Who said ”financial planning is as dull as watching paint dry”?
I’m sure lots of people have actually said/thought that … and in many ways, financial planning done well is indeed a lot like the painting process.
I spent most of last weekend with a paint brush in one hand and a roller in the other and I had a lot of time to bemoan my utter loathing of anything ‘DIY’ whilst I cracked on and did what was necessary.
It occurred to me after I stepped back and examined the end result of my frustrating (and frankly downright painful at my age) labours, that financial planning is A LOT like painting a room …
You first have to admit the need to make a change; then you have to make some decisions about what you want to do and when you want to do it; then it’s time for organising your equipment (I have discovered that a telescopic pole to extend one’s roller is a MUST); and then it’s the big one … pick a day and just ‘start’ – the preparation is the slog … I was taught well by my father though – sugar soap the walls, fill any blemishes, do the cutting in – and most importantly (like a mantra!) “let the roller do the work”.
There are obstacles in the way, literally and metaphorically – the family dog kept wanting to ‘help’ and I slightly under-estimated my paint quantity requirements (spotting this before it became a problem; meant I only had to make a small adjustment to my plan and simply ended up using a slightly different shade on one wall).
The bulk of the time you are painting ceilings and walls, it is dull, unglamorous, tedious, painstaking and seems to go on forever. But … that moment when you know you are loading the roller for the last time … pure joy! Until you look back at what you’ve done and it looks patchy because it’s wet – which is totally normal but gut wrenchingly soul-destroying.
So you shuffle off to spend what feels like another lifetime cleaning paint out of the brushes, rollers, trays etc; you remove stray paint from your hair, your glasses and your elbow and you get cleaned up.
You avoid looking at the room for a good hour or two (read what it says on the paint tin) – and then you tentatively go back in and check … and lo and behold – it’s glorious. It’s a thing of beauty – you send pictures of it to your friends and tell them how wonderful it looks (they say the right things in response of course – but how excited can you get about a ceiling and four walls?!).
And you pat yourself on the back (rightly so – but gently because that aches too) – the preparation, the planning, the hard graft, the mental effort, the tedium, the waiting – all absolutely worth it.
The nature of a complex world is such that terms are used somewhat glibly to describe something. There are lots of roles, titles and descriptions that have altered or perhaps been extended or broadened over the years. Language is constantly changing.
There was a time when there were only two types of financial adviser, a Tied Agent or an Independent Financial Adviser (IFA). This role involved the selling and implementation of financial products. The distinction that IFAs made was that they were working on behalf of their client, selecting the best from the entire marketplace, whereas the Tied Agent sold whatever their company made available. Such simple, binary distinctions are long gone.
Today we have mortgage brokers, insurance brokers, credit brokers, financial advisers, IFAs, financial planners, wealth managers, financial coaches, lifestyle financial planners, restricted advisere and financial guidance and I am sure a lot more besides.
As with most sectors, financial services has evolved and professionalised. Definitions are sometimes left very vague, I might argue that this tends to benefit those that wish to obfuscate. One example being that of the term “restricted”. It isn’t beyond the imagination of most of us to appreciate that a restricted solution means, not able (or commercially unwilling) to consider the most appropriate solution from the entire market place. So it will serve those that are restricted to hide such a term deep in their literature, contrary to regulatory requirements.
Being independent doesn’t mean being a sole operator, it can, but in terms of financial services it means having access to the whole of the market of financial products and solutions. This places the adviser in the best place to select a suitable option for you. However it is still basically arranging stuff, which is fair enough, but not real planning.
Financial planning is helping you to clarify what you want your future to be and considering your current position, how to best achieve your goals, or recognise that they are not realistic. Products are very much last consideration. By way of illustration, suppose you have an ache, the medics don’t jump straight to heart surgery. Your issue may be small or life threatening, but there are obvious pertinent questions and analysis to be performed before deciding what needs to be done, by whom and with what “tools”.
A financial planner will create the opportunity for you to discuss your ambitions, your struggles with money and the reality of your present situation, without judgment, in may respects the adviser should be a “blank canvas” a term that Freud brought into consciousness. Once assessment has reached a sufficient point we can begin to build a plan, a model of your future income sources to support your lifestyle and spending choices. Nothing is “set in stone” everything can change, importantly a model is simply a version of the future (a simplistic one). It will be wrong, but the main point is to help clarify your goals, have a plan and review, review, review keeping you on track.
I might argue a better term for financial planning is planned spending, because is reality that is what a “lifestyle” really is. Your choices about what and how you spend.
Complexity arrives in the form of a changing landscape of investment markets, economic realities, geo-politics, taxation and law. This doesn’t dictate how you alter things, but how we shape the dance between them and your changing personal situation. None of us are the people we were at 18, but there are echoes. A planner, a proper one, will help you navigate your motives, desires and the realities of your choices, not simply arrange your pension or “manage the money” which to my mind misses the purpose behind it all.
The fact is that at the heart of this there are problems that are universal. Firstly, few if any of us wish to reduce our lifestyle, however you define it. Most people are not good at holding onto the money that they earn, inherit or win. Most of us are not good at discerning the cost of a lifestyle either now or in the future. It’s far easier for us to account for how we would spend an imaginary lottery win than how much it will cost us to live as we are for two, three or four decades once we are retired, or frankly what we spend each month now. We are all tempted by the illusion of get rich quick solutions, starting your own business, writing a best- selling book, setting up a social media account where the ‘likes’ are followed by pounds, or of course the next big one, cryptocurrency or whatever you fancy.
The truth is much harsher. It’s a long, slow process, full of setbacks as well as successes. As for advice from friends and family … well I don’t know them, actually scratch that, I do know some of them, you refer them to us … but suffice to say that qualified, regulated, impartial, non-judging, prudent, long-term, evidence-based, evidential advice is likely to be of greater value with no vested interest in whether you holiday in Bournemouth or the Bahamas; Charlton or Cuba.