The ‘intangible’ benefits of a financial plan.

Once upon a time, there were three fish living in a pond. They were friends who did everything together. One day a fisherman saw them from across the pond and made plans to catch them. The wisest of the fish immediately made plans to move to a different pond. While one of the fish agreed, the other denied, saying that the pond was home and he shall not vacate it. The third fish also pointed out that there had never been any danger in their pond. The first two fish were unable to convince their friend so they parted ways. The very next day the fisherman cast his net and caught the third fish, while the other two escaped.

The moral of this story is to heed to wise friendly advice. Every problem is different and requires a different plan or solution.

While our last post covered the relevance of financial planning in our everyday life, we’d like to focus this post on the intangible benefits that come out of the process. The biggest and most significant one being the relationship you build with your financial planner & advisor.

We’re all familiar with the triad benefits associated with a financial advisor — better knowledge of financial products, saves you time and effort, and, the crowd favorite, maximizes your returns. Most investors believe that a planner or advisor’s job is to help them generate returns or make them rich. While advising on investments is part of a planner’s repertoire, their job is to help you work on your overall financial well-being.

A question more important than “are you saving enough?” is “are you saving at all?” Cultivating the habit of saving precedes the dilemma of whether it is enough or not. In much the same way, the advisor is doing his job right when you think twice before making a big buy. Or feel guilty for breaking your long term savings.

The potential value of financial advice varies depending on the nature of the engagement. People working with a financial advisor who takes a more holistic view of their needs are likely to fare better than those who attempt to do it themselves or who work with advisors who take a transactional approach.

Your financial planner’s job is to give you perspective first, and manage your investments second. While the latter is just as important, your advisor will recognize the relevance of preceding it with the former.

Let’s list down some of the intangible benefits you get from the experience:

Personal attention

Your planner will take the time to get to know you, ask questions about your financial situation, understand your risk tolerance and help you form your financial goals. Only then does he (or she) create a personalized financial plan for you and your family.

Easy rapport

Talking about money is awkward for most people. So to be able to create a rapport that helps you ease into talking money is a feat in itself. Your advisor’s job is to ensure that you feel safe and confident about discussing anything financial, or even personal, with him at any time of the day. This personal connection you build with your planner is imperative to a successful relationship.

Unbiased opinions

To understand how your planner stays unbiased, you need to first understand the importance of his or her choice of compensation. When your planner’s source of income is fees collected from you, and not commissions from product distributors, you become the sole focus for him or her. It would not matter whether the product or service recommended has a higher back-door pay. The only focus would be what is good for you so that the service provided to you is the best he or she can do.

A catalyst to act

While your financial plan gives you the direction you need to take, unless it is acted on, it remains just a plan. Your advisor can be your catalyst, inspiring you into action. He or she can help you cultivate good saving habits, encourage you to earn better or spend less as the situation demands, and persuade you to have the needed fail-safes in place.

Financial coach

Most people approach planners with wrong ideas about investing. A good planner helps you deconstruct the flawed investing strategies and reconstruct a better one. An important part of the planning exercise is to educate and build conceptual knowledge so that you can understand and relate to the plan. In times of uncertainty, your advisor can help keep your focus on the bigger picture. When you are unsure of a big purchase, or a big loan, your advisor can give you a fresh perspective based on not just product knowledge, but supported by an understanding of you as well.

Keep emotions out of the equation

You may know better than your advisor on more than one occasion. But there are times when emotions override reason. Your planner can protect you from emotional decisions because he or she is an objective third party. He or she can stand in the way of a potential bad decision.

Continuity

A plan is a continued effort on your part and on the part of the advisor. It is not meant to be executed once and forgotten about. It requires maintenance and frequent reviews to adjust to circumstances. Your planner will keep in constant touch to ensure that there is continuity to the plan. He or she will also ensure that your investments are constantly monitored and action is taken when, and only when, needed.

Support system

Through your financial planner, and consequently your financial plan, you build a support system for your family to fall back on if things go awry. We refer not only to covering risk through insurance or maintaining a contingency fund, or even being prepared with a will. The support we refer to here is the advisor, the human element that connects you and your family to your life savings.

“Peace is its own reward.”

- Mahatma Gandhi

The ultimate goal of doing a financial plan is peace of mind. But the exercise of creating a financial plan is the easy part. The difficult part is executing the advice and sticking to the plan. You have to do the right thing over and over again. Chances of winning at this goes up substantially when you have a planner to help you through it.

Whatever your reasons are for needing a planner, the fact remains that you need one nonetheless. Be open to the idea of forging a good relationship and you will win great many perks from the experience.

“Some people cross your path and change your whole direction.”

- Marsha Egan