Study: Most Investors Have No Financial Plan

Nearly two in three advisers surveyed indicated that half of their clients do not have a financial plan.

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Roger Wohlner
Recently, I wrote about why everyone needs a financial plan. However, many Americans still need help envisioning their financial dreams. A study by the Principal Financial Group included feedback from more than 600 financial advisers concerning their client's preparedness for retirement, and indicated that many Americans are still behind when it comes to planning for their retirement.

Here are some interesting takeaways from the study:

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More than 75 percent of advisers surveyed indicated that not saving enough was the major roadblock to their clients' success. This is important because the amount saved is something that people can control, while investment performance or economic conditions are largely beyond our control.

Close behind, 73 percent of the advisers surveyed indicated that a client living beyond their means was the biggest obstacle to financial success. Again, an area that is within an investor's control.

The study also reports that nearly two in three advisers surveyed indicated that half of their clients do not have a formal financial plan in place.

Two-thirds of the advisers surveyed indicated that the biggest reason clients strayed from their financial plans was that they were living beyond their means. This outranked job loss (50 percent) and life events such as marriage, divorce, or having a child (45 percent).

The survey results reinforce the need for financial planning on its own and serve as a basis for the financial advice that I provide.

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Several years ago, a former client indicated that he didn't need any financial planning help because he knew exactly where he was headed and how he was going to get there. This same client had me set aside a portion of his assets so that he could manage this pool of money himself. Months later, nothing had been done with this account. While this client was clearly knowledgeable about investing and personal finance, it was clear that he could not or would not devote time to his own affairs. Perhaps a formal plan with action items and benchmarks would have benefited this client.

A financial plan can help in areas such as:

Formulating and quantifying financial goals.

Establishing reasonable assumptions and expectations for goals such as retirement.

Quantifying the amount you will need to save to achieve your goals.

Setting benchmarks to determine if you are on track to achieve your goals.

Showing you the ramifications of various financial decisions such as spending versus saving, or making a major purchase now using credit versus saving for that purchase and deferring it.

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As always if you feel that you need assistance with financial planning it is wise to enlist the aid of a qualified fee-only financial adviser.

Roger Wohlner , CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill. where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. He recently cofounded Retirement Fiduciary Advisors to provide direct investment and retirement planning advice to 401(k) plan participants. Follow Roger on Twitter and LinkedIn.