A good financial plan considers all factors

Most of us specialise nowadays so we can excel at a given topic, however when it comes to your personal financial plan, you need to ensure that you don’t let one factor (e.g. tax) outweigh other factors (such as investment risk) when considering your overall situation and establishing your comprehensive financial plan.

It’s why my financial planning process is holistic & comprehensive.

Comprehensive means including or dealing with all or nearly all elements or aspects of something.

Holistic is characterized by the belief that the parts of something are intimately interconnected and explicable only by reference to the whole.

In terms of your financial planning process, it means first and foremost consideration of your personal situation, beliefs and objectives, before tallying these with all aspects of your finances and coming up with a bespoke and personal strategy for maintaining and enhancing your prosperity.

My process for creating your comprehensive financial plan is as follows:

1. Understanding what you really want.
2. Assessing exactly what you have and why this is so.
3. Considering what factors apply to your situation and how they do so, what weight they should form in any decision and how they interact or intertwine with each other.

Some factors to consider would be tax, investment risk profile and capacity, return required, product charging, financial understanding, lifestyle, family, personal, life expectancy, income needs, cash flow, leaving a legacy, affordability etc.

At all times the focus should be on you and your overall strategy – the big picture.

A great way of understanding the importance of a holistic and comprehensive approach is to read the poem by John Godfrey Saxe, composed in 1872 and based a Hindoo Fable.

THE BLIND MEN AND THE ELEPHANT. A HINDOO FABLE.

i.

It was six men of Indostan

To learning much inclined,

Who went to see the Elephant

(Though all of them were blind),

That each by observation

Might satisfy his mind.

ii.

The First approached the Elephant,

And happening to fall

Against his broad and sturdy side,

At once began to bawl:

“God bless me! —But the Elephant

Is very like a wall!”

iii.

The Second, feeling of the tusk,

Cried:”Ho!—what have we here

So very round and smooth and sharp?

To me ‘t is mighty clear

This wonder of an Elephant

Is very like a spear!”

iv.

The Third approached the animal,

And happening to take

The squirming trunk within his hands,

Thus boldly up and spake:

“I see,” quoth he, “the Elephant

Is very like a snake!”

v.

The Fourth reached out his eager hand,

And felt about the knee.

“What most this wondrous beast is like

Is mighty plain,” quoth he;

“‘T is clear enough the Elephant

Is very like a tree!”

vi.

The Fifth, who chanced to touch the ear,

Said: “E’en the blindest man

Can tell what this resembles most;

Deny the fact who can,

This marvel of an Elephant

Is very like a fan!”

vii.

The Sixth no sooner had begun

About the beast to grope,

Than, seizing on the swinging tail

That fell within his scope,

“I see,” quoth he, “the Elephant

Is very like a rope!”

viii.

And so these men of Indostan

Disputed loud and long,

Each in his own opinion

Exceeding stiff and strong,

Though each was partly in the right,

And all were in the wrong!

moral.

So, oft in theologic wars

The disputants, I ween,

Rail on in utter ignorance

Of what each other mean,

And prate about an Elephant

Not one of them has seen! 

Application to your financial plan

Consider the professionals and people you may come across over the course of your personal financial lives.

Solicitor. Accountant. Financial Adviser. Mortgage Broker. Estate Agent. Bank Manager. Stockbroker etc.

Each one is extremely well versed in their subject matter, but do not tend to consider factors outside their area of expertise and remit – and nor should they.

However this specialised approach ensures that none of them know enough about your overall life and goals to be able to give you truly unbiased advice – their very specialisation tends to create an inherent bias towards the areas within which they are competent.

Their knowledge may have great depth, but it lacks sufficient breadth.

As an example, an accountant will think of the tax benefits of an investment, without due consideration and understanding of the risks involved. The tax advantages tend to blind an accountant to other factors that may well be more important than tax. The old saying ‘don’t let the tax tail wag the investment dog’ is still frequently forgotten.

The downside of my approach is that sometimes I could be viewed as being ‘a jack of all trades and a master of none’.

I’m unlikely to know all of the important details in each field, however what is important is that you can have someone you can trust to sit on your side of the table working with you, with no ulterior motive, or sales pressures.

I view this approach as akin to visiting your family GP (but you get a lot more time with me than 15 minutes!). He may not know every detail across the medical field. But he has a broad enough understanding, along with an overview of your own personal situation and history to ensure you go to the right people at the right time.

This means you can work with me alongside other professionals; I’m not directly in competition with any of them.

That being said I’m a stickler for saving money (must be my Scottish genes), so if I think you’re being overcharged elsewhere I will tell you, and if I think something can be simply done yourself without paying thousands of pounds in charges and fees, I will show you how.

Please remember when creating your comprehensive financial plan to always keep in mind the big picture and your objectives.

Be patient. Good financial planning takes time.

Don’t allow one factor to sway your thinking and take the time to consider all factors before reaching a decision for your future prosperity.