While I could wax poetic about how financial planning is like raising a farm of cash cows, I am instead going to talk about what people regularly mistake as financial planning.

I am repeatedly shocked by the lack of help people get from their “financial advisors.”  

I got a call from a friend of a friend who was wondering if I knew someone who could help her with figuring out whether she should take Roth conversions, what she needed to do to prepare for Medicare, what to do with her carryforward losses, and when to take Social Security.

Her financial advisor, who works at a large, name-brand institution, told her she needed to consult someone with tax knowledge about these topics. This “advisor” was overseeing millions—MILLIONS!—of her assets.

Could I help her?

After an incredulous silence and an internal wtf moment, trying to hold back my disdain for this “advisor,” I explained that she shouldn’t even be making this phone call. Her advisor should have already done this analysis and education.  

She was within striking distance of leaving her paycheck behind.  These conversations should have started years ago and should have been happening annually.  But they weren’t. 

Yes, any strategy suggestions should be reviewed by a tax professional, but she should already have these answers.

Shocking.

So, yes, I could help her, but I also have a fiduciary duty to her to put her needs ahead of mine. She was already paying for an advisor, so I told her she should at least go get the services she was paying for from her existing advisor.

What Financial Planning Is

Financial planning is a comprehensive process that includes investment planning, insurance, cash flow management, tax strategies, education funding, retirement planning, and estate planning. It’s designed to ensure your financial well-being by aligning your decisions with your life goals and helping you navigate both the routine and unexpected events that can impact your financial future.

It’s not just about managing assets; it’s about ensuring you’re financially prepared for life’s big moments. Some common triggers for seeking financial guidance include:

• Retirement Planning: Ensuring your money lasts through retirement, managing withdrawals, or rolling over retirement plans.
• Handling Inheritance or Windfalls: Managing unexpected financial gains in a way that aligns with your long-term goals.
• Life Changes: Whether it’s a marriage, divorce, or the birth or adoption of a child, a financial planner helps you adjust your plan accordingly.
• Financial Crisis: A layoff, illness, or natural disaster can affect your finances; a planner can help you create a strategy to manage these disruptions.
• Coping with Loss: The death of a spouse or family member brings financial responsibilities that require careful handling.
• Education Funding: Whether you’re planning for your children’s or your own education, a planner can ensure these costs don’t derail other goals.
• Business Transitions: Buying, selling, or passing on a family business often requires a solid financial strategy to handle tax and legal implications.

These life events often bring about significant financial changes. By working with a financial planner, you can ensure that your decisions are well-informed and that your financial future remains secure.

There should be a delineated, understandable process:  Understanding your situation, setting goals, knowing your strengths and vulnerabilities, exploring options and recommendations, implementing those recommendations, and ongoing monitoring.   

Here’s What Financial Planning Is Not

Let’s clarify what financial planning is NOT. Many people often mistake financial planning for the following: 

Money management. This is the biggest misconception: that someone who decides how your money is invested is providing financial planning. They are not. At one point, they might have said, “Here’s how much you need to invest each year to meet your financial goals,” but that’s a simple math calculation.

“How long your money will last” calculations.  Anyone – including you – can take your assets, expenses, age, and predicted rate of return and figure out whether the assets you have will last you until you die.  That does not take into account inflation, what happens if the market drops the year you leave work, long-term care scenarios, early death of a spouse/partner, helping kids pay for a wedding or buy a house, etc.  

Buying an insurance product.  There are lots of great insurance products out there to help with premature death, leveraging assets for more long-term care needs, creating income streams, or creating tax-free retirement income supplements.  But buying one of these out of the context of your financial life is not financial planning.  It’s a product sale. 

Creating a budget and sticking to it.  I prefer the term “spending plan” to “budget.”  But this is cash flow management, not financial planning.  Now, managing one’s money so that there’s money left over to save and invest is an integral part of building a financial success plan.  But it is not, in and of itself, financial planning.  I do financial planning all day and rarely scrutinize or discuss a client’s spending plan.

Retirement planning only.  While saving for retirement is often top of mind when thinking about long-term financial goals, it’s rarely the sole objective. Many of us aim to achieve other financial milestones throughout our lives—such as funding a child’s education, taking a sabbatical, starting a business, or purchasing a second home. Neglecting these mid-range goals in favor of focusing solely on retirement can actually undermine the success of the retirement plan itself. A well-rounded financial strategy should account for both short-term and long-term aspirations.

A plan without plan-ning. Ninety percent of our decision-making is emotional, not fact-based.  Any “advisor” that is throwing a financial plan at you to impress you with their knowledge is doing you a disservice if they do not understand how you think about money, what your relationship with money is, how you make decisions, and what will get in your way of making good ones.  A plan is useless and outdated the day it’s presented unless there’s support to make it happen.

Get What You Deserve from Financial Planning

If you’re paying an advisor who claims to provide financial planning, make sure you’re receiving the full spectrum of services: investment planning, insurance strategies, cash flow management, tax planning, education funding, retirement, and estate planning. It’s important to ensure you’re getting the value you’re paying for.

If you have any questions or need support from a wealth advisor, contact us.

Lanning Financial Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.