We have often said that the traditional financial planning model is broken. Interestingly, the old traditional model has become the source of many problems for people seeking investment advice. Although people naturally seek out a planner to assist with their financial affairs, we find that the heart of the planning problem lies in the way that the planning is carried out.
For starters, financial planning or the development of a financial plan is very often used as a sales or marketing tool to sell a firm’s financial products. And of course, the sale of these financial products produces a commission on the plan’s recommendations.
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Unfortunately, the investor rarely knows whether or not the plan’s recommendations are in their best interest or in the best interest of the planner and his/her firm. In addition, the majority of planners work for a brokerage firm or insurance company, and don’t really work directly for the client. In this case the brokerage firm or insurance company actually controls what products the planner can recommend to clients.
Next, the traditional planning model does very little to educate investors and help them deal with the instincts and emotions that are at the root of a poor investment experience. Almost no effort is given to help clients learn how markets work and how to achieve true peace of mind when investing.