Creating financial plans that work is as much a talent as it is a skill. To be effective, a financial advisor needs to understand her client’s current situation, how the income – or incomes – is/are allocated on a month-to-month basis, as well as the client’s personality and style. 

With all these variables, it is no wonder that things sometimes go wrong. 

Here's a look at some common reasons why financial plans fail. (For more, see: Avoid These Retirement Portfolio Mistakes.)

1. A Plan the Client Doesn't Execute

Obviously, a big reason for a financial plan to fail is that the client doesn’t follow the plan. This can be related to some other reasons we’ll look at, or it can simply be a lack of will. Self-control is difficult and we live in a world where saying no now to prepare for some future period of prosperity is becoming an increasingly hard sell.

Given any income and full control to reduce expenses, anybody can create a financial plan that ends with a million dollars at retirement. Unfortunately, most people don’t work that way. The best plan is always the one that actually gets acted on. So let's dig into why some plans just don't fit the clients they are built for. (For more, see: Key Steps to Building a Great Financial Planning Practice.)

2. The Plan Doesn’t Evolve

People’s priorities change and their plan has to change with them. The financial plan a person has coming out of college will be very different from the one after the first kid, a career change or a new house. These are life changes that you can discuss with clients – and run some scenarios – but you also need to emphasize that the current plan can be updated rather than abandoned.

3. A Too-Ambitious Plan

Not to shock anyone, but sometimes clients do not have a clear idea of a) what they want to do and b) what they are willing to do for it. This leaves the advisor in the role of deciding how much they can reasonably save and invest on a monthly basis, and that’s a classic situation where the resulting plan doesn’t get followed.

In some cases, the client himself may be too ambitious, expecting to save unrealistic amounts and invest at above market returns all the time. Part of the job is drawing out the client’s financial goals, then developing them into something concrete and realistic that he or she agrees to work towards. (For related reading, check out: A Financial Advisor’s Job is Not to Beat the Market.)

4. Poor Communication

Poor communication is another plan killer. When we talk about financial planning, we are talking about something that is simple numbers and math, but it has to be communicated in terms of lifestyle and dreams. Too often the information communicated to a client through a financial plan is only in terms of numbers. Without that emotional connection to what those numbers mean, your client is left with a piece of paper with figures to put in different accounts rather than a plan he or she can get behind.

The Bottom Line

Creating a solid financial plan for someone is something that can be life changing, no exaggeration. That said, a financial plan is useless if it never gets acted on. To increase the chances of a financial plan actually being implemented, it is important to remember the person as much as the numbers. Communicate it in terms of lifestyle, temper expectations, and be upfront with the fact that it will need to be updated over time. It may sound like pop psychology, but these simple steps will increase the chances that the financial plan you create can actually be life changing for your client. (For more, see: How to Advise Clients on Company Stock in 401(k)s).

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