A few years ago, on a warm Autumn day, my family was invited over to a clients’ house for dinner. The kids played out back while the adults enjoyed wine, appetizers and beautiful weather. At some point during our conversation, my wife remarked on how much she loved their home, which they had recently purchased.
“Well, that’s thanks to your husband,” they said in tandem.
I blushed and thanked them for the compliment, but immediately denied taking any credit for all the hard work they put into making their goal a reality. Deep down inside, I was immensely humbled and unable to think of another time in my career something like that happened. My wife knew how much it meant to me as I saw her smiling at me from across the patio table. She knew how hard we worked to buy our home just a few months after them.
In my 16-years as a financial planner I can seldom recall someone thanking me for a good day, month or year in the market. If they did, it was probably more in jest knowing that the markets themselves played a greater role in their investment performance than me. Don’t get me wrong, I am supremely happy when my client’s stick to their strategy and make money but, as a planner, I also know that money is just the mechanism that allows individuals to achieve their financial goals.
Despite financial planning becoming more mainstream today than it was just 15 or 20 years ago, it unfortunately remains a distant second in popularity to the world of investing. That’s because most people still believe participating in the market is a quicker answer to reaching their goals and dreams. That making the right bet on a stock (i.e. Tesla) or investing in a new technology (i.e. Blockchain) will be the thing that gets them there sooner.
But in reality, clients can spend years with little to no exposure to the markets to achieve some of their biggest goals in life. In the anecdote above, me and my clients worked diligently to map out all the viable pathways to homeownership. We had tough conversations regarding which of their goals would need to be delayed and which expenses would need to be sacrificed in order to appropriately save for their home. It took discipline, loads of encouragement and resilience to make it happen.
Now, would they have gotten there on their own? Probably. But I would argue that it could have been much more difficult, time consuming and energy draining had they gone at it alone. Furthermore, any number of wrong steps could have placed them in uncomfortable positions like asking family for money or, worse yet, making a regrettable or ill-informed financial decision that would be hanging over their heads for years to come, literally. Can you imagine finally getting to your goal only to end up regret you decision?
Financial planning doesn’t favor any one area of personal finance over the other. Rather, it draws upon its various disciplines to provide context and pathways to a particular goal. For example, leaving a legacy touches on every area of personal finance, from cash management and investments to taxes and insurance. Meanwhile, some goals keep it simple like building a cash reserve, which draws almost exclusively on budgeting and cash management. Financial planning isn’t so much a tool as it is a tool belt filled with a variety of tools used for solving multiple goals.
I believe that everyone deserves a shot at achieving their own great things in life, whether that’s buying a home, raising a family or one day having the ability to treat work as an option. Financial planning is the only thing I know of that can consistency help individuals get there soundly and on their own terms. Most of all, I believe it’s how professionals like me earn their keep, demonstrate value and ultimately get thanked for the work that we do. They are the returns that cannot be quantified.
Come reconcile your gains and losses over on Twitter:
Average investors can handle losing 3% to gain 30%.
Excellent investors can handle losing 30% to gain 300%.
— Douglas A. Boneparth (@dougboneparth) February 25, 2020