This article article was published in the "New Rochelle Review" in the June 2005 issue.

Life and Money TM - Financial Planning With Heart - Part 1.

By Frank Sisco, CPA, PFS

In financial planning for major issues of life and money, the heart should rule the head, or at least show leadership.   Too often, we make financial decisions as if we were engineers, lawyers or accountants.  Researching and studying, analyzing and reanalyzing, graphs and spreadsheets, charts and calculators.  And usually the true goals are missed by a long shot. It happens even when financial advisors are involved in the process. 

Clients meet with their advisors and tell what they see as the issues and problems  The advisors come up with several suggestions and they discuss the options and settle on a set of action steps.  All very professional and polite.  However, the tough questions are often not asked, the questions that tug at the heart, the ones that can be unsettling.  Why don’t you close your marginally profitable business?  Do you really want to exclude one of your children from your estate?  Why haven’t you gotten sufficient life insurance and long-term care insurance for your loved ones? Why do you spend so much money on clothes? The tough issues are usually skipped or paid merely lip service by both the client and the advisor. Often the advisor does not want to cause angst that might lead to inaction.  Usually, the client has difficulty in properly expressing the feelings related to the facts. Sometimes, both are clumsy initially with a more meaningful discussion. Significant potential financial loss and emotional upset can result.

The family profile is one tool some advisors use to uncover a person’s particular situation, especially for individuals who are middle aged or older. The advisor builds a family tree with the clients’ help (both spouses present if possible), detailing the names, ages, occupations, disabilities, sub-family, etc.  As the information is recorded on the family profile, the clients are asked questions about each key relative and out of the client pours heart-related information that reveals important financial considerations.  The love of a disabled granddaughter who warrants annual gifts to help with special therapy and education.  Fairness for a helpful cherished son who deserves a larger share of the estate.  Admiration for a deceased father who built the family business and put several children through college, leading to the client’s desire to generously help his grandchildren.  Adoration for the mother who handled admirably the family finances, leading to a client’s greater sophistication about the financial markets and complex investments.  Emotional upset about a grandparent’s long horrible illness contributing to the clients’ intense desire to protect assets by getting long-term care insurance and being more conservative with investments.  Financial failure of grandparents during the Great Depression and the loss of a residence, resulting in a low tolerance for risk and a preference for guaranteed investments and minimal debt.  Frustration over the conflicts among adult children and their unwillingness to be financially responsible, making difficult the process of planning for the succession of the family business.

         In next month’s column will be more about financial planning tools to help expressions of the heart.

___________________________________________________

About the author:

Frank Sisco is a CPA and Personal Financial Specialist, and author of several articles about personal finance and issues of life and money.   His firm, Financial Management Corporation, is located in Harrison, NY.  Frank makes his home with his wife and daughter in New Rochelle, NY.  He can be reached at 914.381.3737 or by email at ideasmoney@aol.com, or visit his website at www.LifeAndMoney.com.