- This article is written by Nandish Desai
“Financial planning” is the NEW buzz word these days all over the internet, TV channels and newspapers. These days even bank employees are selling a lot of financial products on the name of “Financial Planning” . Investors are literally bombarded with the word – Financial Planning from various sources like blogs, articles, advisors and every mutual fund and insurance agent, and the flow of information has created some kind of mental image in investor’s mind about – “what is financial planning?”.
In a typical financial planning exercise, a financial planner goes through your financial data and then draws a written financial plan, which touches upon various area’s of your financial life like life insurance, health insurance, asset allocation, retirement, children goals etc etc. But in this article we want to add more dimensions to what is financial planning, and want to add a whole new perspective to what is financial planning. The article’s motive is to help you to see financial planning process with new and empowering perspective.
Our view of “Financial Planning”
We feel that at Jagoinvestor – even our own view about the term called “Financial Planning” has changed over a period of time and we would like to share the same with you all today. We have worked with close to 300+ clients till date and today we want to share our learning and insights which we have drawn from our experience in so many years. With every passing day we are evolving inside our profession and we also want our readers to grow with us.
What Investors and Financial Advisors think about “Financial Planning”
We want to know what do investors and various financial advisors connected to us on social media think about “Financial Planning” , We wanted to know from them what is their view about “What is Financial Planning?” . So we asked them on facebook here and here. We got lots of answers and we are sharing some of them with you below. There is no wrong or right definition here, so we just collected few answers from investors and financial planners and we want to show you what they think about it.
8 insights about Financial Planning
Now We will share with you 8 insights about how to perceive financial planning in a new way. We feel a big number of investors and financial advisors have a very narrow view about “financial planning” and its potential. We simply want you to see Financial Planning tool with fresh pair of eyes. May be it’s time to question our perception about what financial planning is all about. Here are those 8 insights below.
1. It is not about securing future, it is designing your present
A lot of investors and advisors think that financial planning is about future, in our view it is not about future. Financial Planning is an exercise that helps you to design your present as an investor. Future is an illusion and it just does not exist in reality. You have to use financial plan as a tool to make each day/week/month and year your best financial year. A lot of investors think with the help of financial plan I am going to secure my future, but in reality it is about learning to play fully in this very moment.
Let me share an example with you – All the investors who drop a financial planning inquiry on our services page – we usually ask them why they want to go for financial planning and what financial planning means to them ? And the most common answer we here is, “I want to do financial planning, so that I can secure my long term financial goals like children goals, retirement etc.”
They think financial planning can help them to be more secured. We ask them to stop over focusing about future and look at what best they can do right now with their financial resources.
2. Financial Plan is not about “Financial Goals”, it is about Financial commitment
A lot of people think financial planning is only and only about financial goals. May be financial goal is one small part of the whole financial planning exercise, but surely its not only about financial goals.
In our view it is about strongly announcing your financial commitment and what you are going to do now on-wards in your financial life and then sticking to your commitment. We encourage all our clients to announce their monthly financial commitments. Setting financial goals is extremely easy, but sticking to your monthly financial commitments is where the rubber meets the road.
Let me share with you something about our clients, what we do with our clients - When we get on call with any investor clients of ours, they bring all their WANTS on table (difference between Needs vs Wants here) . Wants like second home, A lot of clients want to even plan for the kid who is not yet born. Now, the moment we start the commitment conversation the goal list starts to shrink. Commitment is doing what is required to get what you want and not allowing anything to get in your way.
3. Financial planning is NOT about bringing Certainty
As human beings we are always attracted to Certainty. Most investors want to know whether they will be able to achieve their financial goals or not ? This is the core reason why they hire a financial planner! . In our view the best thing about life is that it is mysterious and uncertain. If we pull uncertainty out of future then it is no longer the future; It is present – which is projected forward and nothing else.
We want investors to hire a financial planner not only with core focus of bringing certainty, but to building financial muscle, to face every kind of situation that life throws at you, to bring more completeness in various areas of financial life, to get an external opinion about your financial life.
We have seen this happening with many investors – No matter how much they plan, life turns out the way it turns out. Now this does not mean you should not plan, but you should develop your mind that is constantly planning in face of what happens.
4. It is NOT about financial plan, it is about the Journey
We find so many investors and financial planners – who are totally attached to the document called “Financial Plan”. They pick small small things from the PDF document given to them and over focus on them, it might be some number , some fund name or some assumption taken.
In our view the real results are not inside of a financial plan, they are located outside of a financial plan. We ask our clients to draw key learning’s from the financial plan and then throw away the plan. Every investor is on some journey and it is important to enjoy the journey. If you are not enjoying the wealth creation journey, you will never enjoy the so called destination.
