My name is Tim, and welcome to the Financial LIFE Planning weekly!

Choose Your Own Adventure: A New Approach To Financial Planning

published3 months ago
8 min read

Financial planning, as a relatively new profession, has experienced a rapid pace of evolution. Initially, it began as an aggregation of previously segregated financial industry services—brokerage, banking, and insurance—but it took a major leap forward when the first class of Certified Financial Planner™ (CFP®) designation holders graduated in 1973.

The completion of this five-course curriculum marks a “textbook” approach to financial planning that has done the profession much good. But it has also done unintentional harm, because as is often the case in any established profession, the methods and mechanisms have a way of taking center stage, rather than those being served by them.

This week, we'll explore a new approach to financial planning as we also give thanks for the first green week of the market in three weeks and the first slate of NFL games in 6 months!.

In this FLiP weekly you'll find:

  • Financial LIFE Planning:
    • Choose Your Own Adventure
  • Quote O' The Week:
    • Pablo Picasso
  • Weekly Market Update:
    • Guessing Games

Financial LIFE Planning

A New Approach To Financial Planning

Have you ever experienced this notion of practice rising above the people it serves, and even with the most reputable professionals? Maybe it was an accountant whose techniques trampled over a more inquisitive approach to your tax return, an attorney who only seemed to have one tool in his toolbox, or even a doctor who seemed to see you only through her lens, rather than seeking to know and understand yours.

The Most Expensive Book I Ever Bought

I’ll never forget, after a period of dealing with chronic migraines for years, saving up enough money to go to an internationally-renowned specialist in Baltimore who didn’t accept insurance. In order to ensure I made the most of my visit, I read his best-selling book on migraine prevention cover-to-cover, dog-earing and highlighting every other page.

When I got to his office, I waited the compulsory 30 minutes beyond our scheduled appointment time, waited another 10 minutes after being seated in an exam room, and finally he entered, I on the edge of the paper-lined table. The first question he asked was, “So, did you read my book?”

He proceeded to outline its primary themes and recommend precisely the recommendations mentioned in the book, almost verbatim, all without really delving into when my headaches started or diagnosing why. I walked out a little shell-shocked, especially after writing a check for half of my mortgage at the time for a single visit that illuminated nothing more than the book I bought on Amazon for $9.99.

A New Approach To Financial Planning

Similarly, as financial planning has developed from theory to practice, the practice has often preempted the people it serves, resulting in a large number of financial plans across a diverse and eclectic range of clients that look surprisingly similar. It’s more convention than conversation, more template than tailored.

Yet there is a “new” approach (that actually finds its roots in the origins of the profession) that bucks convention and eschews templates. It has garnered several different labels, but it can be summarized as financial life planning. That word squeezed in between financial and planning is the key differentiator as it is also a reminder of the central theme of all the strategy and methodology—you, the client, and your life.

Financial life planning begins with an exploration of you—your present situation and circumstances as well as your hopes, dreams, fears, and concerns. Then it progresses to an articulation of your intentions and priorities in life that will then act as the guide through which all financial planning is done.

Choose Your Own Adventure

The end result is less a sculpture made in the image of your financial planner or even a paint-by-numbers illustration where you choose the colors. It’s a choose-your-own-adventure book with an unlimited number of possible outcomes.

As I began to practice this type of financial planning, about 10 years into my now 23-year career, I was given a glimpse of something remarkable: financial planning that was as unique as those it served. But even more, I began to see plans shift well beyond the clients’ own expectations.

Because our lives are typically moving at such a harried pace, it’s very rare that we have a conversation that is both life-based and intention-oriented. Sure, conversations about life will ensue over cocktails with friends, at family parties, or even during the commercials of the football games you’re watching this weekend. But most often, these conversations are largely superficial, and even when they do delve below the surface, rarely do these conversations have a trajectory that is designed to lead to genuine intention, much less action.

But through the practice of financial life planning, I’ve seen clients, many of whom had already checked most of the big financial planning boxes, change their financial plans quite dramatically once they did the work of more deliberately exploring life.

I’ve seen clients who expected to work for 10 more years retire—or change careers—almost immediately; clients who expected to stay planted in the same zip code for the rest of their lives chart a path for an adventurous move to a favorite destination (or move from their favorite destination to wherever their kids and grandkids lived to prioritize family); clients who dramatically changed their approach to charity or philanthropy; clients who expected to give their inheritance away at an unknown future death date plan a family meeting to discuss their hoped-for legacy while they are living; clients who wrote the book they’d been embarrassed to admit they’d always wanted to write; clients whose marriage was on the rocks due to financial disagreements saved by articulating for the first time their personal money stories.

