WHAT IS an effective Values-Based Financial Plan?

Certainly, a great deal of the answer is that the most effective financial life plans are much more than just a thick book of assumptions and calculations for people to wade through. It's the substance of the whole relationship between the client and the planner and what takes place.

Whenever I ask clients, “Do you want a neatly presented giant book of calculations or extra face to face time?” they always go for the latter!

The ‘number crunching’ and workings need to be done to create the plan, but it’s for our use to produce the plan and recommendations rather than for you to wade through and risk being confused (although all ‘working’ papers can be seen if you ask).

So what is Values-Based Financial Planning? Simply put, it can be represented by this diagram:

The Resources are:

• Assets
• Liabilities
• Income
• Your Skills
• Your Abilities (to save, to earn, to budget, etc)

The Goals are:

• Who you wish to Be
• What you wish to Do
• What you wish to Have

 …and there's a cost attached to these and so we then express them in financial terms.

The Goals are not just the tangible things, but also about how you want your life to unfold. What does your life have to look like to feel that you are meeting your core values? These are revealed when we talk about your Financial Road Map and The Three Questions, for example. In this way, your financial plan helps you to make financial choices that support the life you want in a profound way.

Your Financial Road Map becomes a high level picture of the life you want, which we look at again regularly and update. Your plan has the action steps needed to ensure your Financial Road Map happens in real life.

So, we are looking at the resources available, whether they need enhancing and what you need to do with them to move you towards your goals.

There will be various time frames attached to these goals, a rate of return needed, obstacles (real and perceived) to be navigated and risks to allow for. Our planning relationship will address these.

We are also looking to see if the return needed to achieve the goal is acceptable for the risk you’re prepared to take and if there are obstacles which cannot be removed. In either of these cases, we may be looking at alternate scenarios and compromises to either achieve goals as set by you or change them to something else that’s acceptable in collaboration with you.

We have found that a plan which is clear to understand, flexible and easy to carry out to achieve your goals for your reasons includes:

• Clear, written strategies and recommendations in plain English - ideally including a one page summary per strategy with diagrams as well as the written word.
• A clear written implementation plan - Staying on Track Tactics (STT’s): two or three pages of action steps of who does what and by when in sequence at our progress meetings.
• Dynamic lifetime cash flow and scenario modelling at planning meetings as appropriate.
• Open discussion, communication and collaboration between you as the clients and me as the planner.