Back-of-the-Napkin Planning

by Jeff C. Johnson

Coffee and napkin

Probably every financial professional has done it, at least once in a while. It’s a quick outline made at one of the “four Cs”: church social, country club, coffee shop, or, of course, the cocktail lounge. It’s the back-of-the-napkin financial planning doodle!

It’s a hastily jotted down note, a “guess” based on the hazy memory of outdated, often not-too-accurate estimates of a client’s (or prospective client’s) recollected financial account information.

It is potentially harmful—though convenient for general discussion—because it is (1) usually not accurate, (2) never kept up-to-date, and (3) often completely forgotten and omitted during future discussion or decision-making. Using inaccurate information compounds the error when longer-term planning periods are applied.

Thankfully, there is a solution. Consider this:

Bill and Jane are busy doctors with two active teenage sons—busy, busy! I think you get the picture. The phones are ringing constantly at this home.

They have three accounts with their advisory firm, plus Bill has two retirement accounts with his medical group. Jane has an additional account with her practice, and they have two college savings accounts for the boys. Who can track all of that?

Enter technology!

Using secure internet connections, individuals and their advisers can link all of their financial accounts into a desktop screen or onto a printout, creating a clear picture of an entire family of accounts. At Buckingham Strategic Wealth, this service is called Total Account Solution (TAS).

Such services are not usually free (investment advisers have to pay for the connections and have staff to support the service), but it’s worth it for investors to eliminate guesswork and downright inaccurate data when making lifetime plans. (Plus, the investor doesn’t have to take the time to attempt to gather all this data to get good advice.)

In my book The Eight Points of Financial Confidence, I outline the need to measure and monitor progress toward your life’s most important goals (it’s point number two). Tools like TAS are growing in importance for advisory firms and their clients.

Go ahead with the cocktail, but you don’t need to stake your financial life on decisions made on the back of a napkin.