I was talking recently to someone who travels a lot. He is constantly flying for both work and pleasure. Some of the flights are local and others are all over the world. Since he is in airports so much he often talks to pilots. Something he has noticed over the years is the consistency of the answers to a couple of simple questions. First, he asks if they have flight plans. Second, he asks if they ever adjust flight plans once in the air. According to this informal survey every pilot but one has a flight plan (I’m a little concerned how the one who did not create a flight plan ever got a license). More interesting is that every pilot who created a flight plan told him the flight plan is always adjusted once they start flying.
I thought this sketch from Behavior Gap was perfect in this case. While I do not have a pilot’s license (although I have piloted a small plane before) the sketch and flight plan story reminded me of financial plans. My experience over the years has been that financial plans are good in the moment. However, they always change over time and must be continuously monitored and updated.
Heck, usually the day after I create a plan it is outdated. Obviously the values of investments change daily. Goals change, whether because ones are accomplished, they are dropped or new ones are added. Maybe there is a big change in a client’s life, like a job change, death of a loved one, sale or start of a business, or surprise addition to the family.
Getting from Point A to Point B on a financial plan is never a straight line. My job is not to defend an outdated plan. It is to help clients navigate a changing landscape. My value as a planner comes at the peaks and valleys of this route to get to your goals. The tops are easy times when we talk about taking some gains and rebalancing. The other end is where I earn my money because it comes with scary markets and life changes.
What’s more important than the plan are the course corrections we make while we work toward the goals. This is why I talk to my clients at least quarterly, but often more frequently. This is why we do formal meetings twice a year. Based on my experience, meeting a client once a year is nowhere near sufficient to make sure their financial plan is in order and any corrections are made. I am amazed how many people change their car’s oil every three months but don’t expect to meet with their financial advisor more than once every 12 months.
And this applies no matter what stage of life you are in. Whether you are a physician who has just completed his or her residency or someone who has been retired for years. Your life is constantly changing. Your financial plan needs to be updated to reflect these changes. Otherwise, your journey to Point B may be the most inefficient trip you have ever taken.
My final thought is to make sure your financial advisor is not charging you every time they update your financial plan. Any real financial advisor will include this as part of the service you are paying them for. And when I say “real financial advisor,” I mean the type of advisor you would refer your mother to. There is no reason an advisor who is already charging you 1% on a $1 million portfolio ($10,000 annual fee) charges you an additional fee for a financial plan. If they are, well, I would consider them a salesman and not a real financial advisor. Flying and finances are scary enough. Why would you do either without a well thought-out and updated plan that should be a core component of what you are paying for?
Dan Johnson CFP™ is the President and CCO of Forward Thinking Wealth Management, LLC, which is a flat-fee financial planning firm located in Akron, OH and set up to work virtually with clients across the country. He charges clients a flat fee of $4,800 regardless of asset size.
Contact Dan: [email protected] (330) 835-6205
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