Frequently financial planners refer to themselves as the quarterbacks of personal finance. This analogy has always annoyed me. This is why…
A Troublesome Analogy
Initially, I figured my distaste was with the idea of bro-dude planners wanting to think of themselves as sports heroes. That is certainly one reason for my irritation.
Let’s analyze the football analogy as I have heard it presented. (My knowledge of football is pretty limited so bear with me.) The financial planner is likened to the QB because they call the plays. They create the overall plan and have familiarity with the roles played by the other positions. They determine if it makes sense to hand-off the ball to the investments to run. Or, maybe they throw a pass to the insurance.
The Missing Element
However you frame the analogy, there is one important element missing. The client is always left on the sidelines. I believe the client is the MVP! (gag, gag, sorry…I couldn’t resist).
This analogy, which omits the role of the client, highlights the problem with much financial planning. Advisors choose a play out of the playbook and hope to stoke their own ego by scoring a touchdown. They are not looking at the individual, unique clients and hearing them say “I’d be happy with a few yards.”
Alternate Analogies
For a long time now I have been pondering alternate analogies. The best I can come up with is the financial planner as a tailor.
The tailor does not make the fabric. They rely upon the weaver for that. In my analogy, the accountant is the weaver and taxes are the fabric.
Taxes play an integral role in financial planning. The garment cannot be created without fabric, just as a financial plan cannot be created without knowledge of tax laws. The purpose of retirement accounts such as IRAs and 401ks is the tax benefits. Strategies regarding selling of assets, unwinding stock options, and claiming social security are all influenced by the tax ramifications.
The role of the tax preparer (accountant, CPA, EA) is to weave the nicest fabric possible, at that moment, given the supplies they have. Their purpose is to minimize current taxes and possibly those in the near future.
The attorney creates the pattern. They prepare legal documents, understanding the intricacies of the law and what is needed in an existing situations. But once the legal documents (or the pattern) is created, their job is done until/unless you request a new pattern.
Integration of Elements
Sewing requires lots of other tools: pins, needles, thread, etc. (My sewing knowledge is slightly better than my football knowledge but still not stellar). The tailor must know how to use these tools, as the planner must know how to use different tools of financial planning such as investment options, types of accounts, etc.
A tailor uses the pattern, the fabric, and the tools to create a garment. But, if they have not take their client’s measurements, then the garment is unlikely to fit.
The tailor must work with their client to uncover the client’s needs. Does the occasion call for a casual or formal outfit? What is the client’s personal style? Do they feel best in bright colors or neutrals? Pants or a dress?
Similarly, the role of a financial planner is to integrate many different elements of personal finance: investments, taxes, insurance, etc. Financial planners must truly understand the specific needs of their clients in order to integrate the clients goals with the rules, regulations, and logistics to create a meaningful plan.
Suitability is Imperative
The tailor, as the professional, may need to educate their client. If someone requests a winter coat made of muslin, the tailor would inform them that it is not a suitable fabric.
Similarly, a client savings for a purchase next year would be informed that investing in stock is not appropriate. But, it is not the tailors job to tell the customer that they do not need a coat, just as it is not the advisors job to decide what purchases are high priority for the client.
Fast Fashion and Quickie Plans
To take this analogy further, the financial advisory world is, sadly, full of fast fashion. Sweat shops are churning out poorly constructed garments that properly fit only a small portion of their customers. Their extractive practices may seem appealing at first glance but actually quite harmful.
There are a lot of individuals out there who use the title of financial planner but are actually product salespersons. They provide cookie-cutter free financial plans with the goal of selling a specific product such as insurance, annuities, or loaded mutual funds. Vehicles such as Roth IRAs, Annuities, and high yield savings accounts work very well for some people in some situations. But, they are frequently offered up as a universal, one-size-fits-all solution.
The job of the financial planner is to assist the client in selecting an appropriate fabric (investment vehicles and account structures), locating the correct pattern (estate plan), taking the clients measurements (suitability), listening to understand the clients taste (goals), and then using all of their tools to create a well fitting garment that is tailored for that specific customer.
Now that I have tried tailor on for size (pun intended), I believe I must continue my quest for a better analogy. If one comes to mind, please let me know! In the meantime, I will move forward confident in the knowledge that I am not the quarterback.