Tuesday, December 22, 2015

"....Planners & Clients Kill Personal Financial Plans & Goals"

Personal Financial Planning Software Doesn’t Kill Personal Financial Plans & Objectives; Planners & Clients Kill Personal Financial Plans & Goals

Guns don’t kill people; people kill people. And the same goes for software and personal financial planning: software doesn’t kill personal financial plans; planners & clients kill personal financial plans.
          Yes, software may misfire, software may be incomplete, and software may not be real time (though it is getting there.) But the real impact on realization and or being on track to personal financial goals from potential problems impacting the goal(s) (other than being realistic to begin with), is contingency planning in the planning process and updates.
          Placing the blame on software is placing the killing on the gun rather than who pulled the trigger.
          Trigger events are critical in contingency planning – be they a decline in a portfolio for an objective by X%, a medium to high probability and high serious potential event on a client’s business, or Obamacare care effecting the (beta- volatility) of an Internist’s flow of income.
          So while software is important, damn important – to play what if, to project, to now be more real time and user friendly, things not worth doing are not worth doing well and better to do the right thing right (contingency planning) then the wrong thing right (great software minimal contingency planning).
Now, it is true one can’t plan for all contingencies (there is always something). And one can get paralysis of analysis at the extreme. Furthermore, the high seriousness and low probability contingencies i.e. a flood, a disability etc causing capital depletion are best handled by risk transference (insurance) unless self insurance is a viable alternative. But the medium to high probability and medium to high seriousness (impact) potential problem analysis is given short shift in personal financial planning – as personal financial planning is minimally personal let alone based in strategic planning techniques used in business but focused on financial techniques applied to personal resources & More, More, More (which to repeat myself has a habit of becoming less, worse, later).
Below are my previous thoughts to a planner relative to ‘is financial planning software’ being incapable and a contingency planning process (potential problem analysis adapted from Kepner Tregoe Decision Analysis) that may be useful. Also, it is suggested that client’s ask their planner to see the planner’s business plan and his or her contingency planning for the practice. This suggestion is not to review their plan – but to see if they actually plan and contingency plan for their business or does the Emperor Planner have no clothes.

…I agree to your indictment  that personal financial planning software is incapable in addressing the ups and downs, uncertainty, and volatility.
Unfortunately, while valid - this indictment puts the software cart before the horse not vetting sufficiently contingency planning techniques which then financial planning software can be applied to....

The first question is contingency planning and triggers. Per Kepner Tregoe potential problems analysis (which I used per objective in copyrighted forms while in practice) the questions become

1- what is the potential problem(s) per objective
2- what would be the cause
3- what is the probability (high, medium, low)
4- what is the seriousness (high, medium, low)
5- how to prevent and if not prevent
6- how to minimize

and I added what is the trigger #7.

Thereafter, one has an action plan on the medium to high probability and medium to high seriousness in most cases as to what, who, when, cost etc... - per each objective within each key result area. (per asset protection/depletion - where there is low probability high seriousness - i.e. flood, hurricane etc one would use risk transference - insurance)

Where software - as a tool comes in - is the what if - in the contingency planning - set off by the criteria.

Thus, the horse is put before the cart so that the planner doesn't become hoarse with assurances and platitudes - but can with the client recall their documented contingency planning – being proactive rather than reactive or in a blame game.. (Even then, there still will be tuchass comforting necessary due to client amnesia(c))

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