I can’t think of any profession that is more misunderstood than financial planning.
So what exactly is it? Why is it worth paying for? And how do you find the right financial planner for you?
We address all of these questions in the latest episode of The Investing Show with the help of Helena Wardle, herself a financial planner and also an author entrepreneur.
Robin Powell: Hi Abraham. How’s it going?
Abraham Okusanya: I am very well, thank you, Robin. What are we exploring today?
Robin Powell: This time, we are looking at financial planning. For me, financial planning is one of the most misunderstood of all the professions. If you ask people in the street, they would struggle to explain it.
I’ve been speaking to Helena Wardle who, as you know, is a planner herself and a staunch believer in the value that good financial planning provides. She’s also an author and entrepreneur. I started by asking her, in her view, what financial planning really means.
Helena Wardle: Financial planning is about looking at where you are, knowing your own circumstances around money, and using that base to give yourself direction as to where you want to head to, what things you might need to change or readdress, and understanding your circumstances. It’s also about having a thinking partner to really ask the questions that you may not know to ask yourself, or you may not think about asking, and understanding what opportunities and options are out there for you to explore. To me, it’s the ultimate way of making an informed decision because you have the benefit of your own understanding of what’s important to you and what you’d like to do, alongside an expert that can support you with knowing the things that you perhaps don’t know or don’t think about to make those good decisions. And I think we all know circumstances where talking it through with someone else has made a difference. And to me, the actual elements of financial planning are ultimately clarity, direction, and reassurance; and that’s what people get out of the process.
Robin Powell: So there you have it. Three key benefits of good financial planning: clarity, direction, and reassurance. And notice how Helena’s definition didn’t even include investing or the financial markets. Fundamentally, for her, financial planning is about identifying what you want from life and going out and achieving it.
Helena Wardle: I think the world of money has got a really skewed message in general because most of us just want to know we are OK, and want to know we’ll have a good life. The fact that eight people in the world are richer than 50% of the world is sad to me, because it shows that there’s a massive disparity of what’s important to people. I think if we break it down, in a really simplistic way, money is there to fund the life that we want to live. What we want all varies. What’s important to us all varies and I think, when you break it down and look at, “okay – I’ve identified these are the elements that are really important to me to focus on,” it actually makes your decision making far easier. It means that you’ve got more clarity about what you want to compromise on; it means that you are clearer on deciding different directions that you might need to choose from. And I think all of those things help people make better decisions and feel so much more content in their lives.
Robin Powell: These questions are all very pertinent, but many of us go through life without properly addressing them and, if that sounds like you, it’s time to stop procrastinating.
Helena Wardle: Even in saying that: “make time to address these big things,” I can hear the internal groan for a lot of busy people. The reality is that it takes up headspace, whether you think it does or doesn’t. Worrying about how to fund this, or how to make a decision around investing or changing your pension – all of those kind of things sit on your brain space, whether you like it or not, and actually taking some time to just break down: what is important to you? What direction would you like things to go in? And how would you try and aim to get there? I think it’s incredibly valuable and, if someone did a bit of research around asking people how much time they spend in a queue in Starbucks, and then asking them again, how much time have they spent on their money? And actually the answers to those, if you look at: what value does it give you to stand in a queue in Starbucks vs. the value it would give you to spend a bit of your time thinking about one of the things that funds all the stuff that matters to you – I think it’s no-brainer, but it’s a very hard one to get people to understand why that is worth spending time on.
Robin Powell: Having a robust financial plan will give you that clarity that Helena is talking about, but it’s not something you can just set and forget. Financial planning is an ongoing process.
Helena Wardle: I think it’s incredibly important to remember that life changes all the time and it doesn’t have to always be enormous changes.
