A definition: “Personal financial planning is a process designed to enable consumers to achieve their personal financial goals. The service of personal financial planning is provided by a personal financial planner to assist clients with their personal financial planning”, from ISO 22222 – Personal Financial Planning. By starting with this consumer focus it’s possible deal effectively with many difficult financial planning issues, particularly misunderstandings concerning risk, and ultimately client accountability for their financial plan.
Consumers do some form of personal financial planning all the time – when they open and use a bank account, purchase and pay insurances, choose and stay in a job, contribute to a retirement account, etc. In most cases their underlying objective is to make the most of their opportunities without putting their financial wellbeing at risk. In the person’s mind, there is usually no formal starting point such as a written plan.
However at some point in time, an individual may recognise the need for assistance and seek the help of a professional to help crystallise and document what they should do. If the person (now a client) ‘owns’ the ongoing journey and the adviser ‘merely’ provides a service, then client ownership of strategic decisions embodied in the plan flows naturally.
Client accountability can be simply understood and managed from this perspective.
Provided it can be demonstrated that they act to ensure clients are able to make informed decisions, then clients are responsible for the decision. This is qualified to the extent that the adviser has: properly informed the client about strategic alternatives and allowed the client to make a free choice between those alternatives, recommended/selected only products/services that are fit for the alternative’s purpose, and properly implemented the recommendation/selection.
This has important implications for client satisfaction, liability management and settlement of disputes. Advisers experienced with market declines will tell you that properly informed clients are happier with the services they receive, easier to manage and often become reliable referral sources.