What is Financial Planning?

The term ‘Financial Planning’ means different things to different people and encompasses a range of interlinking soft skills and technical expertise. Whether you call yourself a Financial Adviser or a Financial Planner, a Wealth Manager or a Money Planner, a Financial Coach or Life Planner, it is largely personal choice. It will be part of how you explain your service and reason for being to potential clients.

You may offer a broad service or a narrow niche service, come from a large firm or small firm, be an employed adviser or business owner and adviser. Then there is the way you charge fees. There are as many approaches as there are Personal Finance Professionals and that’s probably because Financial Planning and Advice is a very individual and personable service.

The common and golden thread that runs through everything, is that you strive to deliver the best possible outcomes to your clients with the intent of improving their lives.

The purpose of PFS POWER is not to say that any one method or approach is right or wrong. Nor is it to dictate a particular Financial Planning process. Our objective is simply to widen awareness of a range of potentially useful techniques and tools that might help you and your clients achieve your ultimate goals.

A range of interlinking soft skills and technical expertise

Coaching

Unearthing the minutiae of life takes skill and coaching. The ability to use coaching techniques to ask great questions and listen well, is a good starting point for gaining a deeper understanding of a client’s life, aspirations and priorities. Getting the client to articulate this in their own language helps build a desire and willingness to act. This important conversation helps prepare the foundations for a long-term Financial Planning relationship. Key and inspiring information is supplied in the client’s own language and it is important to listen more than talk as life stories unfold. Only checking in when clarification is needed. An ongoing ability to provide behavioural coaching will help clients stay on track, avoiding expensive mistakes which may take a financial plan off course.

Life Planning

Coaching and Life Planning are closely linked. Clients wish for uncomplicated, practical recommendations that will support their chosen lifestyles. That’s why before we talk about money, we take plenty of time to consider a client’s whole situation. It’s only when we have a clear understanding of lifestyle needs and future priorities that financial recommendations can be tailored to suit specific circumstances. The goal is to optimise client outcomes, to provide a clear strategy for clients to live the life they want for the rest of their lives without the fear of ever running out of money.

Organisation

Some clients are overwhelmed with the volume and complexity of the financial paperwork they receive. They value the taking away of a metaphorical ‘shoe box’ of papers and sense making of them. Tedious and time-consuming administration of paperwork can become digitised and clients given online access to information. This is probably just the stepping stone for discussing what it is all for.

Advice

Most people seek financial advice when they are faced with a life change or life transition. Most will approach a Financial Adviser to discuss a specific money related topic whether it be protection, home buying, pension, family loss and inheritance, investment or later life care.

Whatever the reason, the resulting need is to find out the answer to the questions:

• “Am I going to be OK?” and,
• “How much money is enough?”

Knowing how much is enough to maintain a desired lifestyle throughout life, is crucial to clients feeling control, comfort and happiness. A full understanding of what it is clients really want is crucial in preparing cashflow models, financial stress tests and a suitable investment strategy. All part of a long-term financial plan, and the bedrock for clients who stick around as profitable clients and refer you to your family and friends.

Client Frank Donlon went in search for pensions advice and was immediately struck with how much time was spent “unearthing the minutiae” of his life. You can read Frank’s article here: (Why) Don’t All Financial Advisers Do It This Way?

Financial Planning is a Process

Many organisations and individuals have documented what they believe to be the right Financial Planning processes and there are just as many criticisms of them as there are processes written. The delivery of life-focused Financial Planning is personal and takes on the personality of the individuals and businesses delivering it. Again it is about adapting what you think fits with your own style and firm.

In this article, Chris Bowmer of Fortitude Financial Planning talks about the process his firm follows and refers to the Six Step Process developed by the US Financial Planning Standards Board.

The whole Financial Planning process has made me think about what I really want to do. It has helped me confront myself about what I earn, what I spend and what is left over. It has been a really good discipline and has helped me make some key decisions. The cashflow modelling gives a very visual picture of the impact certain actions can have over time. It is very reassuring to have confirmation of my overall financial picture.

Pete Murphy, Financial Planning Client

New to Financial Planning?

Download the first POWER ‘A Guide to Financial Planning’ here.

Watch these videos about Life Centred Financial Planning.

Explore the POWER content in Why Financial Planningand Purpose & Vision