I believe that ultimately financial planning is about helping people with providing insight in the realization of reaching their financial goals and to change their behavior for the better. Therefore, we need to use our left-brain capacities such as our knowledge, logical reasoning and analytics. These left-brain capacities are a financial planner’s most powerful skills.
However, to help our clients at best, I believe that we also need to use our right-brain capacities such as empathy, emotional intelligence and building rapport.
A roadmap to help people reach their goals is the financial plan.
A financial plan is a comprehensive analysis of people’s current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans. These will be used along with estimates of asset growth to determine if a person’s financial goals can be met in the future, or what steps need to be taken to ensure that they are. A financial plan is often made in conjunction with an accountant or tax professional.
To make a proper financial plan, the following questions are important:
- How many does a client wants to spend now and in the future?
- What is the goal with respect to the desired net assets?
- What’s the desired investment risk?
If people have a clear long-term goal, you help your client to reach this goal with proper tax solutions.
However, although saving tax is often mentioned as a goal. I believe this is never a goal but – just like investing – a way to reach the real goal of a client.