It is easy to sometimes lose sight (for clients and advisors alike) of the primary aim and benefit of financial planning. It is not to maximize short term returns (as we outlined in the March 23 STAT) but rather to build a better life.  Life is a series of trade-offs.  In order to get something, we have to give something up. We accept less of something today for more of something tomorrow.  There often is tension in this process because most of us aren't well equipped to make these trades-offs.

In the short term (days-months), investment returns are often unduly influenced by emotions and unexpected events.  In the long term (year-decades), returns are driven by market fundamentals. As much as we might want, we can't know what will occur today, tomorrow or next week in the markets. Our strongly held belief is that this is largely irrelevant anyway, assuming that you have structured your portfolio according to the dictates of your long term goals. The above chart, "The Investor's Cycle of Emotions," reflects the capricious sentiment of those who allow their investment decisions to be guided by the unpredictable market. This is where financial planning comes in. It helps align your goals (the why) with your resources so that you can outline a path to follow and avoid short term distractions (the how). Financial planning empowers you to make deliberate decisions.

There will always be bumps in the road towards financial independence. Financial planning, if delivered from an independent perspective, is dynamic by design and anticipates regular changes. It provides an antidote to products, strategies and techniques that might be ill-advised for your specific circumstances.  Financial planning allows you a fighting chance to avoid costly mistakes (and bad behavior) that can destroy your financial life.