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Planning: More than Just Investment Advice

Recently, a financial industry writer wrote that financial planning was really subsidiary to investment advice and that such advice is the most important thing. This came in the context of an article about how advisers charge for advice or planning and saw no real difference between planners and investment advisers.

The writer appears to have fallen into two typical mistakes we often see in writing: First, whatever someone else does is just not as important as what you do (planning is unimportant, investments are it) and second, it is how you grow your investments and not what you do with them that matters (if only investment advice matters, then it may well not be tied to the client’s actual goals).

Clearly, a client with a complicated financial situation likely will benefit from financial planning even if that client does not have much of anything to invest. If the client’s source of income and wealth lies in assets which an investment adviser cannot manage, that might make the client less appealing as such to the adviser, but won’t negate the need for true financial planning.

The planner in this situation might make suggestions as to what the client might do if there is a liquidity event that provides funds for investment or might suggest how that client invest an unmanaged retirement plan account (401(k)). Neither of those types of advice is essential to the financial plan nor would they defeat the charging of a planning fee by the adviser. Further, as any experienced adviser knows, clients may or may not follow the investment advice provided and that may or may not affect the financial planning done.       

Bottom line, the best situation for a client will be to have a real financial plan tied to investment advice. That “product” may be billed as a flat fee, as a retainer, based on managed assets or in some other format. A planner as adviser does not have to be tied to any one of these and choosing one approach over another does not make the service provided any less valuable. 

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