Financial ‘Life’ Planning

I often explain financial planning to my clients as a science whose applications aren’t terribly difficult. It boils down to creating a savings and investment program within the framework of your income and assets. Discipline is undoubtedly the most difficult component to implementing one’s long-term financial plan. Further, the more emotion we can remove from the investment process, the better off we will be. Buying low and selling high is rarely what happens when emotion meets the stock market. Lately, however, emotion has taken on a different and more important purpose as the economy dips into recession and investors are witnessing an unprecedented amount of volatility.


Normally when a client calls in worried about his or her investment performance we have a discussion about staying the course and not worrying about short-term market volatility. However, the level of stress experienced by some clients over the past few months reveals at least two things: first that many clients do not understand what their actual tolerance for risk is; and second that ‘staying the course’ might not be the best advice. If a client is losing sleep over a struggling portfolio they may be better off taking some losses and going to cash for a little while. Money is obviously very important but heightened stress levels–especially when they are avoidable–are probably a bad idea. If you are worried enough that you’re checking stock prices for the first time in your life and obsessively watching CNBC, it may be a good time to re-analyze your risk tolerance. I’ve had multiple discussions with people over the past few months about getting out of the market for a few months, even at the expense of missing the first 10% or so of a market rebound. A surprisingly large number of clients are in favor of this arrangement because it allows them the comfort of knowing their money is stable at a time when the markets most certainly are not.
One underlying component of whether this ‘going to cash’ idea could work is considering the income needs of the client. For people who truly may never need all of their investable assets to live, the idea is very feasible. Even if an advisor is opposed to the idea, at least call your clients and explain that none of us can predict exactly when the market rebound will occur and they should plan around more uncertainty. Throw the ball in their court and get an honest reaction. Your clients will appreciate it and you can worry less about having angry and/or disappointed clients.
Along similar lines, Roy Diliberto wrote a feature in December’s issue of Financial Advisor magazine in which he urges advisors to consider whether they are money managers or financial advisors. He writes that money managers should feel less compassion and empathy with clients because their ‘clients’ are really the portfolios they manage and not the clients who invest in those portfolios. Financial advisors, particularly those who emphasize the planning side of the business, need to be more interactive with clients to determine how unusual market volatility may alter their financial plan. Money managers need to realize that gathering assets is what they do best and clients shouldn’t expect you to sit down and analyze their personal balance sheet if you never have in the past. They can pay another advisor an hourly fee for that sort of service.
Financial advising has tied itself into life planning now more than ever before. People need money to reach their long-term life goals. Good advice about saving and investing can save people a giant headache when they are older and less capable of generating an income. Be as open and honest as possible when speaking to your financial advisor. If you feel uncomfortable having that relationship with your advisors, consider finding someone who can truly appreciate your situation and give honest and objective feedback.
As always, questions and comments are welcome.
Russell Bailyn

Wealth Manager
Premier Financial Advisors, Inc
14 E 60th Street, #402
New York, NY 10022
P: 212-752-4343 *31
F: 212-752-7673
rbailyn@premieradvisors.net
Securities and certain investment advisory services offered through: First Allied Securities, Inc., a registered Broker/Dealer. Member: FINRA/SIPC. Premier Financial Advisors, Inc. is a Registered Investment Advisor. First Allied Securities & Premier Financial Advisors are not affiliated entities.

One thought on “Financial ‘Life’ Planning”

  1. I would go further than your comments. Although many investment managers might ptotest, money management has become a near-commodity service. What most people really need is an advisor that understands their particular dreams and aspirations and is capable of developing a nuanced financial plan that serves those goals. This is the essence of financial life planning. What I see is that clients are far more loyal and much better served if a capable advisor has developed a master plan and can tell clients at any time the funding status of each of their dreams and aspirations.

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