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Practicing the Financial Planning We Preach

Would you be comfortable taking weight-loss advice from a dietician or a fitness trainer who was overweight? Would you trust a surgeon who was unwilling to be a patient in the hospital to which he sent his patients?

Probably not. Yet clients don’t hesitate to trust financial planners who don’t have financial planners of their own. To my knowledge, planners who do have their own planners are only a tiny minority of those in the profession.

Apparently, most planners don’t see this as a problem. Maybe that’s the reason why a recent webinar on financial planners having planners, sponsored by the National Association of Personal Financial Planners (NAPFA), was cancelled after not even one planner signed up.

This was surprising to me, as NAPFA is the organization of planners who are fee-only. This is the group I figured would be most drawn to the message and benefits of a financial planner having a planner. After all, fee-only financial planners don’t sell products. They charge a fee for their advice.

I could understand someone who is fully or partially compensated by commissions being resistant to having a financial planner. In their world view, financial planning advice is ancillary to the main focus of selling a product. Why would they want to buy financial products from someone else?

Fee-only planners, however, are more focused on the process of financial planning. We help people achieve financial wellness. Even more important, we work to help clients define and achieve their life goals and increase their overall well-being.

A few years ago I became interested in why most financial planners thought this financial planning process was good for everyone else but themselves. The most common reasons planners gave for not having a planner were that they could do their own planning, they wouldn’t receive value, they couldn’t find a competent planner, and they couldn’t find someone they could trust. These were the same reasons for not having a financial planner given by readers of The Wall Street Journal who responded to a survey.

I found this paradox baffling, especially when you consider that many financial planners will tell you the value of financial planning is far more than dispensing technical knowledge and investment expertise, which are almost a commodity these days given the vast amount of information on the web and in the financial press. Many will say that a great benefit of financial planning is the relationship you form with the planner, having someone who will understand you, support your goals, and be there for you and your family when you need them the most. Yet many financial planners seem not to believe this is such a great thing themselves.

Does this mean most fee-only financial planners are charging clients for services they don’t believe in? I don’t think so. On the contrary, I find the majority of my professional colleagues to be passionate about their work and deeply committed to the well-being of their clients.

When financial planner Michael Kitces addressed this topic in a recent blog post, he titled it, “Are We Being Hypocrites About the Value of Financial Planning?”

I’m not sure whether the majority of financial planners are hypocrites, or whether—like many of our clients—we simply tend to put off doing the full financial planning we know we should do. Maybe the real problem is our own unconscious beliefs about money and our own assumptions that we “should” be able to do everything money-related for ourselves.

Ironically, those beliefs and assumptions are no different from those of many clients. Which is exactly the reason that, like our clients, financial planners need financial planners.

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3 Responses to Practicing the Financial Planning We Preach

  1. Michael Kitces November 15, 2010 at 5:59 am #

    Rick,
    Well, it looks like you disagree with my implication that planners are being hypocrites about planning – no offense taken. 🙂

    But I have trouble believing it’s just a function of the tendency to put off doing what we should do, although I’ll grant ‘human inertia’ plays a big factor.

    I think you’re on the right track with the comment that we believe – especially, as planners – that we ‘should’ be able to do everything ourselves, which is why your research shows planners rate “I can do it on my own” and “I won’t receive [incremental] value for my money” as their primary objections to the planner-for-planner relationship.

    Yet again, as you point out, the direction of planner seems to be thrusting away from the “pure technical knowledge” and towards the more human, behavioral, and emotional factors – which we are often quick to point out is best served by having a third-party involved (the planner).

    So I am still faced with the challenge that I see more and more planners say that a core piece of their value proposition is everything they do BEYOND their technical knowledge alone… yet they are still unwilling to hire a planner for themselves. Or worse – as I’ve received in private feedback from many to my own blog posting – they find the idea “ridiculous” in the first place.

    So what, exactly, IS the value of financial planning?

    Respectfully,
    – Michael

  2. Dave Jetson November 15, 2010 at 9:53 am #

    The problem of financial planners not having financial planners them self mirrors the issues of counselors not seeking counseling for themselves as needed. I believe it is a problem that goes beyond what is seen on the surface.

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