Financial planning is a critical aspect of securing one’s financial future. However, many might not realise that the conventional approach taught in certifications like the Certified Financial Planner (CFP) or Chartered Financial Planner (ChFP) only scratches the surface of true financial planning. This blog post explores the missing pieces in traditional financial planning and sheds light on what a proper financial planner truly offers.
1. The Invisible Solutions:
Traditional financial advisers often focus on gathering assets under management and selling products, inadvertently overlooking essential financial solutions. These “invisible solutions” encompass various strategies that can significantly impact one’s financial well-being. Examples include paying off debt, investing in non-financial assets like property or businesses, making charitable contributions, and indulging in luxurious expenses to meet life goals.
2. Asset Creation Strategies:
For the majority of the population, who aren’t wealthy, financial planning should revolve around asset creation. This involves converting intangible assets into tangible ones, observed in the form of cash flow. Cash flow management becomes the centrepiece of financial planning for 95% of the population who fall outside the purview of traditional financial advisors.
3. Intangible Assets – The Overlooked Gems:
Financial advisers often overlook intangible assets, which lack tangible value on a balance sheet but hold tremendous potential for wealth creation. London Business School classifies these intangible assets into productive, vitality, and transformational assets.
– Productive assets encompass reputation, professional connections, intellectual property, contracts, and more.
– Vitality assets impact well-being and longevity, such as having a purpose in life, supportive relationships, and a focus on physical and mental health.
– Transformational assets enable adaptability and flexibility in changing circumstances, achieved through diverse networks, continuous learning, and self-awareness.
4. Sustainable Livelihood: A Case Study:
A profound example illustrates the power of proper financial planning. Suppose an individual has lost their pension at the age of 60 to scammers and is overwhelmed with uncertainty about their future. Traditional financial planners may struggle to address this situation. However, a proper financial planner would focus on creating a sustainable livelihood.
– By identifying one’s productive assets, passions, and the market’s demands, an entrepreneurial opportunity can be leveraged to develop a sustainable livelihood.
– Once sufficient cash flow is achieved, surplus assets can be allocated to traditional financial assets for long-term savings and investments.
5. Beyond Financial Distribution:
Proper financial planning is not solely about distributing and selling financial assets. Instead, it emphasises delivering comprehensive financial plans that encompass a wide range of solutions. In cases where traditional financial assets are necessary, a financial planner can direct clients to appropriate platforms for self-arrangement or delegate wealth management to a suitable intermediary.
Conclusion:
Proper financial planning delves into the invisible solutions and intangible assets that often go overlooked in traditional financial advisory practices. By focusing on asset creation strategies and sustainable livelihoods, a proper financial planner can cater to the vast majority of the population and unlock the true potential of financial well-being. As financial circumstances and needs vary, embracing a more comprehensive approach becomes vital in ensuring a secure and prosperous financial future.
Academy of Life Planning 