Jump to Main Content

What is financial planning?

An inside-out perspective
Ask the average person to define ‘financial planning’ and you’re likely to get a wide range of responses. That’s not surprising, as it’s a combination of two common words into a seemingly generic phrase. But in truth it’s far more than that.

Behind that deceptive simplicity is a powerful concept. It literally turns the sales-driven practices of a bygone era inside out. Rather than the individual being the object of a sales effort, he or she is the subject of a discovery process designed to identify personal needs that may be satisfied by financial products and services. So what does that mean, and what does it look like?

From the individual, looking out
Turning the perspective around is not to suggest that a sales process is inevitably bad. Capably undertaken, it will identify those who value what is being offered, and net personal benefit can certainly arise out of that.

But while this approach may satisfy the want of a product to find a home, there could still be gaps in the needs of the person. In fact, there may be another product, service or strategy that would better serve the person’s interests.

Comparatively, an approach beginning with the person establishes context for what may be offered, clearly focusing on the needs that must be met. In this way, it helps clarify what is important on a personal level, what is practical in financial terms, and where things are desired and required to go. Products and services may then be evaluated for their fit within this framework.

Taking control and responsibility
Financial planning takes effort. It is not something that is merely performed upon or delivered to a person. Rather, financial planning is a collaborative and continuous process involving a person with life goals, and an advisor tasked to help realize them.

Think of it as a meeting of two experts: one versed in his or her own history and goals, and the other with the financial knowledge and organizational skills to help pull that into a viable financial plan. By treating it is a joint venture with shared responsibility, the odds of reaching a satisfactory result are immensely improved.

The process for assembling that plan may vary, but the main stages are:
• Unearthing and clarifying personal goals
• Constructing financial objectives to meet those goals
• Gathering information and documents to inform decisions
• Analyzing the current situation to identify gaps
• Developing recommendations and an action plan
• Implementing the action plan
• Monitoring results, reviewing the plan, and adjusting as required

And don’t forget fulfilment
So, does sales just go by the wayside? No, a plan is simply prose on a page until it is put into action. Implementation is critical. This is the point at which the advisor’s product knowledge comes back to the fore, in the mode of advising the person as investor. And even when an advisor is engaged for a specific need but not preparing a formal plan, the financial planning view should underpin the engagement. Either way, the sales part of the process supports and fulfills the plan.

By building from the individual out, there is greater confidence that the plan will fit the person’s needs, that it will be put into action, and that it will be effectively positioned to achieve its purpose. That’s the whole point of adopting a financial planning perspective.

Contact a Meridian branch to book an appointment with an Advisor to get started on your financial plan.