How does financial planning help me?

How does financial planning help me?

Many investors fail to appreciate a fundamental truth about financial planning: it isn't something you do once and then forget about. It's a lifelong process, built on long-term habits rather than a single burst of effort. There's certainly a great deal of work to be done at the outset, deciding on your financial goals, working out how much you need to invest to achieve them, and devising a strategy. But that still leaves plenty for your adviser to do on an ongoing basis.

In this video, Jason Butler, for many years a highly successful financial adviser and now an author and consultant, explains what the planning process really entails. Working out what's important to you, running the numbers and project-managing your finances isn't like booking a two-month block of sessions with a gym trainer. It's about evolving regular, positive habits: sound decision-making, accountability, and the discipline to keep checking in with your plan and your finances. Some years will demand plenty of changes, others very few. Some decisions will be difficult, others simple. Sometimes the way ahead won't be obvious at all, and you'll still have to commit to something. Butler recalls clients who, in a quiet year, would remark that not much had happened, yet when asked what they valued, would answer: the discipline, the structure and the peace of mind.

You'll also learn about one of the most important ongoing tasks your adviser performs: rebalancing your portfolio, perhaps once or twice a year. It's something every investor needs to do, yet those managing alone frequently neglect it. The principle is simple. If you start with 50% in bonds and 50% in equities, and equities grow to represent 60% while bonds fall to 40%, you sell some equities and buy more bonds to restore the balance. It's deeply counterintuitive, because you're selling something that has risen and buying more of something that has fallen, which behavioural science tells us we find genuinely difficult. Rebalancing doesn't maximise your returns, but it does keep the risk and return profile of your portfolio firmly in check.

The takeaway: financial planning helps you most when it's treated as a continuous discipline rather than a one-off exercise. So when choosing a financial adviser, make sure it's someone you're happy to work with for a very long time.

Chapters / Key points

• Why financial planning isn't a one-off exercise
• The work involved at the outset: goals, numbers and strategy
• Why planning is about building long-term habits
• Discipline, accountability and regular check-ins
• Why quiet years still deliver real value
• Why clients value structure and peace of mind
• What rebalancing means and how it works
• Why rebalancing feels counterintuitive
• How rebalancing keeps your risk and return in check
• Why choosing an adviser for the long term matters

Transcript

How does financial planning help me?

Robin Powell: Something that many investors often fail to appreciate is that financial planning isn't something you can do once in your life and then forget all about. It's a lifelong process. Sure, there's a great deal of work to be done at the outset, deciding on your financial goals, working out how much you need to invest to achieve those goals, and of course devising a strategy. But that still leaves plenty of things your adviser will need to do on an ongoing basis.

Jason Butler was for many years a very successful financial adviser. He now works mainly as an author and a consultant.

Jason Butler: That planning process of what's important to you, doing the numbers, project managing, isn't just like turning up to a gym with a two-month session with a gym trainer. It's about evolving new habits, regular, positive habits, proper decision making, accountability and a proper discipline to continually check in with your plan and your finances. Sometimes you'll have to do lots of changes, sometimes you won't. Sometimes there will be difficult decisions, sometimes they'll be simple. Sometimes the way ahead won't be really clear, it won't be obvious, but you're going to have to plump for something.

And so, I remember when I was working with clients, sometimes they'd say, "Well, it hasn't been a busy year," but when we said, "What did you value?", "I value the discipline, the structure, and the sense of peace of mind that I have."

Robin Powell: One of the most important tasks for your adviser is to rebalance your portfolio, perhaps once or twice a year. It's something you need to do, but investors who try to manage on their own, without the support of an adviser, often fail to.

Jason Butler: Rebalancing is really simple. If I start out with fifty per cent of my portfolio in bonds and fifty per cent in equities, and regardless of the value of the portfolio, if the equities now represent sixty per cent of the portfolio and the bonds represent forty, I have to sell some of the equities to bring them back to fifty and buy more of the bonds. Now, what that means is you are selling off something that has gone up, which is counterintuitive and behavioural science says we're unable to do, and you're buying more of something which has fallen, which makes us compound our fear and our pain. So it's counterintuitive, but what it does mean is, it doesn't mean that you maximise your return, but it does mean that you keep the risk-return profile of the portfolio in check.

Robin Powell: So, when choosing a financial adviser, make sure it's someone you're happy to work with for a very long time. Thank you to Jason Butler, and to you for watching. Goodbye.