7 "Hidden" Value Areas of Financial Planning

Financial Planning is a profession that can sometimes be challenging for others to understand the value, because the benefits aren’t always immediately visible. This is due to the nature of the planning work that is done.

It can sometimes be difficult to make our work tangible, especially in the beginning stages. There might not be a pressing issue that needs to be solved, as can be the case with doctors, lawyers, CPAs, and other professionals. Instead, financial planners provide the value that some people never know they need, until they start working with a Certified Financial Planner (CFP®).

Contrary to popular belief, working with a CFP® or other quality financial advisor is so much more than investment management and budgeting. A quality financial planner covers a variety of topics, and works diligently to ensure that your plan is as up-to-date and accurate as possible. Unfortunately, unlike other professions, it’s sometimes difficult to quantify the value they provide.

Here are 7 areas of financial planning that can’t be easily quantified.

1. Peace of mind – Arguably the most valuable aspect of working with a Certified Financial Planner or qualified financial advisor is the potential for increased peace of mind. You get honest feedback about where you stand (financially) in life compared to your objectives. You have a trained professional to oversee and manage your accounts, provide guidance on cash flow management, and review economic conditions on a regular basis, so you don’t have to worry about any of the details.

2. Tax Savings – This occurs in a variety of ways, especially when your CFP® and CPA have a good working relationship. Some general tax saving strategies include tax loss harvesting – realize paper losses to offset future income, asset location (holding income producing assets in tax-deferred accounts), holding period (long-term vs short-term treatment), Roth conversions and/or contributions vs tax-deferred accounts, tax-free investments (some municipal bonds and certain alternative investments), plus others. Some tax savings are easy to quantify, such as with municipal bonds, you can see how much tax-free income you receive every year. Others, such as Roth conversions and asset allocation is much more difficult, as it depends on your future tax brackets and taxable income, along with other variables.

3. Self-control – The one that no one wants to admit to, but everyone, even many advisors, are guilty of. Unless you’re a robot, it’s impossible to operate completely without emotion, but emotional decisions are typically the most costly. Whether you’re racking up credit card debt to live your best life, buying the car you can’t afford, selling stock at the wrong time because you’re scared, or even holding onto a losing stock because you’ve grown attached to it, emotional decisions can have a dramatic effect on your plan. Unfortunately, it’s impossible to know the cost of these mistakes until it’s too late. A good financial advisor will be able to help explain the situation, and hopefully help relax your nerves and guide you to a more reasonable decision.

4. Estate planning – No, financial planners are not attorneys, but they (should) have a fair amount of knowledge regarding estate planning. A good advisor will review your estate planning documents to ensure you have appropriate coverage and protection, and will make sure that the beneficiaries on your accounts match your wishes. To provide even more value, these items are typically reviewed every couple of years to verify no changes need to be made. Imagine if you forgot to replace your spouse as your medical power of attorney after you had a nasty divorce 😬, or didn’t add any provisions for your newborn child to your trust. Talk about some mistakes that can’t be expressed in dollars. Learn more about the benefits of estate planning in our Why do I Need Estate Planning blog.

5. Employer benefits – How well do you understand the benefits your employer offers? Do you even know what they all are? A good financial planner will help you decipher the code and optimize your employer benefits. From choosing the insurance plan that’s right for you and your family, to guiding you through your equity compensation and 401(k) allocations, and everything in between, they provide the guidance to help you get the most out of your employer’s benefits package. You can learn more from our blog post – Employer Stock Benefits.

6. Large purchases – This is more or less a subset from #3, but it warrants its own category. Most people make large purchases without performing all their due diligence with the research, usually because they’re excited and ready to roll. Your financial planner can help you map out the most optimal way to make these purchases, helping to reduce your total cost of financing. They’ll also help you determine the long-term costs, so you don’t rush into something that you can’t afford.

7. Business structure – Choosing the right business structure and tax-filing status is one of the most important decisions a business owner makes. Your business structure will impact how you get compensated, your capital structure, tax consequences, and your liability exposure. With all the complexities and variables involved, it’s impossible to determine the value of making the right choice. For more information, check out our blog post – Choosing the Right Entity Structure.

As you can see, the true value of working with a Certified Financial Planner or quality financial advisor goes far beyond investment returns. Obviously, investment management is a part of what financial planners do, but the real value lies far beneath that. It’s the value that people don’t typically talk about, because it can be so difficult to explain and place a value on.

If you’re considering working with an advisor for the first time, we recommend finding a comprehensive advisor to get the maximum value for your buck. If you’re working with an advisor that doesn’t focus on these other services, then it may be time to find a more comprehensive planner.