their role very seriously.

Once the plan has been agreed then I have always seen the process as:

1. Agreement on how the goals will be achieved – i.e. going down to the solution or product
2. In some cases the planner may take an active role in delivering the recommendation, or they may act as the “coach”, i.e. co-ordinating the process and using other professionals such as stock brokers etc
3. The planner working with you will agree how they monitor the progress towards achieving goals
4. Financial planning is a dynamic process – goals may change over time due to changes in lifestyle. So the financial planner will constantly review the situation and adjust recommendations accordingly
5. And finally for many the financial planner will meet them at least once a year to review the plan, but they are always available to meet

Conclusion

The idea of a financial adviser is dead (or should be!). Once financial management is under control then the focus has to be on financial planning and the setting of realistic goals, and realistic plans to deliver these. The continual monitoring of this is where the cost comes in and the question then arises as to whether the slightly additional cost is worth paying.

In my next blog I want to look at the idea of doing financial planning yourself, I will then look at costs and finally look at some things to look at when choosing a financial planner.

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