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What is True Financial Planning and Why Should You Care?

Tuesday, February 28th, 2017

Over the years financial planning has evolved from a great tool, clearly directing people’s financial lives, to a money making plan for advisors.

Financial planning is not and should not be used as a tool for advisors to sell products or gather investment assets.  When advisors focus on selling rather than planning, they typically are offering a less efficient way for someone to reach their goals.  Unbiased financial planning requires extensive research to create the most efficient plan, and unbiased asset management requires extensive research to create the most efficient portfolios.  Someone who offers to do it all rarely does it well.  Unfortunately, throughout the industry there are many financial planners who offer plans only to sell mutual funds, annuities, permanent insurance, and other products.  This method is appealing to some advisors because there are high commissions involved and the investments are extremely easy to monitor.  This however is seldom in the best interest of the client.  The result is a financial plan not specifically tailored to the individual’s needs or goals and subpar investment performance.

True financial planning is the process of taking someone from their current situation to their financial goals most efficiently.  This elevates the conversation from “here is some money, invest it for me” to “here is what is important to me, how do I get there?”  It is vital to understand how taxes, insurance, education, cash flow, and estate planning as well as investments fit into a plan so each recommendation can be made without conflict in other areas. When implementing a holistic approach, opportunities and threats to a plan are revealed and can be dealt with before damage is done.  Once a plan is created, it must be periodically updated to ensure the recommendations remain relevant.  Just as a sports team has different game plans for each opponent as they proceed through a season, a financial plan will need to be updated as a client’s situation changes through their life.  Too often someone purchases a financial plan to help them get on track, and five years later the person has a new job, new house, and new baby.  The original financial plan has absolutely no relevance and provides no benefit.

Many people use financial planning to make wise decisions when it comes to retirement savings.  The earlier planning begins, the less leg work is required to accumulate enough savings to retire on time.  The difference among financial planning and other methods of financial advising is planning will provide for retirement while also providing for current spending, college savings, tax efficiency, risk management, and dealing with other financial obstacles.  Retirement saving may be important, but not at the expense of other areas of life.      

It is a common misconception that financial planning is only relevant for someone saving for a comfortable retirement and once retirement is reached, it is no longer necessary.  It is true that planning earlier in life will make achieving goals much easier; however, retirement is arguably the most important time for comprehensive financial planning because financial mistakes can be much more impactful.  Questions in retirement such as how long will my money last, how to prepare for increasing medical costs, how should make withdrawals from accounts and social security be structured, how should debt be handled, how to save in taxes, and what should be done with property. All these concerns if handled poorly can result in an unnecessarily low comfort level in retirement.

The most important item to think about when considering financial planning is the “why”.  Why does someone actually need this?  When done correctly, financial planning can expose ways of achieve goals quicker.  Efficiency leads to shortcuts and shortcuts lead to comfort and more time for the important parts of life.  A survey published by the CFP Board states that people with financial plans are over twice as likely to report living comfortably, and a survey by TD Ameritrade reveals that planners are over three times more likely to feel confident in reaching retirement goals when compared to nonplanners.  By exposing ways to retire quicker, make assets last longer, save in taxes, or create a budget, the result is an increased quality of life which allows us to spend more time on what we want and less time on what we have to.

Financial planning, in a sense, is the Google Maps of someone’s financial life.  We have a starting point (current situation) and a destination (goals).  Google maps gives us directions on the quickest and easiest way to our destination just like a financial plan.  However, sometimes during our journey conditions change such as traffic, accidents, road construction etc.  Google Maps then gives new directions to account for the change in circumstances just like a financial plan.  As our lives change, new recommendations are needed to keep us on the easiest path so we can reach our destination on time.

When implemented correctly, financial planning can be a life-long tool for making life easier and more comfortable.  If you are considering how planning can benefit you, just be sure the financial planner you choose has your best interests in mind.

At Wilsey Asset Management we have implemented an unbiased financial plan that truly focuses on your needs. For questions about a financial plan, you can call Harrison Johnson at 858-546-4306 or send an email to

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