The Financial Planning Gap

February 1, 2011

Undertaking a process of financial planning is rarely a front-of-mind activity, nor one that many people approach with excitement or anticipation. As important as it may be to identify, assess and prioritize a list of financial objectives, the process can be a difficult and emotional one. And although the results of the process almost always provide a high degree of confidence about retirement planning and goal achievement, a large segment of pre-retirees simply haven’t bothered.

A recent study by the Society of Actuaries (how’s that for a place to take the kid’s on a Sunday afternoon) concluded in a recent survey that nearly half of baby boomers have no financial plans in place in case they live longer than expected.

So what accounts for this gap?

One reason could be the cost of financial planning. With many advisors charging between $1,000 and $3,000 to put together a comprehensive financial plan, it can be cost-prohibitive, although the cost of planning often pays for itself in the first year alone, in a variety of ways.

Another issue is the negative past experiences people have had with financial service providers. This typically has to do with high commissions sales reps, or with brokers who steered their clients into bad investments and never communicated effectively with them about their goals.

A third possibility is the fact that many people have not taken the time to explore their most important goals, many of which are directly connected to their savings and income.

Finally, I suspect that plain old procrastination is the primary culprit. Frequently a new engagement begins with the client telling me just how long financial planning has been on “the back burner” for them. Money can be a confusing, complicated and emotionally-charged subject, and for many it is easy to simply not face it. (“If I don’t go to the doctor, I won’t know what ails me.”)

In any of these cases, finding the right financial planner to work with and communicating clearly about what you want out of the process can go a long way toward helping you achieve your most important financial and life goals. Indeed, it is the number one responsibility of financial advisors to help their clients discover what these goals are.

My experience has been that once people are aware of their financial goals they become very interested in them, and once that happens, they are no longer resistant toward planning for their ultimate fruition .

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One Response to “The Financial Planning Gap”

  1. Zambonesman Says:

    liked the humorous line about actuaries… plus, i just downgraded from smart phone to dumb old style phone and i’ll be saving about 50 buck a month- and got the phone for free! saving money is sexy!


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