As a financial planner, one of the most common questions I'm asked is: "What's the real value of financial advice?" It's an excellent question, and one that deserves a thoughtful answer. After all, if you're considering working with a wealth management firm like Oak Four, you want to be confident that the advice and strategies we provide will genuinely improve your financial outcomes.
The challenge in answering this question is that the value of financial planning isn't always easy to quantify. Unlike picking stocks or timing the market (which we don't advocate), many of the most impactful financial planning strategies don't show immediate results. Instead, their value compounds over time, often in ways that aren't immediately obvious.
The Multifaceted Nature of Financial Planning Value
When we evaluate financial planning strategies, we need to consider several different types of value:
1. Wealth Enhancement: Some strategies directly increase your wealth, such as tax-efficient investing or optimising your retirement contributions.
2. Risk Management: Other strategies might not increase your wealth but significantly reduce your financial risks. This includes proper insurance coverage and portfolio diversification.
3. Peace of Mind: Many clients find immense value in simply knowing they have a solid financial plan in place, even if it doesn't directly increase their wealth.
4. Behavioural Coaching: Perhaps the most significant (and hardest to measure) value comes from helping clients avoid common financial mistakes and stick to their long-term plans.
Measuring the Measurable
Some aspects of financial planning are relatively straightforward to quantify. For example:
- Tax Efficiency: We can calculate the tax savings from strategies like asset location (placing investments in the most tax-efficient accounts) or tax-loss harvesting.
- Cost Reduction: Lowering investment costs through the use of low-cost funds can have a significant impact over time.
The Challenge of Counterfactuals
However, many of the most impactful financial planning strategies are difficult to quantify because we can't know for certain what would have happened without the advice. This is known as the "compared to what" problem.
For instance, how do we measure the value of:
- Preventing a panic sell during a market downturn?
- Encouraging increased savings rates?
- Providing confidence that retirement spending is sustainable?
In these cases, we're comparing the outcome of our advice to a hypothetical alternative that never actually happened.
The True Value of Financial Planning
While it's important to try to quantify the value of financial planning where possible, we believe the true value often lies in areas that are harder to measure:
1. Clarity and Direction: A good financial plan provides a clear roadmap for your financial future, aligning your resources with your goals and values.
2. Confidence: Knowing that you're on track to meet your financial goals can reduce stress and allow you to focus on other aspects of your life.
3. Behavioural Management: A financial planner can help you avoid common pitfalls and stick to your long-term strategy, even when emotions might tempt you to deviate.
4. Time Savings: For many of our clients, the value of delegating complex financial tasks to a professional frees them to focus on their careers, families, or personal interests.
5. Holistic Approach: A comprehensive financial plan considers all aspects of your financial life, ensuring that different strategies work together cohesively.
Conclusion
While some aspects of financial planning can be quantified in pounds and pence, the full value of a well-crafted financial plan often exceeds what can be measured on a balance sheet. It's about creating a financial framework that supports your life goals, provides peace of mind, and helps you navigate the complexities of personal finance with confidence.
At Oak Four, we're committed to delivering value across all these dimensions. We believe that the true measure of our success is not just in the numbers, but in how well we help our clients achieve their unique vision of financial success.
If you'd like to explore how comprehensive financial planning could benefit you, we'd be delighted to have a conversation. Together, we can work towards creating a financial future that aligns with your goals and values.