Do you know how much you are worth on paper? If I asked you to write down the value of all of your financial assets (bank accounts, retirement accounts, investments, etc), do you think you could do it accurately?
My guess is that people like you and me generally have an idea of what that number is. People like us are already pretty responsible with money, we might already have the tools for tracking wealth, and we are bombarded with this information via statements, apps, etc. all the time.
Most people like us also know how much we earn, what our mortgage payment is, how much we owe in loans, and some of the other financial numbers that are part of our daily lives. We know the cost of various things like houses, cars, and food. We know what the expense of a Florida vacation is, and we have some pretty good guesses about the high prices of colleges and weddings. It’s not the lack of information that makes financial planning a puzzle. All the info is right there, just waiting for you pay up.
Of course, the fact that information is readily accessible is true about a lot of things. I know how airplanes stay aloft. I generally comprehend how a nuclear power plant works. I think I understand why people like country music (I don’t like country music, but I think I get it!). Knowing facts doesn’t necessarily give us the skill or wisdom to use the facts.
Unlike piloting an airplane, running a nuclear plant, or writing a country song, financial planning is one of those things that a person can do for herself without specialized training. All of the tools I use and the knowledge I have are publicly available for little cost and are easy to access. There isn’t one thing I do for clients that they could not do for themselves with enough motivation.
So why have I been able to build a practice and make a career by doing something that people can do on their own for a relatively small cost?
The answer is diligence.
Why diligence? Well, it’s obvious that CFP® professionals should know what they are doing, that they should act in the best interest of the client at all times, that they should do so to the best of their abilities and do it in a way that they know gets the best results. Diligence sets all of that apart. My job is, quite literally, to get a person to do what he already knows he should do, but doesn’t always do. I must diligently do the things that must be done for my clients. They pay me to make sure the critical things get done.
Some of us hire personal trainers. We pay professionals to paint our houses or landscape our gardens. I went to Peru to hike the Inca trail; plenty of maps were available, but we hired a guide. My wife and daughter have hired a wedding planner for my daughter’s wedding. (I initially thought this was ridiculous, but it turned out to be, for them, a real asset.) (Ok, I’m still complaining about the cost, but I get it…). We hire these people to do important things for us because we think the cost is worth the benefits we get: time saved, expertise, avoidance of mistakes, money saved in the long run…diligence.
In March, the CFP® Board approved a new “Code of Ethics and Standards of Conduct” for Certified Financial Planner™ professionals that now has 15 “Duties Owed to Clients”. These duties lay out explicitly what a CFP® professional owes to his clients. The fourth duty listed (after Fiduciary Duty, Integrity, and Competence) is “Diligence”. I think it’s the most important. Dilligence is what separates a CFP® professional not only from other financial professionals, but also from the do-it-yourselfer.
I keep people focused on saving money to achieve goals. I help them take the emotion out of monetary decisions. I help them create these important goals and remind them later why they made those goals. I keep them from making short-sighted or disastrous decisions. I make sure they invest in ways that are boring, consistent and, ultimately, the keys to success. I help them, once they are retired, spend the money they’ve saved instead of worshiping it! I am the cheerleader and the scold. I am the bad cop or the good cop, depending on what’s needed. I help people be fearful when others are greedy, and greedy when others are fearful.
Why don’t clients do this on their own? Well, hey, I mow my own lawn but I don’t do my own plumbing. I’ll paint a bedroom but have no interest in fixing my car. I’d rather play golf badly than learn how to cook. We all make decisions about what we do and don’t want to spend our time (and money!) learning and doing. My career exists for those people who know that financial planning needs to get done in a diligent, professional manner but who don’t want to do it on their own.
Now I’ve got to get back to writing that great country song. I’ve got to remember to include a pickup truck, a keg of beer, a riverbank at night, and maybe a broken heart or a wagon wheel…