World Financial Planning Day
World Financial Planning Day (WFPD), 9 October, is a global event to help raise awareness of the value of financial planning. It is a perfect opportunity for individuals and families to take positive steps aimed towards increased wealth and wellbeing.
WFPD is organised by the Financial Planning Standards Board (FPSB) who are dedicated to establishing financial planning as a globally recognized profession, and promoting global standards, certification and professional growth. They envision a future where financial planning is universally acknowledged and their Certified Financial Planner (CFP) certification is synonymous with excellence in the field.
I am a CFP and played a key role in bringing the CFP designation to New Zealand. As Chairman of the New Zealand association of Investment Advisers and Financial Planners (IAFP), I represented New Zealand in the USA in meetings with the FPSB. Financial Advice New Zealand is now the NZ affiliate of the FPSB and is uniting with a network of international professional adviser bodies to celebrate and promote the value of quality financial advice. Now there are 223,770 Certified Financial Planners across a global network of 27 countries and territories. Last year, 599 million people were reached through media coverage, events and social media to celebrate this initiative.
The Value of Financial Planning Report
Supporting World Financial Planning Day is the recent ‘FPSB Value of Financial Planning Report’, based on extensive Global Consumer Research of 15,332 consumers. The report begins with an introduction by Dante De Gori, CFP, Chief Executive Officer FPSB who highlights that:
“We are living in an everchanging, complex world which is calling for people everywhere to become more financially responsible. Money can be a source of stress for many people. For some, it can even take a personal toll on them, impacting their quality of sleep and even their mental health. The current economic climate isn’t helping… The good news is professional financial planning can help. Financial planners support people to take control of their financial lives, empowering them to feel more confident and stay on track to achieve their goals…The FPSB Value of Financial Planning Consumer Research study presents a compelling comparison between the personal experiences of individuals who navigate their financial journey alone, those who work with a financial planner, and importantly, those who seek advice from a CERTIFIED FINANCIAL PLANNER professional.”
According to this research, the top five benefits of working with a financial planner reported by clients are:
Improved financial wellbeing and peace of mind
Better financial decision-making confidence
Help to explain and simplify financial matters
Saves time and effort organising finances
Feel more satisfied with their wealth
People who work with a CFP professional say they are better off and that they:
Experience a higher quality of life: Feel better about their health, connection, purpose and life satisfaction;
Have greater financial confidence: Feel more confident about their financial security and ability to achieve their personal financial goals;
Are more satisfied with their financial situation: Feel better about their spending capability, personal financial risk management, and overall wealth;
Enjoy a better experience with the financial planning process: Feel more optimistic about meeting their financial needs and achieving financial gains.
In this study, the barriers or myths that prevent people from seeking the help of a financial planner were explored and the findings provide evidence to break down these misperceptions. Clients said that the benefits of financial planning services outweigh the costs, and that these benefits are present regardless of wealth or age.
Dante De Gori concludes: “If you’re wondering how financial planning might benefit your life, I encourage you to connect with a financial planning professional and explore how advice can help you build a roadmap to secure your financial future and achieve your goals and dreams”.
The Value of Advice Report
A recent report from Russell Investments titled ‘The Value of Advice’ concluded that in New Zealand in 2024, the value of an advisor was 4.7% per annum. The report quantifies the value in what it refers to as the A, B + C of adviser value added:
A for Asset Allocation, this involves the adviser helping a client to having the optimal mix of asset classes – typically in terms of cash, fixed interest, property and shares, locally and internationally. This is regarded as one of the most important decisions an investor can make. The Russell report highlighted the example of the “disengaged investor” not taking account of their own age, balance or retirement goals.
B for Behavioural Coaching, this involves the adviser helping clients navigate the emotions that can cloud financial decision-making. Without the support and guidance of a wise adviser, investors can be their own worst enemies selling at the bottom and buying at the top rather than staying invested. The report shows a USA example of how regularly increasing or decreasing exposure to the share market resulted in a substantial opportunity cost of missed returns.
C for Choices and Trade-offs, an adviser can guide clients over time from when they are accumulating assets to older age when they may be drawing upon their investments and when care requirements may be significant. The latter category dominates headlines with the number of New Zealanders aged 65 and over forecast to be 40% of the population by 2050. But younger generations are increasingly faced with trade-offs that may be necessary to achieve their long-term goals. In this challenging environment advisers can reinforce the benefits of implementing financial plans early in life and then identify opportunities or compromises to achieve the desired outcome.
The report quantifies the 4.7% value in terms of Asset Allocation and Behavioural Coaching. Excluded from the 4.7% but nevertheless adding significant value is Choices and Trade-offs. The report then adds E for Expertise which is ‘Priceless’.
I use the ‘Money Doctor’ metaphor to highlight the value of ethical investment expertise. Like a specialist medical doctor, an expert ethical investment adviser can draw on their extensive experience, advanced education and knowledge of financial planning, clients, markets and funds to:
diagnose your situation including your current personal and financial situation, goals, and investment timelines, investment risk profile and ethical investment profile, then
prescribe a customised Plan showing how your goals can be achieved and Portfolio of the optimal ethical investment funds (much like a doctor prescribes medications), then
monitor again like a doctor, changes in your personal situation and goals, changes in in financial markets and funds, and recommend changes to your plan and the prescribed investment as needed.
The Bottom Line
Many New Zealanders have a DIY (Do It Yourself) mentality to many things, including financial planning and investments, and don’t properly consider what help costs and what it is worth.
In his book ‘Simple Wealth, Inevitable Wealth’, USA based Nick Murray suggests that you assume “good help costs about 1% a year, expressed as a percentage of your portfolio”. Then the question is whether working with a high-quality financial adviser will (a) increase your return by more than 1% a year, (b) save you more than 1% in mistakes they help you not to make, and/or (c) save you time, effort and worry that is worth more than 1% a year to you, and/or (d) all of the above? Nick Murray maintains: “The value of a high-quality financial adviser is a multiple of what he (or she) costs. That’s all that matters”.