You Don’t Want a Project Financial Plan. Here’s Why.

You don’t want a project — aka one-time — financial plan. You don’t. Seriously. 

Some things just don’t work well as one-off purchases, and financial planning is definitely one of those things. And to be sure, let’s get on the same page about the thing I’m talking about here: actual financial planning.

Real financial planning isn’t a gimmicky sideshow to some investment or insurance broker’s sales pipeline. It’s not turnkey or cookie-cutter, and there isn’t any A.I. out there really doing any actual financial planning.

Real financial planning is the main event. It’s incredibly valuable, and anyone who’s been through a real financial planning process knows the value. And when it comes to the question, “Have you done real financial planning?” note that there are far more nos than yeses, unfortunately.

Real Financial Planning

To begin, if you want real financial planning, you should hire a fee-only financial planner who will give a fiduciary duty to you 100% of the time. Your financial planning should be highly personalized, and it should be the thing you do before making decisions, not after or along with them. A true financial plan starts with the planning — not with investment portfolio management or an insurance product purchase.

In other words, step one: Definitely stop buying permanent life insurance from that up and to the left mutual place because they throw in a “financial plan.” 

Even better yet, you should pay for your financial planning in simple dollar terms that you can easily understand. Lots of “financial planning” is paid for with some percentage formula that’s tied to some investment portfolio or insurance product. You start to wonder how things would work if the pharma companies paid for your doctor visits as long as you bought enough of their drugs.

Percentage of investment fees or insurance sales commissions paying for your financial planning represent a conflict of interest. Step two: Don’t pay for your financial planning this way unless you want most of your solutions to involve investment accounts managed by your advisor or some sort of Swiss army knife life insurance policy that somehow solves financial problems you didn’t even know you had.

When your advisor bases your “financial planning” on the amount of assets they manage for you, they can be incentivized to keep more of your money under their management. That can create a conflict of interest when the time comes for you to, say, move some of your assets outside of your advisor-managed investment portfolio to take advantage of another opportunity, like purchasing rental real estate. 

Which brings us to the third, final, and (possibly most) critically important part of vetting your fee-only financial planner who is actively limiting conflicts of interest …

Should you work with that financial planner on a project (i.e., a limited, one-time engagement) or on an ongoing basis? Easy … step three: Stop buying project or one-time financial planning. Invest in ongoing, comprehensive financial planning services.

Nurture and Grow

Imagine a financial plan like a garden. Would you plant the seeds and give them a season’s worth of water and fertilizer all at once? Sure, your garden will need water and fertilizer to grow. But to see the results you want, you must water and fertilize regularly and strategically. Even more so, you’ll need to prune and weed your garden eventually, but both make no sense to only do immediately after you plant the seeds.

Yet a project financial plan attempts to do all of the planting, watering, fertilizing, pruning, and weeding in one go. At the very least, this leaves you to figure out when and how to handle a majority of the maintenance and even when, why, where, and how you should plant new seeds — if your untended garden bears much fruit in the first place.

It’s reasonable to assume that the closed-end nature of a project financial plan will somehow save you money. One defined project, one defined cost, and you can close the books on financial planning … until one little thing or another comes up and changes much or all of the calculations and assumptions on which your financial plan is built. 

Do you take a guess about how to navigate that change? Re-up and start over with your financial planning project? Do something in between?

Life moves, priorities change, goals come and go. A static snapshot of your finances and how to make progress works well in a vacuum, and we do exactly that with any financial planning analysis. But when the reality of change occurs, you are better served with the ability to refresh that financial planning analysis, to recalibrate the strategy of meeting your financial goals, and to understand more completely how you’re progressing toward those goals. And if that change is pressing, you might not want to start fresh, having to work through the entire process all over again before receiving an educated recommendation on how to navigate the change.

That’s where a project financial plan falls short. It’s not able to do much or any of that educated advising — other than at the very first moment you receive it — and it just can’t help you if … no, when your variables and assumptions change. Stop buying it. Invest in the type of real financial planning that can help you turn goals into strategies, strategies into implementation steps, implementation steps into completed actions, and completed actions into peace of mind while the pros hold you accountable and handle the heavy lifting, end to end, from your investment portfolio to your tax return, year after year.

Stop buying project or one-time financial planning. Those plans go stale all too quickly. Invest in ongoing, comprehensive financial planning services from a team that understands your entire financial picture.