8 myths about financial planning

By Bryce Sanders | February 23, 2015 | Last updated on September 21, 2023
4 min read
Business adviser analyzing financial figures denoting the progress in the work of the company
© Yuliya Tsyhun / 123RF Stock Photo

You understand how important financial planning its, but not all clients grasp its value. Here’s how to bust eight common myths.

Myth #1: Wealthy people don’t need plans

They’ve got more money than they can spend. Why do they need a report?

Why it’s wrong: Rich people have different problems. Minimizing taxes. Passing wealth to the next generation. Providing for family without removing the incentive to work.

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How to explain: Focus on their higher goals, such as leaving a legacy.

What to communicate: “You’ve always had money. This gives you the ability to provide for your family. It’s important your money does what you intend it to do. How do you want to be remembered? What do you see as your legacy?”

Myth #2: It’s a one-time report

The plan spells out risk tolerance and asset allocation., but they can buy index funds online.

Why it’s wrong: Implementation is the most important part of the process. They might need a trust and establish one but neglect to fund it.

How to explain: Focus on implementation.

What to communicate: “The plan will show how to get your house in order but there will be lots of moving parts that need attention. You need someone to prioritize the steps, liaison with your other advisors and introduce additional resources where necessary.”

Myth #3: They can do it themselves online

Why would someone pay for something they can do themselves?

Why it’s wrong: They don’t appear before CRA or represent themselves in court. They get qualified advice.

How to explain: The stakes are too high.

What to communicate: “It’s likely certain features of your life make your situation unique. Let’s assume the online tools are out there. How are you going to integrate the different elements of the plan together?”

Myth #4: Planning should be free

People are used to information and services found on the internet to be available without cost. Planning can be done online. Shouldn’t it be free?

Why it’s wrong: Many “free” services on the internet only let you in up to a certain threshold, like newspaper sites allowing you to view current stories. If you want to dig deeper into their archive, it requires a subscription.

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How to explain: You get what you pay for.

What to communicate: “Planning is an advice-based service similar to tax or legal advice. Those are available online but most people pay a professional to get the benefit of advice tailored to their situations.”

Myth #5: Plans deliver bad news

Clients suspect their finances are a mess. Why do they want to pay good money to get a report telling them what they already know?

Why it’s wrong: People visit the doctor when they are sick because they want to get better. Their problems might not be as bad as they fear.

How to explain: It’s easier to identify problems and position solutions if they’re identified early.

What to communicate: “No one’s life is perfect. Everyone has something needing attention. You must uncover the issue, determine the scope and consider a range of options to address it.”

Myth #6: Planning takes too much time

My clients are in a hurry. They don’t have time to pull all these documents together.

Why it’s wrong: In the 1980’s statements, retirement plan benefits and bank balances all came on paper. Today almost everything is available online. Your client can easily access the reports they need, printing you copies.

How to explain: Show it’s easy. Why is the outcome worth the time?

What to communicate: “Most of this information is available online. The result will be seeing all your holdings together in one report and putting your goals in focus. Isn’t that worth your time?

Myth #7: Plans exist to push product

Consumer advocates claim it’s true. The firm talks about cross selling.

Why it’s wrong: Plans identify needs and problems but the client isn’t required to buy your solutions. They can walk out the door and implement the plan elsewhere.

How to explain: The plan is portable. Implementation matters.

What to communicate: “The plan provides a snapshot of where you are now and the likelihood of achieving your goals under different scenarios. It highlights issues that might cost you money down the road. The plan is portable. We can help you address those issues or you can work with outside advisors. We can work alongside them too.”

Myth #8: They don’t want it

A client coming in to buy stock doesn’t want her life mapped out.

Why it’s wrong: Most people know they need help getting to where they want to be. Their lives are often disorganized. They focus on paying bills, not paying themselves.

How to explain: Create and fill a need.

What to communicate: “Most people have goals but not a roadmap. Busy people have assets spread all over the place. We can bring it all together and show it in a single report. Have you seen that before?”

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Bryce Sanders

Bryce Sanders is President of Perceptive Business Solutions Inc. in New Hope, PA. His book “Captivating the Wealthy Investor” is available on Amazon.com.