28 April 2020

The different roles a financial planner plays

What are people paying for when they seek out a financial planner? What are the key roles of a financial planner and which aspects of this relationship add value? The real answers to those questions may surprise you.

Typically, financial planners say they provide advice on cash flow analysis, asset allocation, investment and retirement planning, insurance, wealth preservation, estate planning and so on.

But is that really the main benefit they deliver to consumers? You may want to think about this differently. For example, when you seek out a car mechanic, what are you paying for? Brake and transmission diagnosis and repair? Auto-electrical maintenance? Collision repair? Cooling systems replacement?

What most people want from automotive services is a car that gets them safely, reliably and efficiently from Point A to Point B. They want the car serviced in good time, they want a fair estimate of what it will cost, an itemised bill and a guarantee on parts and repairs.

Likewise, the value of a good financial planner – at least in the eyes of most clients – will often differ from the advertised services. To be sure, asset allocation and portfolio advice are important components, but these are just means to desired ends.

What people are paying for, in the final analysis, is guidance to a goal, peace of mind, a sense of security, a feeling that someone has their back and an assurance that they will be okay whatever the world throws at them. Furthermore, people value a sense of structure about their financial lives and an understanding of the choices at their disposal.

The technical tools that a financial planner employs – an understanding of what drives returns, the role of diversification, a knowledge of the tax system, the techniques in rebalancing portfolios – are without doubt critical components in delivering those desired outcomes. But they are only a part of what people are paying for.

In fact, a sound financial planner will play several pivotal roles for their clients, none of which are on the typical job description. Here are seven of them:

  1. A guide – Most people know what they want or, at least, know what they don’t want out of life. What’s often missing is a sense of how they can get there. A planner provides an independent plan, showing possible pathways and the trade-offs involved in each.
  2. A teacher – Many people’s sense of what drives returns comes from the day-to-day noise in financial media. It is all about product and short-term returns. A good planner shows the client what drives long-term returns and connects this to their lives.
  3. A coach – It is easy to make financial resolutions – to save more, to spend less, to grow wealth, to leave a legacy. It is not so easy keeping them. A financial planner at his best will ensure goal accountability, keeping the client on their desired path and talking them off the ledge in anxious times.
  4. An organiser – Our lives are busy. Jobs and family commitments leave little time for dealing with the minutiae of cash flow analysis, portfolio management and rebalancing, insurance and so on. A good adviser takes care of this complexity and frees you to focus on what really matters to you.
  5. A filter – The problem with the world right now is not a lack of information. We are overloaded with the stuff. The challenge is finding the right information for us in a form we can digest. The right adviser becomes a trusted source and an information filter.
  6. A counsellor – Few big choices in life are simple. There are always competing imperatives. Planners who can help you cut through the material stuff to your underlying values are worth their weight in gold. Yes, this is your life. But you still need someone outside your circle who can keep you focused on your goals so you can be true to yourself.
  7. A sentinel – The best financial planners are not only looking at your circumstances as they are today, but what might be coming over the horizon to change all that. And they are mindful of your legacy – the welfare of future generations and how your wealth can keep working beyond your lifetime.

These seven roles are not exhaustive by any means. There are many others, but this gives you an idea of the depth and breadth of services a good financial planner will provide.

Again, to use our car mechanic metaphor, a financial planner is not simply trying to fix your car but is looking to ensure you and your family reach your desired destination safely and reliably while enjoying the journey along the way.

That is where the value lies.


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