All Things Financial Planning Blog

What is Financial Planning?

2 Comments


I’ve been thinking a lot recently about financial planning.

Now, you’re probably thinking something along the lines of, “As a financial advisor, shouldn’t you be thinking about planning?”

But what I mean to say is that I’ve been thinking a lot lately about what is financial planning? How is it different than experiences that consumers of financial goods and services have with other financial professionals? How do I communicate what I do with promoting the financial planning process in a way the difference is understandable?

It’s only because I’m just not sure when I say to a client or prospect that I do planning  that the message is interpreted in the same way. And I understand why that is – we all have our own experiences of working with professionals and firms in parts of the planning process; financial planning businesses operate in all sorts of differing models; and virtually everyone in the business calls themselves some variation of ‘financial advisor.’

As I’ve come to find, perhaps the best way to relate the experience of planning, isn’t in terms of planning at all. On an episode of the Colbert Report, Jerome Groopman, M.D. explained how his approach to medicine is uniquely different than how we may traditionally think of that business. Dr. Groopman, a Harvard professor, researcher, and author, has studied and written for years about the doctor-patient relationship. His most recent book, Your Medical Mind: How to Decide What is Right for You, continues exploring that relationship, and how a doctor’s advice should be in helping you come to an answer for your medical care.

This paradigm of patients being involved in the decision making process was strange to host Stephen Colbert. After all, what did Groopman go to school for if not to tell patients what to do in the face of needing medical care?

Groopman responded, “I went to medical school to help you understand the risks and benefits as an individual, so that you can put your values into [medical] decisions.”

In other words, Groopman believes that doctors should work as more of a consultant to help you come to the right decision, than someone who leads you to a predetermined conclusion. “I can certainly help guide you, and explain to you what the risks and benefits are. But I need to know from you what your personal approach is, what is your philosophy, how much risk do you want to take, how do you perceive the benefit.”

In working with a financial planner in the financial planning process, the decision making should lead to you making decisions based on your values, rather than down a pre-determined path.

Do we pay off the mortgage, or not? Should I invest in an annuity or a mutual fund? The financial answer may be obvious, but only you know where the answer to the cost and benefit decision truly lies.

What it means is that when you are looking for financial advice, consider first if the person you are speaking with feels more like that consultant who will get to know your values and goals, or if they resemble the past paradigm of providing a product or service.

This decision on who to choose to work with on your finances is one that only you can make, and it should be based on your needs and values. As a planner, I recommend sitting down with someone who can help you weigh the pros and cons to make the best decision for you…and that experience may be the best way to understand the value of a financial planning relationship.

robertSchmanskyRobert Schmansky, CFP®
Financial Advisor
Clear Financial Advisors, LLC
Royal Oak, MI

Author: Robert Schmansky, CFP®

Robert Schmansky, CFP(r) is a financial advisor with Clear Financial Advisors, LLC, in Bloomfield Hills, Michigan. A student of personal finance, Rob holds a Masters Degree in Economics, and post-graduate certificates in financial planning. Rob has been an adjunct instructor of CERTIFIED FINANCIAL PLANNER(tm) courses, and speaker to military families on personal finance issues. Rob writes on financial literacy and investments for FPA, Forbes, and his blog the Clear Money blog.

2 thoughts on “What is Financial Planning?

  1. Robert–Dr. Groopman has a great approach.

    As you rightly point out, there is a school of thought in financial planning that holds understanding the clients’ values and goals paramount. There is also a school of thought in the financial services industry that believes that your financial advisor is your navigator in decision-making. One approach is to understand the clients’ values so the advisor can make the right recommendation. The other approach is to help the client understand the clients’ values and issues so the client can decide.

    John

  2. John – thanks for the contribution! There’s probably no right answer on the question of who makes a decision… and that may just depend on the client, or circumstance.

    My interests lately have been in how to better explain nuances in ways we work. I’ve used the analogy of the doctor in the past in that you see them when you need help or a check-up; but I probably have not been conscious of what that may mean to the person I’m speaking with! Are you the doctor that makes decisions, or not?

    Often I think the message from prospective clients is, “I get what you do, you’re the financial guy (you’re the doctor).” But, there’s something different about a Dr. Groopman experience that I think tells a similar story of how a financial planning relationsihp is different than that of other types of financial service individuals… Rob

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