The Art & Science of Financial Planning

By Ande Frazier
financial planning

In the last few years, we have seen the world of financial planning evolve and change. With the emergence of technology, robo advisers, and more information available to provide education, the choices people have with which to plan for their financial future are more diverse than ever before. When it comes to acting on your financial decisions, are you really getting what you need to make smart and effective choices for you and your family?

The practice of any financial discipline requires both art and science to achieve optimal results. An over-reliance on either one will likely result in a sub-standard outcome. Therefore, to be truly successful, one must use a balance of both art and science when identifying potential problems and solutions. Many financial decisions are based on emotion and belief, which can lead to ineffective results. One of the challenges to the “do it yourself” route, is that you may not have the knowledge or skill to discern when these emotions or beliefs are getting in the way of making good financial decisions. By working with a skilled financial advisor, you can look for them to use both art and science to explain how money works for you.

Think of the great Leonardo da Vinci. He is remembered as one of the greatest innovators in history because he used science to master and refine his art. All his masterpieces involved the perfect balance of the two. Financial planning requires the same type of focus. The science part might be obvious, but how does art play a part in successful financial planning? Art includes the ability to be creative when applying solutions to problems. There are many strategies that allow you to take advantage of the positive aspects of financial products, while eliminating the negative. The ability to be strategic means being willing to look at things from a different perspective….using creativity to solve problems.

Art also includes the ability to communicate in real-world language. Dealing with your finances and all the choices that abound, can be intimidating, even to the most astute. Don’t you want an adviser who takes the time to make sure you understand how all your decisions are working cohesively together to accomplish the result you desire? This includes a thorough explanation of all areas of your financial life such as Protection, Savings, Growth, Cash Flow and Debt. Many advisers only focus on a few of these, rather than all of them. Failure to look at all these areas will result in you not achieving success. Look for an adviser that speaks to you in terms you understand. Ask questions and don’t be afraid to get clarity on a decision before acting. It is up to you to know what is going on in your financial world.

The science behind financial planning should include applying economic principles in an unbiased and verifiable manner. Remember, most financial planning operates using a linear approach, but life doesn’t unfold that way. You may have to address many financial concerns all at once. Many baby boomers are dealing with educating their children, entering into retirement, and taking care of their parents all at once. This is where linear planning can be problematic.

In addition, we have to remember that if we use this linear approach to making decisions, we have to hope that all our assumptions play out as predicted. We all know that doesn’t happen.

By adding in the art, you can put yourself in a position to be agile when your original assumptions don’t go as planned. Having the flexibility to bob and weave when life throws you a punch is vital. When an adviser uses an artistic approach to solving problems, multiple issues can be solved at once. You feel more confident, secure, and knowledgeable about your financial life.