Mistakes & Misconceptions
You are the focus of the financial
planning process. The results you get from working with a
financial planner are as much your responsibility as the planner's.
To achieve the best results, you will need to be prepared
to avoid these commonly held fantasies about financial planning.
Planners come across clients who…
- Confuse financial planning
with investing
- Neglect to set measurable
financial goals
- Neglect to evaluate their
financial plan periodically
- Think financial planning
is the same as retirement planning
- Expect unrealistic returns
on investments
- Don't understand how advisors
are compensated
- Are looking for a quick
financial fix instead of a long term strategy
- Don't understand that good
professional planning advice is largely dependent on good
information from clients
- Believe financial planning
is primarily tax planning
- Think they'll lose control over their decisions if they
use a planner
When seeking professional financial planning
advice, expectations often vary. Avoid giving in to the fantasies
by considering the following facts:
Financial planning uses a big-picture approach.
Each financial decision you make may affect several
other areas of your life. An investment decision can have
tax consequences harmful to estate plans; a decision about
a child's education may affect when and how you meet your
retirement goals.
Financial planning is an ongoing process that
takes all your objectives into account.
Remember that all of your financial decisions
are interrelated.
You must re-evaluate your financial situation periodically.
Financial planning is a dynamic process. Your
aims may change over the years due to changes in your lifestyle
or circumstances, such as a birth, an inheritance, marriage,
house purchase or change of job status. Revisit and revise
your financial plan to reflect these changes so that you stay
on track.
Measurable financial goals must be set.
Set specific targets that will help you achieve
what you want when you want it. For example, you need to quantify
terms such as "comfortable retirement" or "good
education for your children" so that you'll know their
real implications.
To know what to expect from your engagement, the right questions
must be asked.
When working with a financial planner, be sure
you understand the process and what the planner should be
doing. Ask how the planner is being compensated. Provide the
planner with all of the relevant information on your financial
situation. Ask about the recommendations offered to you and
play an active role in the decision-making.
Remember, you are in charge.
Your expectations must be realistic.
Financial planning is a common sense approach
to managing your finances to reach your long-term goals. It
can't change your situation overnight. It is a lifelong process. Remember that factors beyond your
control, such as the stock market, inflation or interest rates,
will affect your planning results.
Achieving your goals is the bottom line.
Life is hectic, and all too often we get sidetracked
from reaching our life goals. But proper planning that includes
a relationship with a financial planner who helps you articulate
your goals and then prepares a plan that will help you meet
them will greatly increase your chances of being financially
prepared to handle both the expected and unexpected.
Investing in a plan is investing in your
future. And a professional financial planner can help you
increase your chances of making that plan a reality.
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