3 Reasons Why My Financial Plan Feels Woefully Incomplete (And How To Fix It)
Find a guide who works across your investments, career, and lifestyle goals. Bonus points if they identify with your unique situation. Together, you can solve your personal wealth puzzle.
Your personal wealth puzzle has many pieces. Fit them all together to live your best life. Photo by Anthony Wade on Unsplash.
In the last ten years, attention spans have shrunk. Maxims and simple ideas dominate. See if these short rules of investing sound familiar: Dollar cost average. Keep costs low. Buy and hold. Max out your 401(k). Retire early.
Each is valuable. But combined, they can work against each other. For example, if your savings are stuck in a 401(k) and accessible at age 59 1/2, how are you supposed to retire early? This question struck me in 2020. My close friend recognized it last week!
Wealth building is complex and requires a comprehensive, integrated plan. And that is your destination (as well as this post’s destination).
But first, let’s discuss the traditional financial advisor. Why are they handicapped in helping you?
The problems with conventional financial plans
Your advisor’s financial plans are incomplete, cookie-cutter, and inflexible. They rely on conventional thinking and are often secretive.
The plan is incomplete
A typical financial plan centers on stock and bond investments. It misses other important pieces of your financial life.
Your job and ability to make money
Non-stock and bond investments like real estate or business
Post-retirement incomes like pensions, rental income, and gifts
Your living expenses
Heck, assume #3 exceeds #4. In that case, your financial advisor should recognize that stock and bond investing is irrelevant to you.
Susan is a client. Her Ameriprise advisor repeats, “You need to save more. You need to save more.” But her advisor misses an obvious truth. Susan does not have time to compound her way to a $3 million retirement portfolio. The conventional save-and-invest approach won’t work for her.
The calculator is inflexible and mysterious
Financial advisors use proprietary financial calculators to measure your retirement readiness. But they are complex yet narrow in use. (How is that possible?!) For example, these calculators dive deep into stock and bond investments but ignore post-retirement income.
Since it’s proprietary, each advisor’s calculator is a black box. You can’t check its calculations or make tweaks based on scenarios you’d like to test. The math must support your financial freedom plan. So a rigid, incomplete, black box calculator is a significant failure.
Michael is a client. He faced these calculator challenges when working with more than one financial advisor. He was so annoyed that he commissioned a software engineer to develop his own for $2,000.
The approach is too traditional
This problem hits home for me. I don’t lead a conventional life. I refuse to work 45 years to age 65 and then retire to a golf course. I like the Choosy Consultant* life. Work part of the year, then enjoy a mini-retirement the rest. Start a business. Travel. My life has far more variety, so traditional retirement planning doesn’t fit.
Furthermore, what if the key to my financial plan is earning more? Or building more flexibility into my life? The answer to both may be to start my own business. My financial advisor can’t help with that. This is not a dig at their skills; it’s simply not the financial advisor’s focus.
*Choosy Consultant defined: You’re independent and work on your terms… whenever, wherever, and for whomever you want.
Looking to a wealth planning case study for inspiration
Comprehensive plans fit together like puzzles. They have nuance and change often. But they point you toward life decisions that align with your values and financial goals.
Pia Silva is a small business strategist that I follow. She recently told the story of a gift she received from an ex-boyfriend. The gift was a pair of earrings…really ugly earrings: pink-hued, gold-plated and shaped like roses.
Pia’s very earnest ex-boyfriend described his attempt at this atrocious gift. “You love flowers, especially roses. I know you love gold over silver. And you wear a lot of pink. The earrings hit on everything!”
Each observation is true and would have produced a great standalone gift. But combined in a pair of earrings? Hideous. You see my point…everything needs to align. The puzzle pieces have to fit.
Here’s a real-life situation that a client is working through.
The wealth planning situation at hand
Michael and Morgan live in New Orleans. Michael is not working currently. Morgan has a consulting business which is slowing. They are savers and have built a $1 million portfolio, but their monthly savings rate is shrinking. They have two homes with mortgages, and insurance rates in Louisana are skyrocketing. They have two kids and aging parents. One parent has a large investment portfolio. What should they do to reach financial freedom as soon as possible?
Different solutions from individual perspectives
Imagine the couple seeking advice from various professionals. Here are five examples:
Financial advisor. Get Michael working again (with no instruction on how). Restore their monthly savings to $5,500 and increase investment in the advisor’s mutual funds.
Business coach. Advise Morgan to get more and better leads for her consulting services.
Fee-based retirement planner. Amplify savings in their respective 401(k)s and invest in Vanguard target date funds. Choose the best age to take social security.
Career coach. Help Michael with his interviewing skills to get a higher-paying job. Instruct him on salary negotiation.
Family therapist. Spend more time with their aging parents and deepen those relationships. Lean on each other to care for the kids. Don’t forget about date nights!
Smash these recommendations together, and you’ll have a pair of pink-hued, gold-plated, rose-shaped earrings.
So much and so varied advice. Where to start?
Finding the right comprehensive solution
We must look at the whole to guarantee we solve the right problems. In general, follow a three-step process.
Start with what is important in life
Consider different scenarios
See how the scenarios work out financially
In the case study example:
Start with what is important in life. Michael and Morgan agreed on what was important: “Enjoy family and friends, simplify life to regain control of it, and make money efficiently.”
Consider different scenarios. Given their values, they arrived at three life scenarios.
Earning a 10% return on $1 million is worth $100,000. This is more than the $66,000 the couple can save yearly, even with Michael working. It may be more valuable for Michael to develop his investment prowess.
A possible $3 million windfall from inheritance is huge. It’s more than the couple’s combined earnings for the rest of their careers. Maintaining a strong relationship with mom could bring emotional and financial benefits.
When a child leaves home for college, 90% of your time with them has passed. That’s an eye-opening statistic. Perhaps Morgan and Michael should work less over the next ten years while their kids grow up.
See how the scenarios work out financially. Next, the couple mapped out these scenarios and their combinations. They measured the financial impacts using a (very rare but good) wealth-building calculator.
Yes, there are many moving pieces. Yes, it takes time. And yes, your financial plan must respond to continual life changes. But only when you take an integrated approach will you see the right life path forward.
Is it possible to find good help, if you want it?
You can do this yourself. But having a guide can be helpful. The difficulty is in finding a generalist who also understands your unique situation.
You need a very personal, 100% comprehensive plan supported by math. Only then can you be sure you’re working toward the right goals. Then, your financial, professional, personal, and emotional puzzle pieces will fit together nicely.
At life’s inflection points, don’t default to finding that next job or client.
Your financial advisor, career/business coach, and therapist won’t work together on your behalf. You shouldn’t expect them to. The economics to do so aren’t there. You need someone to help you to prepare a plan that accounts for everything. Then, you can work with individual coaches to go deeper where necessary.
The problem is that this skill set is difficult to find. You need a generalist who can examine your career, investments, small business, retirement planning, and lifestyle. Ideally, they have experience with your specific life challenges. We need more of these types of services!
We should call these guides “personal wealth-puzzle solvers”.
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Brian Herriot solves wealth puzzles from his home in Alameda, California, and cabin in Hazelhurst, Wisconsin. He prepares financial freedom plans for consultants and other mid-career professionals in one-week sprints. Check out his take on a new and different kind of retirement at choosyconsultant.com.