Over the past 40 years, I have seen financial planners drop the ball and leave huge amounts of money on the table putting their clients at risk of losing their wealth.
Financial planning got its basic start in the mid to late 70s as a result of brokerage houses wanting to get into the action of having representatives go out and get people’s money, So the financial institutions set up a system of attracting people’s money, via financial planners, to their coffers. The financial institutions operate under 4 basic rules.
- The financial institutions seek to get your money.
- They seek to get it on a systematic and on going basis.
- They must hand on to it for as long as possible.
- And give it back as little as possible
If they violate these rules they are out of business. So they teach their representatives to do this under the guise of financial planning. I realize this explanation is basic but we have reduced these actions down to the most common denominator.
The basic reason why financial planning is setting people up for failure is because they have no way of seeing a person’s wealth in a total picture letting the clients see everything and its effects before they take action. The way to do this is using a macro-economic model that shows a persons wealth, letting them see everything then projecting the model out over the years simulating the future so the client will see the effects of their investments. With a macro model clients can see whether the moves they want to make are right or not. It’s important to see any financial inefficiencies and correct them before they occur.