Experiential Financial Planning

Saturday, March 23, 2013 at 11am
By John Friedman

People often talk about how there are two types of some something-or-others in this ol’ world of ours.

For instance, you often hear that there are only two types of people in this world, after which you hear what those two types are, e.g., givers and takers, or moochers and makers, or fighters and flighters, or, probably the most obvious and certainly among the most age-old, your classic duality of males and females, etc., etc., etc. And then there’s always that puzzle’y, self-imploding one, which says that there are only two types of people in this world: people who make lists of how there are only two types of people in this world, and those who do not.

All of these . . . bifurcs let’s call them, are suspect. All are too simple by half. Even the seemingly tautological male/female bifurcation is less than perfect because there are plenty of folks who do not fit within either of those two genders.

Nonetheless, the twosie bifurc can be a helpful tool for explanation.

*  *  *

There are two ways to do financial planning.

One way is via data dump followed by plan generation followed by plan dump followed by implementation of the plan. In this process (a) client dumps client’s data onto client’s financial planner, e.g., biographical data, assets and liabilities data, income and expense data, etc., as well as, with good FP’ers (short for financial planners), a whole lot of non-numeric data, and then (b) FP’er takes data and skillfully plugs it into planning-ware, consisting of people and software, and hopefully including a very good knowlegebase and a whole lot of wisdom, and then (c) planning-ware kicks out plan, which (d) FP’er gives to client, after which (e) FP’er and client discuss plan and then (f) FP’er and client make plan happen.

I think of this approach as conventional financial planning. Remember: I am making a broad generalization here. Though no doubt my biases are showing at least a little bit, too.

The other way is via the client having an experience. In this process (a) FP’er guides client through a series of experiences (conversations, exercises, thought experiments, etc.) which help client better understand client’s current financial reality and potential future financial realities, as a result of which (b) client and planner build up a joint understanding of what is, and what is not, working in client’s financial life, together with a joint understanding of what is, and what is not, within the realm of possible future financial lives towards which client and planner can aim their joint efforts, after which (d) FP’er and client jointly put together a plan for how they will direct their efforts towards one of those possibilities and away from the other possibilities, after which (e) FP’er and client make that plan happen.

I call this approach experiential financial planning, or EFP for short. It’s the kind I most often do (you could tell, right?).

EFP is not a perfect fit for everyone. For instance, people who are very busy and/or who are delegators par excellence will feel like the experiences within the EFP process are wastes of their time — that they’d be better off spending their time elsewhere. And for those who feel that way, the experiences usually are wastes of time because the experiences work best when a client lets them in — let’s them wash over and take the client to whatever place they might lead, and then let’s whatever is left after the experience itself is over to then percolate and pickle and ferment and foment and otherwise occupy the deep recesses of the client’s mind and the  quiet moments of the client’s thoughtful repose. Of such things do changed lives come.

So for those folks who aren’t a good fit for EFP, I offer conventional financial planning.

But for those who are OK with putting some time into the process and who are actually kinda excited to hear that they are going on a bit of a journey from which they will emerge at least a bit smarter about their financial lives and at least a bit more able to direct where their financial lives are going, EFP can work great.

And the reason it can work great is that experiential financial planning changes people. Experiences change people; pieces of paper typically do not.

And that is why conventional, data-dump-begat financial plans a/k/a turnkey financial plans a/k/a plug ‘n play financial plans a/k/a canned-plan financial plans a/k/a cookie-cuttered financial plans a/k/a boilerplated financial plans a/k/a check-the-box financial plans a/k/a use-the-last-one-we-did-but-change-the-names-and-birthdays financial plans a/k/a off-the-shelf  financial plans can end up sitting right back on a shelf — for instance, a top shelf where the client never looks, in the corner of a study where the client never goes.  Or, worse still, they end up unread and in the circular file on the floor, waiting to be emptied into the bigger circular container nearby, and then ultimately in the place where all unwanted things go).

By contrast, EFP-generated plans end up, by their very nature, incorporated into the client’s way of being, helping the client lead a better financial life, whatever that might mean to the client.

Yay.

 

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