So, what’s the point of financial planning?
I get a lot of inquiries about financial planning services from prospective clients. They often have never worked with a financial advisor before, they usually say that they want to do better with money.
That’s a great aspiration, but it’s not really the point of financial planning. That may be a welcome byproduct of the financial planning process, but it’s not the goal in and of itself.
Sometimes, they’ll come to me telling me they want to make sure they’re picking the right investments. An advisor will definitely help you with picking investments, but that’s not the explicit point of financial planning. Not to mention that the idea of the “right investments” is subjective based upon what your actual goals are and not some universal assessment.
The truth is, a good financial advisor isn’t good for stock picking. They’re likely not the next Warren Buffet. I know I’m not the next Warren Buffet and I am not going to find you the next Amazon.
Then what is the point of a financial advisor?
Let’s say you have an aspiration of starting a business, leaving a large inheritance to your child, buying your parents a retirement home, etc. You may even be taking some action towards that goal, but aren’t sure whether it’s the “best” way to do so. What you really need is someone to tell you your aspirations are possible and aren’t going to hinder your long-term financial successes.
If you are experiencing financial stress, then an advisor can help you know that the things that are keeping me up at night are not going to happen, or what to do to avoid them. It allows you to cut through the noise and the grey area, and operate with facts and information. Operating from an informed place is the secret to achieving your dreams and preventing your nightmare scenario.
There is another, deeper level to address for certain demographics though.
As an advisor for high-earning and entrepreneurial women of color, my value comes from a few things– removing that stress from your life, serving as a sounding board for your ideas, educating you on the way the rich folks do things, or identifying your blind spots because you’re not used to thinking about money or projecting long-term about money in a multi-decade, legacy focused way.
My goal in financial planning is to serve as a compass or GPS for your life. As things come up in your life, as you contemplate starting a business, career changing, having another child, relocating to another place, etc. you have a resource to check. You can say “I want to do this one new thing in addition to all these other things I wanted to do. Can I do this? Or do I need to rethink this?”
From what I’ve seen, a lot of people seem to think that an advisor is going to wave a wand and be life-changing for them. I believe a good advisory relationship has the possibility to be life-changing. For example, if you’re stressed about your finances around a particular goal. If I’m able to tell you that you can confidently achieve it based on the numbers. I view that as life-changing because you’re able to confidently walk in the direction of your dreams instead of sitting with the uncertainty and never doing it, doing it with stress and continuing to doubt your decision or not doing it at all and then living with that regret. Those are hard ways to live long term and you’re able to avoid that by hiring a financial advisor.
However, a financial advisor is not a magic maker. They cannot take your current state- no assets, never willing to say no to any expense, YOLO all day every day lifestyle and turn you into a billionaire with their amazing stock picks. They can’t do it, I don’t care what stocks they’re picking. No amount of financial planning will overcompensate for your lack of commitment, direction, and discipline. If you’re not interested in doing the work, then they are not able to help you.
Instead, view a financial advisor as a long-term partner, Someone who can rock with you in all stages of your life, alleviate stress and pressure to do things you don’t want to be doing (monitoring portfolio, education-funding decisions, etc.). They are a real tool and resource for those of us trying to change our financial life and change our family’s financial trajectory for the better.
If you want that type of relationship, do your research and commit to being pushed and held accountable. I doubt you’ll regret it.