3/17/2025
Evidence from Our Practical Experience and from Research Meghan Hyland, CFP with Matt Taddei, CFP, PhD
Our real-world perspective of the benefits of Financial Planning
Our many years of experience working with families on their customized financial plans reveal that planning is about much more than just making the numbers work. Clients who have gone through the planning process, often feel a boost of confidence because they have a better, simpler understanding of their financial world and directional clarity to make the best decisions for their family’s future. Clients gain confidence from the partnership they develop with their Financial Planner, often utilizing the Planner as a sounding board for ideas and continued guidance as their life changes.
Our Financial Planning process is built to take a deep dive into all facets of a client’s overall financial situation to ensure that everything is in good order, and if it isn’t, then there will be clear instructions for needed changes. For example, a financial plan will inform clients how much they should have in emergency cash reserves. While this seems simple, it becomes critical if a spouse loses their job, or their home needs an unexpected and costly repair at a time when the stock market tumbles. Having a cash reserve in such scenarios can allow one to avoid the financial and psychological pain of selling investments at a loss. This situation can be a big stressor, but not if one has a financial plan in place and has quick liquidity for this type of emergency.
Another area Financial Planners add value is in client estate planning. Most people prefer not to think about death and therefore often put off creating their estate plan. Unfortunately, not having your affairs in order for after you die leaves your loved ones in a bad spot. Your Financial Planner will help you decide which estate planning documents you need and will work with your attorney to help make the process less daunting for you.
Planners often play an important role in the psychological or relational side of financial matters as well. In our experience as a Financial Planner, countless times we have played mediator between spouses with different risk tolerances in their investments or spouses who have different ideas for how they want to spend money. Sometimes the tough conversations we facilitate are between the client and their children or other family members. A goal of the planning process is to provide a safe space for emotional conversations to ultimately find common ground, solutions, and to reduce stress and uncertainty in our clients’ lives.
Research supports the importance of Financial Planning
From our experience in creating comprehensive financial plans for hundreds of clients over more than two decades, we have had a front-row seat in witnessing the significant financial benefits clients experience from the planning process. Additionally, clients typically express to us the marked increase in confidence and well-being they feel, once they have completed the planning process and have their financial plan in place. Research on the impact of financial planning further highlights its many benefits. Here is a summary of the key findings of a few studies on financial planning:
The Charles Schwab Modern Wealth Survey of 2021 finds the following:
- 36% of adults surveyed reported having a formal financial plan.
- Of those with a financial plan, 96% report they feel confident they will reach their financial goals.
- Those who have a financial plan are much more likely to have an emergency fund and are much less likely to carry credit card debt.
- Those who have a financial plan are much more likely to rebalance their investment portfolios and much more aware of the investment costs they are paying.
According to the Hearts & Wallets survey of 5,794 U.S. households (PlanSponsor, 2022), those with a written financial plan:
- Have better savings rates.
- Have better asset allocation and more balanced portfolios.
- Report having more confidence in financial decision-making.
A 2018 Financial Planning Review Study (Kim, et al, 2018) finds the following:
- Those who consult with financial planners are more likely to achieve their long-term goals.
- The study suggests that the increased probability of long-term goal achievement is due to the planning process emphasis on retirement planning.
A 2024 Report by T Rowe Price finds:
- Retirement planning improves investor confidence.
- 62.5% of the survey respondents who have a formal plan note feeling more confident about their financial outlook.
A 2012 research article (Kym, 2012) finds:
- The benefits of Financial Planning go beyond financial.
- Financial Planning leads to greater social and psychological well-being.
Conclusion
French writer and poet, Antoine de Saint-Exupery was noted as saying, “A goal without a plan is just a wish.” We have frequently witnessed the transformational impact of financial planning on our clients’ lives. We’ve observed how financial planning leads to better financial and emotional well-being for our clients. The brief overview of research on the positive impact of financial planning that we shared above further supports the power of planning. As baseball legend Yogi Berra wisely observed, “If you don’t know where you are going, you’ll end up someplace else.”