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Real Financial Planning Advice is NOT about how much money you have to invest…  Thumbnail

Real Financial Planning Advice is NOT about how much money you have to invest…

The world of financial advice is changing.

I’d argue that it’s actually going through a revolution of sorts, and mid-career individuals and families like yours will be better served as a result. 

Once upon a time, when financial advisors spoke about financial planning they really just meant “investment management.” Most “financial plans” were offered for free (if wealth advisors even thought to pay lip service to the idea of financial planning at all) because the real goal was to invest the client’s available investments/savings once the plan was concluded. 

I mean, why would the advisor be motivated to charge a fee for something they didn’t actually value when doing so would get in the way of the one thing that they did want to get into (managing investments)?

And in the clients’ mind, who had been conditioned to think that financial advice is just another commodity where the lowest price tag wins, who wouldn’t want a free financial plan ie: professional advice they didn’t have to pay for (at least, up front.) 

Unfortunately, 20 years ago, we, as an industry, conflated the idea of, (1) financial planning and (2) investment management to such an astounding degree that the general public started believing those two things were one in the same.

A financial “advisor’s” primary role was to gather investment assets, manage those accounts, and make changes to those accounts as appropriate and then they were compensated specifically and only for that function. 

As a result, both advisors & the general public came to the implied understanding that only people with a substantial investment portfolio truly needed & benefited from having a financial advisor.

Having enough to invest became the “not so secret” key to working with a financial advisor. 

This misguided idea has permeated the culture. The number of times I’ve heard, just in casual conversation, “Well, I don’t have enough money to have a financial advisor” has absolutely floored me. I cannot think of more ridiculous logic if I tried!

Because…Really? In what universe does it make sense that unless you already have two million dollars to invest, you can’t possibly have questions about: 

-         Your cash flow and budgeting

-         Your student loans and broader strategy to pay off debt

-         Your kids’ education planning & goals 

-         Your benefits, stock options, and retirement accounts at work 

-         Your protection & insurance planning 

-         Pre-Tax vs. Roth vs. After-Tax prioritization  

-         Estate Planning

-         Managing your financial behavior 

-         Analyzing your housing costs and real estate expectations

-         Long term Scenario Planning

Are we really saying that a family in their late 30’s earning $450k as a household, with 3 kids, 27 goals, and 12 financial/estate/tax questions should wait UNTIL they have two million dollars before they’re able to benefit from, and pay for, professional financial advice??? That is both insane and counterproductive.

This is the group that MOST needs real financial advice! 

While clearly baffling to me, it makes sense how we arrived at this place: Historically, wealth advisors were not directly compensated for their work in providing comprehensive financial advice and so emphasized the only area that historically we have been paid for…investment management. And this is why advisors started having “minimums” to manage, as without one, there was no way to work with & get compensated fairly by those with smaller investment balances. 

And even as that reality has changed (see below), it’s led to millions of people not receiving or paying for financial advice because they were either embarrassed that they didn’t yet have 5 million dollars to invest yet or they were so put off by the conversations they’ve had with financial advisors (which immediately became about finding out how much money you could/would invest) that they vowed to never speak to one again! 

And so, receiving financial planning advice became the domain of people that already had substantial net worth and that were approaching retirement.  (Why retirees? Because as Willy Sutton once said about robbing banks, that’s where the money is! The older you are, the greater likelihood that you’ll have acquired more assets in need of being managed.)

And, as a quick note, even this reality about when people start paying for financial advice is backwards! People in retirement actually have substantially less life transitions that require financial planning than people in their mid-career years. Retiring itself is typically the only one (unless health costs come about). On the other hand, young families are worried about family planning, education funding, buying a first home/moving a few times, changing careers, combining family finances, sending their kids to college etc. 

Ok, so what’s the alternative to this “old school” model where financial planning advice gets buried under the shiny, misleading, lights of “investment management” and young families with dozens of financial planning concerns get left out to dry? 

A financial planning program where you pay an initial fee for the financial advice you receive regardless of your level of investment assets!  

You see, the problem is not that financial advisors are charging too much in fees…Not at all. I want & deserve to be paid for the excellent financial advice I give to the families that rely on me. In fact, I don’t want to be the lowest cost option…I want to be the highest value option. The problem is actually that too many advisors don’t have a system to charge fees for their planning advice, coaching, and objective recommendations to families explicitly looking for this sort of help. The truth is that most of the older-school, big box firms that created the current dynamic are just not set up for this. 

Well, we are set up for this. In fact it’s our exact program. (And by the way, there are a number of other fantastic independent financial planning firms changing the concept of financial planning as well) 

Let’s walk through what this sort of planning looks like in practice: 

Our team specializes in helping high-earning families in their 30’s-40’s design their personalized financial roadmap and in prescribing the tactical & behavioral changes that will bring them closer to their long-term financial goals. We charge a flat fee for this financial planning program and treat it as a one-time engagement, addressing all of their financial/tax/estate particulars. At the plan’s conclusion, our clients can CHOOSE to take their plan/paid-for financial advice and implement the plan on their own or they can hire us to serve as their ONGOING financial planner & wealth advisor…the choice is totally up to them! 

Because every single one of our new clients goes through this initial Financial Life Plan™ program and we charge a flat fee to do so, a client’s current “investable assets” is never a barrier to entry…there is no minimum to get started! Sometimes, we’re working with clients that need us to analyze/make recommendations for their two-million-dollar portfolio and sometimes, we’re working with clients that are just getting started on the investing side who need us to BUILD AND EXPLAIN new investment strategies from the ground up. It’s all part of the plan….only once we get into the investment management relationship AFTER THE INTIIAL PLAN does their level of assets come into play. 

So if we’re saying that asset level is not relevant to when you should hire a financial planner, well, the question becomes….what’s the driving factor in being ready to do so? Household Income. This is the connective tissue. This realization & the earlier start that thousands of households are getting as a result is the start of a new era in financial planning advice. 

A certain level of annual household income (just to give you a rough baseline, $125k+ single, $250k dual-income) will create enough complexity, opportunity, competing cash flow priorities, and the goal-funding means to where you will be BEST SERVED by having a great financial planner in your corner. In our next post, we will explain why a high household income gives us, as your advisory team, the clearest understanding of our ability to make meaningful and substantial financial change for you. 

The point for now - you shouldn’t have to already have a few million dollars invested to have professional financial advice and to be held accountable by your financial partner. 

With the right firm, you don’t have to. 

If these questions resonate let’s take that next step and speak over a 15 minute right fit call.