Three Steps To Heaven

At Forty Two we provide a service which is often referred to as Lifestyle Financial Planning. When I say that to most people they get a picture of some Californian hippie, hugging trees and smoking wacky backy while chanting some strange incantation or mantra. It’s not like that, honest!

I do now have a mantra which I have decided to adopt thanks to a presentation Richard Allum of Paraplan Plus and Moneyscope gave at the Institute of Financial Planning Scottish Conference recently, but more of that in a minute.

When I first meet someone new one of the first questions they often ask is “what is it you do then?” I always struggle with this. When I say “I’m a financial planner” the poor person who asked the question usually doesn’t know which way to turn and can’t run away fast enough. They often say something like “oh! I already have a pension” or “I’d don’t trust IFA’s” or some other variation that shows they don’t actually know what a Financial Planner does. Sometimes they just make the sign of a cross with their fingers and wave cloves of garlic in front of me. This isn’t their fault; it is a perception created over decades by the media and an industry of financial advisers who keep changing the name of what they do, without actually changing the service they provide. Do you remember when everyone was an Independent Financial Adviser? Then endowment mortgages got a bad name and the same people became Financial Consultants or Investment Consultants. Some are now Wealth Managers or Financial Planners but they are still providing the same basic service – the distribution of financial products.

So, my dilemma is, how do I tell people what I do in a few seconds (i.e. before they have fallen asleep) without causing them to reach a conclusion based on prejudice and previous experience of the financial services industry?

I have heard numerous marketing gurus say that you should never answer this question truthfully. They tell me that “whatever you do don’t say I’m a Financial Planner” or “I’m an IFA” or anything at all that might imply what it is I actually do.  No, instead I apparently need to make it sound interesting and exciting – make it sexy! I need to say something like “I help successful people, who are in the process of selling their enormously successful business for bucket loads of money, lead the life they have always wanted but never knew they could afford.” Alternatively I could just say “I’m in the peace of mind business” but that conjures up images of fat gangsters with violin cases. The answer is supposed to be vague enough that the person asking the question will have no idea what I actually do and will therefore, need to ask another question like, “how is it you do that then?” at which point I can launch into an explanation of what a real financial planner does without ever uttering the words Financial Planner and becoming a social pariah.

I have two problems with this approach;

  1. I am actually very proud to be a highly qualified professional Financial Planner who makes a real difference to the lives of my clients.
  2. I’m uncomfortable telling lies or even being liberal with the truth. It feels wrong and I just can’t get comfortable with a slick “elevator pitch” or sales sound bite.

I guess I’ll just have to find a better way to explain what a Financial Planner does before people switch off or run away.

The truth is we do help people live the life they want both now and in the future. We help people achieve their desired life if they can’t afford it yet; and we help them protect it if they are already financially independent. Financial Planning is as much about common sense and discipline as it is about clever financial strategies, tax planning or investment portfolios. There are actually only three steps to financial heaven. So my new mantra is;

  • Define It
  • Cost It
  • Fund It

Let me hear you chant it after me, Define it, Cost it, Fund it! Define it, Cost it………

Financial Planning in three easy steps; it’s not rocket science you know.

The problem is that most financial advisers start at step three (which they assume requires financial products) and miss steps one and two completely even though they are far more important.

If you don’t know what you want out of life how will you know if you have achieved it?

If you don’t know what your ideal life looks like, how will you know how much money you will need to live it?

Clearly defining your ideal life must be the first step in the process not an afterthought. You can’t build a castle without firm foundations.

Once you and your adviser know what you are aiming to achieve you need to work out how much this will cost and when it will be needed. Different objectives might need money at different times so the only way to know this is build a personal cashflow projection that takes account of your own personal income, spending, assets and liabilities, now and in the future.

Only after the cost of your desired lifestyle is known should you even begin to think about financial strategies to fund it. These strategies might involve regular saving for the future, investing a lump sum, repaying debt, changing your working life, working longer (or shorter) etc. Any lifestyle funding should also be stress tested to make sure that it is still affordable in the event of any disasters such as death, illness, loss of income (possibly redundancy) or an investment market crash.

Financial Planning is really pretty simple but that doesn’t mean it’s easy.

The first two questions in particular often need a trusted adviser to coach you and challenge your assumptions; to make sure you are being honest with yourself and help you deal with any compromises or trade-offs. The third question often requires someone to hold you accountable to the agreed strategy, to provide discipline and help maintain a long-term perspective among all the short-term “noise” of everyday life.

I can’t think of a better time than Financial Planning Week to take a step back and re-evaluate your ideal life then Define it, Cost it, Fund it. This is the real value of Financial Planning.

11 Responses to “Three Steps To Heaven”

  1. Pensions, Investments and Heinz Baked Beans | FortyTwo

    […] my last blog Three Steps To Heaven I outlined my three simple steps to successful Financial Planning – Define It, Cost It, Fund […]

  2. Paul Claireaux (@pclaireaux)

    Hi Alan,
    Nice 3 point process but i wonder if we need to add in “dream” “cost” “wake up” to the front end?


    • Alan Dick CFP

      Alan Dick CFP

      Thanks Paul.

      That would be an interesting process. The “wake up” stage is an important part of good financial planning. It is true that not everyone can achieve the dreams they would like in terms of an “ideal” life. We may want our own Carribbean island and a private Learjet to get there but sooner or later we have to face up to facts. If circumstances improve due to better than expected career development or investment returns then the plan should be flexible enough to be updated accordingly. However, a good plan can help to set realistic parameters and manage expectations from very early on in the process.

  3. Income protection cover

    In my opinion, You should aware about insurance policies like to protect your income you can buy income protection insurance and to secure your loved ones in terms of finance after your death, you should buy life insurance.

    • Alan Dick CFP

      Alan Dick CFP

      I totally agree there is no point in planning an ideal life plan which works as long as everything is rosey but fails completely at the first sign of a problem. That is why I say in the article that it is essential to “stress test” any financial plan to ensure that you (and your family) would still be able to lead the desired lifestyle in the event of a disaster such as illness, disability or even death. However, it is important be clear that the financial plan should come first as this will clarify exactly which types of cover are required and the level of cover required. Someone with no debts and no dependents doesn’t have much of a need for life cover but probably has a need for critical illness and income protection. On the other hand, someone with a dependent family and mortgage, and/or other debts, definitely needs life assurance. In actual fact, a proper financial plan often reveals that clients need far higher levels of protection than they might think. The big mistake that is often made is to start with the sale of a financial product without proper consideration of the context and client specific need.

  4. Stephen Rosling

    How about..”I help people plan their finances”

    Honest; you do what you say; simple.

  5. Jonathan Gibson

    What a great tag-line for your business Alan…



  6. Peter Christy

    I’m already chanting it…



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