Most people agree that a financial plan can provide peace of mind seeing a carefully drafted path to help them achieve their goals. Virtually every aspect of their financial life is reviewed and recommendations provided seeking to help maximize the return on their investments at their acceptable risk level, reduce risk exposure of their lives and assets, and reduce exposure to undue taxation. A completed financial plan can provide significant reassurance, but getting the plan to completion can be quite challenging. We will discuss some of the most common roadblocks and how to best overcome them.
- The dreaded financial planning questionnaire
It’s not unusual for financial advisors to experience a client who is highly motivated to retain the advisor to draft a comprehensive financial plan. After signing a planning contract and receiving the required disclosures, the advisor provides the client with an extensive questionnaire. Typically, this type of questionnaire seeks both quantitative and qualitative information about the client. Quantitative information includes family and other personal data, assets owned, debts and other items that usually appear on the client’s balance sheet – and is usually the easiest information to gather.
Qualitative information, on the other hand, includes the client’s financial and personal goals, timing of achieving those goals, and other topics such as guardianship of minor children in the event of the parents’ premature death. Needless to say, this information is far more challenging to gather because it deals with feelings, values and emotions, and can be the number one deterrent to completing the financial planning process.
- Marital disagreement
Because this process is extremely personal, some topics addressed may bring up issues on which the couple does not agree. For example, determining guardianship of minor children should the couple pass away together can be a serious hot button issue. This is a critical aspect of the couple’s estate planning which is an extremely important part of the overall financial planning process. Additionally, determining custodianship of assets left for the benefit of the children can create the same type of hot button issue.
- Disorganization
One of the many benefits of the financial planning process is becoming very organized with regard to assets, documents, etc. But in order to complete the planning questionnaire, there must already be some degree of organization. When the clients don’t know what assets they have or where to locate them, the planning process comes to a stop. Getting an understanding of what assets and liabilities are involved is a critical beginning step towards plan completion.
- The solution
One way to help avoid the financial planning process from stalling at the questionnaire is to first meet with the financial advisor and discuss the planning process and what it entails, especially the qualitative data that will be needed. This provides the client with the time to make many decisions about their future before beginning the financial planning process. This can help prevent delays in completing the financial planning process.