Financial planning sounds like something that is constraining. It goes against things like living in the moment and being opportunistic. Some throw up at the word budget. This has no reflection on income as those with seven figure plus incomes can be as guilty as those with far less. Unfortunately, far too many facing retirement today are saying I wish that I had thought about this sooner.
Wealth Management and Behavioral Finance
Wealth Management is typically associated with investment management, asset protection, tax planning and estate planning. I find that as a practical matter it involves managing the client’s minds. Meir Statman, noted behavioral economist, cites three relationships we have with money: utilitarian (functional), emotional and self-expressive. An example of all three, one may finance the purchase of a car made by a luxury brand so they won’t feel less of a person because all of their friends have luxury makes. This purchase may get them off track of a budget meant to see them not destitute when they retire. However, feeding the emotion and self-expression is a more immediate need.
Balancing Financial Planning with Short Term Indulgences
I find that many client’s often frame their financial decisions too small. Rather than discuss everything that makes them tick, they leave out key details, like the need or desire for a car. Suddenly that need collides with the agreed upon plan. Had they identified the need for the car and been able to talk out their luxury desires, trade-offs could have been worked through prior this irrevocable decision. Working five more years might be fine to have the car now rather than later. However, that might have been far worse, especially in light of personal mental or physical health issues. Possibly a smaller version of the luxury car with more “cute features would have fed the self-expressive need and their related emotions.
Financial Emotions, Brand Names and Financial Advisor Credentials
Picking a financial advisor, wealth advisor or wealth coach (we are known by many terms) shouldn’t be based on emotion and self-expression. Your choice should be based on finding someone that understands how your emotions and self-expressive needs positively and negatively impact your decision. I have talked to many prospects, who tell me the brand name of the firm that their advisor works for, rather than tell me the name of the advisor. Somehow that should tell me how good that advisor is by the association to that brand. First, every firm potentially has their own Bernie Madoff amongst them. Second, man advisors are incentivized to be “asset gatherers” for their firms. Unfortunately, there is no J. D. Power judging the quality of their financial planning and wealth advice.
Chicago Financial Advisor, Wealth Advisor and Wealth Coach
I recommend finding an advisor based on credentials such as CERTIFIED FINANCIAL PLANNER™, Chartered Retirement Planning Counselor and Accredited Investment Fiduciary rather than brand affiliation. Also, ask them if they are required by law to work in your best interest? They should say yes.
Once you have, talk to them about how they get to know you and what matters to you. Your values, desires and fears. This may require a test drive as you can’t find out everything immediately. Then you have found someone that understands, your utilitarian, self-expressive and emotional relationships with money. Now they will have the information to help keep you on track through the certainty of financial uncertainty.
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