Indeed, when the discussion begins with life before money, financial planning becomes vastly more interesting and meaningful, both for the client and the advisor. Yes, this process still involves everything in the textbook—investing, insurance, retirement, tax, and estate planning—but it takes on an entirely new form as a means, not an end.

Quote O' the Week

Pablo Picasso

Our goals can only be reached through a vehicle of a plan in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.

Weekly Market Update

Maybe a shorter work week was what the market needed. After three straight weeks of losses, we ended the past holiday-shortened week with three consecutive positive days.

  • + 3.65% .SPX (500 U.S. large companies)
  • + 3.70% IWD (U.S. large value companies)
  • + 4.06% IWM (U.S. small companies)
  • + 3.33% IWN (U.S. small value companies)
  • + 2.76% EFV (International value companies)
  • + 3.34% SCZ (International small companies)
  • - 0.66% VGIT (U.S. intermediate-term Treasury bonds)

Guessing Games

Contributed by John Marske, CFP®, a Notre Dame grad and generally good guy.

Needless to say, this market is playing a guessing game with the Fed. How much will the Fed need to raise rates? How effective will higher rates be in reducing inflation? And how deep a recession will the rate increases cause?

The market has been trying to answer these questions over the past six months, alternating between bullish and bearish. Within the last six months the S&P 500 has seen a 16% drop, then a 7% rally, followed by a 12% slide (hitting a low of 3,639 in June), a 17% surge (hitting a high of 4,307 in mid-August) and a 9% decline (falling back below 3,900). By the end of this week, the S&P 500 was back solidly above 4,000.

While the week ended well, it didn’t start out that way. After taking Monday off, the markets continued their slide on Tuesday. The tech-heavy NASDAQ index fell for the 7th straight day (down about 9% during that stretch), its longest losing streak since November 2016. The falling stock prices seemed to be in reaction to higher interest rates.

Higher mortgage rates were one reason weighing on market sentiment, with a conventional 30-year fixed rate mortgage rising to 6.25%. While the next Fed meeting doesn’t take place until September 20-21, other central banks were busy this week. Most notably, on Thursday, the European Central Bank announced a 75-basis point interest rate rise, taking its benchmark deposit rate to 0.75%. The bank also revised its inflation expectations upward — to an average of 8.1% in 2022 — and said it expects to hike rates further as “inflation remains far too high and is likely to stay above target for an extended period.”

The previous day, the Bank of Canada increased its key interest rate by 0.75%, its fifth rate increase this year, bringing its key rate to 3.25%. While a debate had been bubbling about whether this will be the last interest rate hike of the year, the Bank of Canada was clear that more increases may be needed.

It should be noted these rate increases were anticipated by the markets. On Wednesday, the Wall Street Journal reported that a 75-basis point hike at the upcoming Fed meeting is all but signed and delivered, but Federal Reserve Vice Chair Lael Brainard said that “at some point” there will be risks from overtightening, and the Fed’s Beige Book said the outlook for future economic growth remained “generally weak.”

Add that up, plus maybe some technical factors, and the S&P 500 stormed 1.8% higher, its best one-day performance in a month. The NASDAQ and Russell 2000 did even better, rising 2.14% and 2.16%, respectively.

US equities resumed their volatile trend on Thursday, rotating between gains and losses, but managed to extend Wednesday’s strong advance as the S&P 500 moved back above the 4,000 level.

We finished the trifecta on Friday. With the S&P 500 ending the day up 1.53%, while the NASDAQ and Russell 2000 were up 2.1% and 1.96%, respectively.

Next week comes the all-important monthly inflation reports, and the Fed meets the following week. While there are certainly signs inflation is easing, there are still those market participants who feel it will take time. The two main worries regarding inflation are:

  1. The shelter component of CPI makes up nearly a third of the index, and it tends to lag market prices by six to nine months. Since rents are still moving higher, it follows that the shelter component has some ways to rise.
  2. While oil prices have come down substantially since the beginning of the war in Ukraine, Russia continues to periodically cut off oil supplies to Europe. This has caused many to speculate the recent pullback in energy prices will be short-lived in the face of a potentially cold winter.

So fill up your gas tanks while prices are low, and enjoy the nice boost in equities this week. The CPI report is released next Tuesday. I suspect we might see lots of volatility on Monday. Please just remember that short-term market moves are all academic--it's the long-term dedication to investing that matters.

As you go about your Sunday, I hope that you'll take a moment to reflect on today's anniversary of 9/11. It was a day that impacted all of us, but some much more than others. Consider reaching out to one of those folks today with a word of encouragement.


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Oh, and BTW, The information in this article is for educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. That should really come from your financial advisor. I'm thrilled to work for Triad Financial Advisors, but what I write is my opinion, and not necessarily theirs.