Financial Planning - A Broken Model

If you make your living providing financial planning services for people, it is likely that your professional-and well-intentioned-advice cost your clients hundreds of thousands if not millions of dollars last year. With typical investment strategies down anywhere from 30% to 60% as the global economic crisis unfolds, financial professionals everywhere are questioning the validity of their approach.

Of course, one might argue that these people weren't to blame for the economic morass that we're in, but your clients may not see it that way. They, in good faith, entrusted professional advisors with their hard-earned dollars, with the expectation that they would receive help and advice to preserve the wealth, and build more. When the opposite happened, who else could they blame?

The reality of course is that just about everybody got caught flat-footed when it came to the true severity of the current financial problem. In fact, traditional the wealth building strategies and the tools we use for wealth preservation-all based on financial instruments tied to the global economy-no longer work. Another interesting statistic is that despite the efforts of the financial planning community, less than 3% of the population has a written financial plan. Clearly it is time for financial professionals to rethink how they provide advice and services to their clients. And it's time for those clients to rethink what services and advice they really need.

The proper approach should be for financial planners to help people help themselves. The solution is a financial education that has no product bias or agenda vis a vis the typical conflict of interest and that is not designed to steer a prospect to products or services that make the advisor the most money. Everyone should have an education that will teach them how to arrive at objective strategies to help overcome financial obstacles and reach their future financial goals by themselves.

A financial planner who really wants to make a difference-while making substantially more money in the process-should show clients and prospects how to obtain this kind of unbiased financial advice. Clients should understand how to implement objective recommendations while avoiding middlemen in the process. At the same, consumers should be able to gain this knowledge independently of their advisors.

A consumer with a sound financial education will be able to create their own financial plan, and will therefore become responsible for it. The financial planner should help the client to implement and execute the plan, perhaps making suggestions for it, but should not assume total responsibility. For those seeking help with financial stress, the solution is to get a financial education, and to create their own financial security.