Some changes are incredibly out of our control, such as legislative changes, changing the rules around investing, or tax, or whatever that could impact on your money. But the most important thing is what you may aim for, or what you feel is important can change as well. That’s just part of being human and what you need to always remember is your plan is not something that you’re married to. It’s not set in stone – that’s how things are going to happen. No one has a crystal ball. What it should give you is really strong foundations, good direction, and the ability to flex. And that will come from either very simple things – either you postpone things a little bit and push the goal out; you save more, you compromise in other ways. But you can make those decisions when you understand where you are and what reviewing it means is just revisiting where you are. You know where you were in the moment when you set the plan and actually, when you incorporate changes that are happening, it’s just revisiting where you are in that state. The same way as you would on a journey. You wouldn’t just expect that it’s going to be a straight line getting from one point to another. You may roadworks, you could have traffic. In every area in life we have things that change. Even in work, what you set out to do in the timescale you set out to do it, you know it’s not going to go to plan. So why do we expect such an important thing in our lives to always go to plan? It just doesn’t.
Robin Powell: I finished by asking Helena Wardle, how do you actually find a suitable financial planner? Well, she has plenty of suggestions on that front. Crucially, she says, find someone who really listens to you and shows a genuine interest in who you are and what you are looking to achieve.
Helena Wardle: I think the personal thing that I would do, if I was in a client’s shoes, is try and really find someone who would take the time to understand me and take the time to understand what’s important to me. If the initial meeting or the initial conversation is completely about their business and what they are doing, then I’m not really sure that reflects someone that will spend enough time to listen to what’s important to me as a client. I think transparency – they almost need to beat you to it on important questions such as fees and what it’s going to cost you. Because it will cost money. It shouldn’t be something that’s opaque or vague, and you shouldn’t work hard to get that information.
They should be properly qualified. I think it’s incredibly important that financial planners put themselves through the paces and make sure that they have the technical knowledge and expertise to deliver good value for clients. So to me that is incredibly important, and I would also make sure that you do find someone that has got resources to show you that there’s other people that would’ve trusted them, or they’ve come from a trusted source. So having reviews, having evidence of integrity, I think, is quite important in today’s world. You can also find a lot of financial planners that specialise, so they really understand people like you and that might be important to factor in as well.
Robin Powell: Hello again, Abraham. It is a problem for the financial planning profession, isn’t it? That so few people seem to understand what it actually is.
Abraham Okusanya: Yes, and I think that part of that is just the history of what we know today as the financial planning profession. It has its roots in the insurance industry and then the investment industry. So, there are people who think that the job of the financial adviser is simply to find them the greatest investment in the world. But ultimately, the job of a financial adviser really is to help people align their financial resources and their goals. So whatever it is that you are trying to achieve, and that has a financial implication – the job of the financial adviser is to align those two things.
Robin Powell: A question I’m often asked is, can you manage without a financial planner? Now, I do think for some people it might well be possible, but everyone can benefit from good financial planning. What’s your view?
Abraham Okusanya: Ultimately, I think of this question as saying: can you become an Olympics level athlete without a coach? Of course you can. The reality is that it’s harder without that professional support and help. The reality is that most people today probably manage their own finances and create their own financial plan without the help of a professional – but the difference that if professional financial adviser can bring to people’s finances is significant. And I think, generally as we get older, and our finances get more complex; then the value that a financial planner can add grows with that as well.
Robin Powell: Final question: almost every profession now is worried about the growth of artificial intelligence and, for some professions, AI is a genuine existential threat. What about financial planning?
Abraham Okusanya: Well, there is a saying in the profession along the lines of: personal finance is more personal than finance. In other words, the thing that makes financial planning unique is the human, is the emotions that we have to deal with. And I think it’s Richard Feynman that says that: imagine if electrons have emotions, physics will be much harder. I don’t see the truth to the financial planning profession in things like AI and the increasing technology that we are seeing. I think that, because we still need humans to ask the right questions, understand the emotional relationship of the client, and their money; we will see technology obviously take over a lot of the admin and the number crunching, but the core of financial planning – which is the relationship between people and, and their money – I think we will still see financial advisers continue to thrive.
Robin Powell: Thanks Abraham.
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