October is Financial Planning Month and it got me to thinking, what exactly does financial planning mean to me. What true value do I provide to clients and how do you quantify that? There’s a popular white paper by Vanguard (link here) showing a belief that an advisor can add over 3% in total return annually. They drew this conclusion by investigating 7 different modules, 6 of which I would describe as portfolio fundamentals, with the 7th revolving around “behavioral coaching.” Let’s take a deeper look at those and hang on till the end for my real answer.
There’s tangible value that can be added by how I build an investment portfolio. Utilizing investments that are lower cost to cover target areas of the market is the most obvious. Rebalancing a portfolio consistently can add significant alpha by taking advantage of underpriced areas of the market while keeping your risk profile on target. Portfolios that don’t adhere to this can experience drift and leave you exposed to additional risk you didn’t intend to take. Asset location is also important. 401k’s, IRA’s, ROTH, Brokerage all operate under different tax laws. Where I locate different assets within those, as well as where I take them from for income play a huge role in what you make and what you keep on an AFTER TAX basis.
More value can be added through Financial and Behavioral Coaching. My job is part advisor, part confidant. Every day you are bombarded with an incredible amount of information. Within a span of 2 years I’ve fielded phone calls that buying $GME was the only way to retire, then Bitcoin was going to the moon, now we are back to owning gold bars like it’s the 1800’s. Sometimes, having a real conversation, as it relates to your family plan, can bring a sense of relief that not everything is falling apart around you. Getting you properly set up with workplace benefits plays a large role in adding additional value to the plan. Proper deferral amounts and investment allocations in your 401K are very powerful. Helping you at open enrollment to utilize tax advantaged vehicles like HSA’s and FSA’s to maximize AFTER TAX income can also tax savings.
All of those areas bring legitimate value in my opinion (and Vanguard’s). But here’s what financial planning really means to me. How can I help you live the life you want to live? In my personal life I’m not driven by money. That may sound odd as a financial advisor, but my goal in life is to make enough money to do what I want to do, when I want to do it. What drives me is helping other people achieve that same sense of freedom. I laugh when I see examples on Twitter of “influencers” scolding people for spending $3 per day on their coffee…. ”If you saved that same $3 every day each month and compounded that over 30 years you would have blah, blah.” Well you know what? Wawa coffee is awesome. There’s a pretty good chance I’m stopping either in the morning or after lunch every day. It’s so much better than the hot coffee water my coffee maker makes at my house that serves as nothing more than a needed caffeine injection. So, if I feel like getting a 20 oz. Dark Roast, I’m doing it. If I’m feeling really crazy I might even throw in some French Vanilla creamer.
And here’s an even larger example. My family and I just booked a lake house in the Poconos for the summer. My sister was scoffing at the price of the house, which admittedly was a little pricey. You know why it’s so pricey? Because the house is sick, as the kids say. It’s on the water, has kayaks, paddleboards, a pedal boat and a game room. What’s it worth to see all my kids and my nieces out on the lake, fishing and paddleboarding together? What’s it worth to sit around the fire with my wife and my parents and my sister and brother-in-law? How great will it be when my son slams his Ping Pong paddle to the ground after I’ve beat him for the 15th game in a row? That’s worth infinity dollars. How’s that for financial planning? How about my Philly boy Dad losing to both of us in foosball and then quitting claiming he has a pulled calf muscle or something? Priceless. So putting my clients in a position to do things like that (the nice stuff and the competitive stuff!) is exactly what good financial planning means to me.
Maybe you don’t want the expensive lake house, and you want to save your $3 every day instead of the coffee. Cool. That’s my job then. Being a good financial planner means really understanding what a person wants, then putting a plan together to accomplish it. That’s why I love what I do. It’s not about what I want. It’s about what you want and the strategies I can figure out to get you there. So Happy Financial Planning Month. If you need me to find you a lake house or give you ping pong lessons you know where to find me.