Life Planning — Is financial planning really all about the money?Submitted by Affiance Financial on August 28th, 2017
I am often asked, “What is it that you do for a living?” When I answer with “I am a financial planner,” the response is almost always “Oh, so you manage people’s money.”
That’s when I usually smile and answer, “Among many other things. Primarily, my job is to make sure that individuals are on track to meet whatever financial objectives they might have.” Or in other words, I believe that my job as a financial planner is to improve peoples’ lives by helping them to reach whatever goals they might have – financial or otherwise.
People unfamiliar with financial planning are often surprised by this answer. Even current clients may not realize that I see my job this way. But “life planning,” as it’s often called, is one of the most important parts of my job.
The idea of writing an article about life planning came to me at a conference I recently attended. I listened to a fascinating presentation by George Kinder, who is known as the father of the life planning movement. Kinder talked about the fact that he has been suggesting for many years that good financial planning starts with focusing on a client’s personal values, and that financial decisions flow “from the pursuit of non-financial life goals.”
According to the Life Planning Network, a community of professionals promoting positive aging: “life planning is a guided process by which an individual takes stock
s of his or her life, clarifies goals and challenges, and identifies the steps needed to move forward.” As a financial planner, I use life planning as a tool to help clients examine the different intersections in their lives and the financial decisions that might follow.
Here are just a few examples of the important decisions that might fall under life planning:
- Buying a house or renting a lower-maintenance housing option
- Sending kids to private or public school
- Starting a business or staying with a current employer
- Taking a higher-paying job that requires more hours in the office or staying at a lower-paying job that allows more time at home
These examples all have a common theme: In all of these situations, money is not the only, or even the most important, deciding factor. Instead, clients need to make such important decisions align with their personal values first, and then assess the financial consequences of the desired choice.
To further complicate the issue, being a good life planner takes more than just identifying important life intersections. A good life planner also needs to recognize that money means different things to different people. A financial planner can’t help a client get the most of his or her money without first understanding what purpose that money is to serve.
Life planning helps me identify my clients’ desires, dreams, goals, values, and passions. Here are a few examples of statements I have heard from clients that illustrate this point:
- “I worry about what will happen to my wife and kids if something happens to me.”
- “I have always dreamed of taking my family on a once-in-a-lifetime trip.”
- “I want to leave the world a better place.”
Based on these types of statements, I can help guide my clients’ financial decisions. For the above examples, I might make insurance, cash flow, or estate planning recommendations that fit my clients’ values.
In conclusion, as Kinder discussed in his presentation: “The Life Planning philosophy is founded on the idea that every human being strives to live a life of meaning and purpose. A financial advisor’s task must therefore begin with a discovery of each client’s unique aspirations…” When I use life planning as a tool, my job as a financial planner becomes much more than simply “managing people’s money.” My job is to understand that every client is different, ask the right questions, and listen to the answers. Only then, after all the information has been communicated, can I make a recommendation.