We have seen people who after reaching the age of 55 or 60 years of age, tell us that it is the financial journey that matters at the end and nothing else. When we work with investors we just do one thing, we simply ask them to enjoy the process of wealth creation. This eliminates all the worries from your head and helps you to take proactive actions in your financial life.
5. It is NOT about picking perfect financial products
In our view financial planning is not an exercise to pick right or perfect financial products. A lot of investors spend maximum time in “Which Mutual Fund is Best?” or “Which Health Insurance policy premium is lowest?” and similar points. While that’s important to some level, but finally wealth creation is all about testing and exploring.
A lot of investors fail to create wealth because they stop testing and exploring. A good financial planner will always encourage their clients when it comes to testing and exploring new things. He/she will educate you in a way, such that you are motivated to test new things in your financial journey.
A good planner will always say “Don’t’ worry I won’t let you fail but I want you to test new things as an investor”
When we work with our clients – we ask them to test new and unknown territories. We once asked one of our client to think about creating an alternate income even though he was working in a software company. We asked him to cross his mental barriers and keep looking at opportunities. Few months later, In one of the offices, there was a food counter in cafeteria space, which he setup and hired a worker and it was doing well , The question is not what happened later, but the main thing is that he explored some new ways of earning money.
Then there are so many investors who never ever invested in mutual funds thinking it is a risk proposition. We ask them to test this new route and we become their guide. We helped them clear their myths about equity products and once they become comfortable, they started exploring it.
6. Financial plan is not about products, calculations and returns, it is about YOU
The number one expectation an investor holds in his mind is to find a financial advisor who helps him/her to get more returns. “A Financial Plan is not about products, returns and calculations, it is about YOU” - This line is from my book “11 principles to achieve financial freedom”. This entire book has no numbers and calculations in it, it teaches an investor to develop right kind of mindset in the area of money. Financial planning is an opportunity to be 100% honest in the area of money so that you can work on your discipline level and can make corrections as an investor.
Let me share an small experience here. I was working with a client who told me - “I have no idea why my financial life is not good”.
I simply asked him to get the truth on table, I asked him to search inside him to get real answer. He finally agreed and owned all his mistakes and took entire responsibility of his financial situation. It was painful for our client, but things started to shift when the truth got on table. This realization and acceptance gave him a lot of power to change things. It was all about HIM and not about situations and circumstances.
7. Financial planning is NOT about advice, it is about ACTION
The old definition says that financial planning is process where two people connect, number crunching takes place and advice is imparted on what needs to done.
Giving or taking advice is just 20% of the job done, because the rest 80% is all about taking actions. More and more investors will make the most of financial planning tool when they will take actions, because at the end only action produces results and nothing else. As an investor check, how action oriented your advisor is or how action oriented you are as an investor?
A lot of readers write to us and say – “Can you advice me on so and so issue ?” . We say – “NO , We will help you to gain insights along with giving advice so that you are empowered to take actions”
We ask our existing clients to report their weekly personal finance actions to us. This is how things start to shift in their financial world. In our facebook bootcamps, we focus on taking actions for 6 weeks and we have helped more than 250+ investors to make their financial lives awesome till now (5 bootcamps are over, register for the next bootcamp) .
Look at one of the recent bootcamp sharing where, one of our participant “Sachin Gopalkar” is sharing what all actions he did while he was in bootcamp
8. Financial plan has to be a LONG document
Who the hell says financial plan has to be a long and lengthy document. You won’t believe, but there are many softwares which financial planners use and all these softwares are in the race of 30-50-100 page financial plans. Even a lot of financial planners believe that longer the document they give to client, they can showcase the work done by them and all the “analysis” they did. They feel that can justify their “work-hours” put in the financial planning exercise and help them to charge more fees.
But, almost all the investors we have talked to till date are not looking for a lengthy plan; All they want to learn is how to get in control of their financial life. Lengthy documents just confuse the clients. After looking at number of pie charts and heavy graphs and complex calculation tables in the financial plan, investors get more frustrated.
Why not give a financial plan that the investor can own and implement, why not give a one page plan or may be something which is short and sweet. A short plan, which only has something which really matters to clients and makes it easy for them to understand their own financial lives.
We once gave an option to one of our clients – “Do you want a 15 page financial plan or a 1 page plan?”. He said, “I will be thankful if you can give me a 1 page plan”. And we gave him a one page plan, which was sufficient for him to take important actions in his financial life.
Now, you have a whole new perspective on how to look at financial planning and you also know how not to look at financial planning. Share what is it that stops you from getting a financial plan, what stopped you till date? Is it about your lack of understanding, lack of belief in financial planning or something else? Do share your views on today’s article, I have not been very active on writing articles but from now on I will see that I share my views from time to time.
- This article is written by Nandish Desai