Portfolio Management Does Not Equal Financial Planning

Tina Haapala |

By Gary Silverman, CFP®

When I first started my business here in Wichita Falls, I was planning on doing mostly financial planning and offering investment management services as a side part of the firm. What I found is that very few people (in actual numbers: one) wanted to pay me to help them create a financial plan. Fortunately, enough people wanted me to manage their investments (and pay me for it) that 25 years later we are still going strong.

I am very thankful for this as it allows me to eat and keep a roof over my head. But I’m also a bit unhappy. It’s the planning part of personal finance that is the foundation for everything else—including investing.

So, I come to you today to implore you, whether you are just starting your career or are well into your retirement, to take some time and work on your financial plan.

I’ll admit that my industry is responsible for this cart-before-the-horse behavior. How many ads do you see on TV trying to convince you to do financial planning as opposed to those that purport to help you invest, grow your money, beat Wall Street, or some other investment-related service? Investing is where the money is and it is much more lucrative for a company to help people invest than to help people plan.

Now, I’m not asking you to ignore investing or not invest at all. Rather I’m wanting you to consider why you are investing in the first place. Need money to retire? Have you projected what retirement will cost you on an annual basis and the effects of inflation? Do you know how your income needs and availability will change if your spouse dies?

If you are not yet to the point of being able to set aside money for retirement, that’s fine. We’ve got to start somewhere. Have you calculated your spending needs—especially the non-monthly ones—and set up a savings plan for that? Do you have the proper type and level of insurance for the big nasty things that might strike you? Do you have a plan on how you’d cover an unexpected expense of $1000?

Got kids? They are a great blessing…and expensive. Wanting to help them with college? Before you think about what kind of investment account or type you’ll use, you’ll want to first determine what kind of help you want to give them and why. Have you researched what that will cost? Have you taken into account inflation between the toddler years and when your perfect child heads off to college?

Already retired? Do you know, for sure, how your beneficiaries are set up on all of your investment, insurance, bank, and benefit accounts? Do you know what happens to the income streams from pensions, annuities, and Social Security if you or your spouse dies? Have you reviewed your will recently and know who is set up with a Power of Attorney both for your finances and your health?

You see, there’s a lot more to your financial life than investing. Investing is sexy. Planning is for peace of mind.

Gary Silverman, CFP® is the founder of Personal Money Planning, LLC, a Wichita Falls retirement planning and investment management firm and author of Real World Investing