Broker Check

Financial Planning

for the REAL WORLD

“Financial planning is not static. It considers an ever-changing set of circumstances, and assumptions must be updated accordingly.”
- David Swanson, Principal & Wealth Advisor

The single most important truth about financial planning for the Real World, is that the process is subjective. There is no amount of planning one can do that will ensure future outcomes with exact precision. It would require knowing the unknowable, and controlling the uncontrollable. This is contrary to what most financial advisors will have you believe, yet failing to recognize it will lead to disappointment at best – or financial catastrophe at worst.

This observation is hardly meant to minimize the importance of financial planning. In fact, financial planning should always be the cornerstone of any relationship between advisor and client. But we should ensure that the planning is based on reality and not creating false expectations.

Here are some of the most common “theoretical” planning mistakes we see from clients or their advisors:

  1. Assuming historical rates of returns will predict future results
  2. Assuming future inflation, interest rates, etc. will mimic what we have seen in the past
  3. Ignoring effects of fees and taxes on expected returns
  4. Over-simplifying short or long-term expenses
  5. Failure to examine the effects of “sequence” risk - in addition to “investment” risk - when analyzing potential return scenarios

Here also are two general rules that we live by in terms of financial planning at Round Hill:

  1. The less a client understands about the planning process, the more likely the plan will prove ineffective
  2. The more the question “what if?” is asked during the process, the greater the chances for success

At Round Hill Wealth Management, our clients expect to participate in a financial planning process acknowledging that none of us can “know the unknowable” with any degree of certainty. As such, we should examine many different scenarios while using a wide range of assumptions. Finally, we must consider that circumstances are constantly changing – so financial plans must consistently be updated to reflect those changes. That is Financial Planning for the Real World.