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Differentiating Characteristics of Financial Planning

Jae young Yang - CFP Koreaby Jaeyoung Yang, CFP

I would define a financial planner as a professional who assists their clients and their clients’ families in living a rewarding and fulfilling life without financial difficulty and conflicts. Unlike other professionals, financial planners perform the job of planning lives. Specifically, what values and characteristics differentiate financial planners from other professionals?

Financial planning is a process that helps people live a comfortable, fulfilling life by connecting their financial and non-financial goals organically. Therefore, the job of a financial planner carries the characteristics necessary to materialize financial and non-financial goals incrementally throughout the client’s life, rather than stopping after achieving one goal. Of course, there are other professionals who do the same kind of work that seeks to achieve interconnected goals in multiple stages.

Advisers vs. Planners 

For example, an investment adviser selects a product with the highest return and suggests an investment approach regarding liquidation timings for their client to help them achieve their investment goal. The advisor may also propose an investment portfolio including investment time-spans and allocations of money. This kind of portfolio planning is different from investment planning designed to achieve a financial goal that stretches over the entire span of a client’s life. Financial planners use a holistic approach, meaning they base their output on the different cycles of a client’s life whereas an investment advisor puts their focus on maximum returns.

Let’s look at another example. Imagine a tax advisor who focuses on minimizing inheritance taxes. While a financial planner considers tax-saving measures when creating a plan, they pay more attention to the overall reasons for the client’s tax-saving goals. They have a long term view that takes into consideration the client’s preparations for retirement, specific disbursements of wealth among generations, inheritance tax savings, payment preparations for inheritance taxes, etc. Therefore, in order to be a true financial planner, one has to have a strong understanding of what the client needs and desires in their lifetime.

What Do Clients Want? 

Financial planners help clients to prevent problems from occurring while advising them on how to achieve their goals. Most clients hope to:

  1. create more wealth through proper investment and tax-saving,
  2. achieve their family’s financial and non-financial goals with the wealth, and
  3. eventually hand down more wealth to their descendants.

In the process of planning to grow the client’s money, financial planners pay special attention to complying with laws, big investment risks, and potential conflicts that could occur between the client’s children.

In short, unlike other professionals, financial planners must have the differentiated strength of to create long term plans that help clients achieve financial and non-financial goals, rather than simply materializing a few financial goals. In addition, financial planners consider the behavioral aspect of their clients’ lives and work to prevent family issues from occurring. Financial planners who embody these strengths will succeed and be rewarded with lifelong clients.

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