Financial Planning for Life

If the term "financial planners" evokes visions of equities and equity mutual funds - selected to implement financial plans they developed for clients in accordance with their investment goals and tolerance for investment risk - it should not be surprising.

Equity Ownership in America, 2005, a study recently released by the Investment Company Institute and the Securities Industry Association, found that more than 75 percent of the millions who own equities and equity funds outside employer plans bought them through financial planners and other professional financial advisers.

But financial plans leading to ownership of portfolios of equities and equity funds are hardly planners' only services. They not only have delved increasingly into areas beyond investment advice, they also have met clients' needs for more of their life goals, giving rise to the concept of financial life planning.

Some may think that financial planning is a one dimensional process involving technical skills, such as Monte Carlo projections, retirement income calculations, investment analyses and asset allocation. But with financial life planning, planners may ask questions like, "If you could live your 'ideal calendar,' what activities would be on that calendar?" Questions like this get more to the heart of really good financial planning and its natural extension 'life planning.'

The underlying premise is self-evident: people have different goals during different stages of their lives and may not have the confidence - or the necessary time - to deal with them on their own. Life planning is also about raising a person's awareness of the things they do daily, which they may do automatically, which really should involve choices. By helping people think outside the box of their daily assumptions and helping them identify choices, life planning helps them get more from their financial resources. The roles of financial life planners, as they see them, are essentially to help clients to do at least four things:

The number of stages into which clients' lives are divided will, of course, vary based on a number of factors such as the ages at which plans are initiated, the paths which careers take, and the career vs. leisure activity decisions made along the way.

A few examples will illustrate the types of life stages that people experience and the types of goals associated with them:

Start of Career:


Mid to Late Careers:

End of Careers:

These are just a few of the functions performed in financial life planning. A financial life planner will explore much more deeply with his or her clients those personal characteristics that influence their financial choices, including fears, dreams, family circumstances, work-life balance, values and volunteer commitments.

Once the financial life planner has explored the above (and more), a financial plan can be designed within the context of life stages that reflects what is most meaningful in the client's life and how they define true wealth.

December 2005 - This column is produced by the Financial Planning Association, a membership organization for the financial planning community, and is provided by Terry Green, CFP, AIF, a local member of the FPA.