I have been surprised by some recent conversations with potential clients. And while they were certainly instructive for me, I thought they’d also be instructive for You Out There, you who might be wondering if you need or deserve a financial planner.
When I was designing my business, I asked myself, “What financial issues do women in high tech face?” The answers were along the lines of “How do I save for my child’s college education? What do I do with this company stock? How do I invest my 401(k)?”
And while it’s true that I know more than the Average Bear about 401(k) plans and portfolio management and college planning (you would, too, if you’d spent years dedicated to figuring it out), what I don’t know is what’s going on inside people’s heads. And verily, that is where effective financial planning really happens.
These recent conversations taught me a little more about what people are thinking about financial planning, for themselves and in general. Do you see yourself in these conversations below?
What Drives People to Reach Out to Me
I ask potential clients this question, “Let’s say we work together, and we have this conversation again in three years. If you look back on those three years, what would you want to see? What would you want to have happened?” I’ve had several people say something like this, “I want to understand our finances a lot better, and I want to feel as if we’re doing the right thing.” Notice it’s not “I want to have $50,000 in the bank” or “I want to own a house” or “I want to have enough money to send my child to college.”
People often come to me because they want to feel more confident about their finances. They want to understand the totality of their financial picture. They want to know that they’re aligning their finances with their goals and values, that they’re putting each dollar to its highest and best use.
These people have no shortage of specific financial goals. They do want to have $50,000 in the bank, buy a house, and have enough money to send their child to college. But ultimately, that’s not what drives them to a financial planner. They come for a much more nebulous reason. (Yeah, that’s right, I said “nebulous” in a blog post, a blog post that is way over 500 words. Look at me, breakin’ da rules.)
They’ve all read, I’m sure, endless reasonable advice about how to accomplish each one of those goals. But those articles and those online calculators don’t (can’t?) take the totality into consideration, including your personality, career dynamics, and family situation. So, these people are left doing “what’s right” in a piecemeal fashion, with a nagging doubt that maybe they’re not doing the “what’s right” in the whole.
These are people (okay, mostly women) who are smart, driven, and accomplished. They work in high tech, they have advanced degrees, they went to Wellesley College (my alma mater). Many of them even throw around surprisingly technical terms for non-financial folks, terms like “asset allocation” and “monte carlo.” (Look ‘em up if you want; it’s not necessary for you to know them, though.)
Not surprisingly, many of them are already doing what they’re “supposed” to be doing: they have their 401(k) in a target-date fund, they’re paying down debt as aggressively as possible, they’re saving for their child’s college and for retirement. But, they wonder,
Is it enough? Is it the right thing? What are the other things I could be doing with my money? And would those be better?
And they come to me in the hopes of answering those questions.
Do you find yourself awash (one might even say “drowning”) in advice about this, that, and the other aspect of your financial life? Do you, too, wish you had a better grasp on the Whole Picture so you’d know what steps would benefit you most overall?
“Is Financial Planning Even Appropriate for the Middle Class?”
A woman recently ask me, sort of self-consciously, “Is financial planning even appropriate for me? I mean, we’re middle class, maybe upper-middle class. Isn’t financial planning only for the wealthy?”
[“Middle Class” is a pretty fraught word (hell, I even wrote a blog post entitled “When $200,000 is just middle class”), but for our purposes here, let’s just say you’re middle class if you feel you’re middle class.]
My answer, not at all surprisingly, is No, it’s not just for the wealthy. Forces are conspiring to make it not just more affordable to the Not Wealthy, but also more necessary for the Not Wealthy. Put that together, and financial planning is in fact very appropriate for the middle class. (Oh, and I should say that I realize I’m using a very privileged American concept of “wealthy” because I know even “poor” Americans are rich by global standards.)
More Affordable (or the “How” of financial planning for the middle class)
Technology, primarily software, and especially software-as-a-service, has made financial planning a much cheaper endeavor.
I don’t need IT staff. I don’t need to drop a few thousand dollars on each of my software tools. I don’t need a receptionist. I don’t even need a friggin’ office! And I am one of a small but growing population of planners who are taking advantage of technology to lower our costs so we can provide planning to the Not Wealthy in a transparent, fee-only way that is subject to the fiduciary standard (now that’s one term of art you probably should know).
One member of the XY Planning Network (a professional network I belong to, which serves Gen X and Gen Y in exactly the way I just described) even wrote a blog post about how to start a planning firm on less than $10,000. Those are start-up costs most businesses would kill for!
If a planner can keep expenses low, then she doesn’t need to restrict her client base to people who have at least $500,000 to invest, and then charge clients 1% of of those assets each year. Nor does a planner need to provide “free” financial planning while getting paid via commissions on the investment or insurance products she sells. The more cheaply we can do our jobs, the more people can afford financial advice that is best for them.
More Necessary (or the “Why” of financial planning for the middle class)
I think there are two reasons why financial planning is becoming increasingly necessary for the middle class. One bad. One good.
The Bad. Our safety nets are disappearing. Our society, family, and government is fracturing. (Yeesh, that sounds much more Mad Max than I intended.) We are increasingly on our own when it comes to our financial security.
What did our disability, life, and long-term care insurance used to be? Our kids and extended family. Now we have smaller families and they live scattered to the winds. I live in Washington; my brother lives in Houston; my father lives in Virginia; thankfully my mother at least relocated near me so I don’t have to worry about that distance…but she’s sure not living with me.
What did our retirement income used to come from? A pension that someone else (an investment professional) saved to and invested. And a fully funded Social Security system. Now it’s “defined contribution” plans like 401(k)s and IRAs and 403(b)s that require us each to figure out how much to save, make ourselves actually save it, figure out how best to invest it, and then not Freak Out and do the wrong thing when the market takes a dive. We take the risk onto only our own shoulders and suffer the consequences alone.
The good. Many of us are making more than enough money to cover our Needs. So, the Wants step up. Financial planning helps you more effectively address your Needs and also figure out how best to achieve your Wants. That looks different for everyone, certainly up and down the wealth ladder, but even for people on the same rung.
Financial planning–whether you can do it yourself or with a friend or with a professional–helps both manage the risks of modern life and maximize the value you get out of life.
Do you feel weird about the idea of having a financial planner? Like somehow it’s “above your station”?
Do you, too, want to feel more confident about your finances, understand the totality of your financial picture, and know that you’re putting every one of your dollars to its best use? Have I persuaded you that financial planning for the Not Wealthy is not just reasonable but maybe even appropriate for you? Reach out to me at or schedule a free 30-minute consultation.
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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner and/or an accountant for advice specific to your situation. Reproduction of this material is prohibited without written permission from Meg Bartelt, and all rights are reserved. Read the full Disclaimer.