What is a Financial Planner for?

One view is that we have unique insights into market direction that give our clients an advantage.  But of the many roles a financial planner should play, crystal ball gazing is not one of them.

The truth is that no-one knows what will happen next in investment markets.  And if anyone really did have a working crystal ball, it is unlikely they would be plying their trade as an advisor, a broker, an analyst or a financial journalist they would be on the beach sipping cocktails all day!

Many people still think a financial planner’s role is to deliver them market-beating returns year after year.  Generally, those are the same people who believe good advice equates to making accurate forecasts.  And what did Warren Buffet say about forecasters in one the Berkshire Hathaway annual reports?……The only role of stock forecasters is to make fortune-tellers look good!

But in reality, the value a professional advisor brings is not dependent on the state of markets. Indeed, their value can be even more evident when volatility, and emotions, are running high.

The best of this new breed play multiple and nuanced roles with their clients, beginning with the needs, risk appetites and circumstances of each individual and irrespective of what is going on in the world.

None of these roles involves making forecasts about markets or economies. Instead, the roles combine technical expertise with an understanding of how money issues intersect with the rest of people’s complex lives.

Indeed, there are at least seven hats a financial planner can wear to help clients without ever once having to look into a crystal ball:

1. The Expert

Now, more than ever, investors need financial planners who can provide client-centred expertise in assessing the state of their finances and developing risk-aware strategies to help them meet their goals.

2. The Independent Voice

The global financial turmoil of recent years demonstrated the value of an independent and objective voice in a world full of product pushers and salespeople.

3. The Listener

The emotions triggered by financial uncertainty are real.  A good financial planner will listen to clients’ fears, tease out the issues driving those feelings and provide practical long-term answers.

4. The Teacher

Getting beyond the fear-and-flight phase often is just a matter of teaching investors about risk and return, diversification, the role of asset allocation and the virtue of discipline.

5. The Architect

Once these lessons are understood, the financial planner becomes an architect, building a long-term wealth management strategy that matches each person’s risk appetites and lifetime goals.

6. The Coach

Even when the strategy is in place, doubts and fears inevitably will arise.  The financial planner at this point becomes a coach, reinforcing first principles and keeping the client on track.

7. The Guardian

Beyond these experiences is a long-term role for the financial planner as a kind of lighthouse keeper, scanning the horizon for issues that may affect the client and keeping them informed.

These are just seven valuable roles an advisor can play in understanding and responding to clients’ whole-of-life needs that are a world away from the old notions of selling product off the shelf or making forecasts.

For instance, a person may first seek out an advisor purely because of their role as an expert.  But once those credentials are established, the main value of the advisor in the client’s eyes may be as an independent voice.  Knowing the advisor is independent and not plugging product, can lead the client to trust the advisor as a listener or a sounding board, as someone to whom they can share their greatest hopes and fears.

From this point, the listener can become the teacher, the architect, the coach and ultimately the guardian.  Just as people’s needs and circumstances change over time, so the nature of the advice service evolves.

These are all valuable roles in their own right and none is dependent on forces outside the control of the advisor or client, such as the state of the investment markets or the point of the economic cycle.  However you characterise these various roles, good financial advice ultimately is defined by the patient building of a long-term relationship founded on the values of trust and independence and knowledge of each individual.

Now, how can you put a price on that?

Lance Baron

Certified Financial Planner (CFP) based in East Sussex, UK. We support people in Southeast England with more than £500K to invest by building a financial plan that will help them live the life they want… until age 100