Defending Financial Plan Decisions


There is no law which states Americans must have a financial plan in order to have personal household financial success.


According to Spectrem’s study Defining Financial Planning, 74 percent of investors with a net worth of at least $100,000 have a financial plan, while 26 percent do not. Among those that have a financial plan, 27 percent created the financial plan on their own, without the benefit of advice from a financial professional.


Let’s look at the reasons investors used for setting up a financial plan, and then let’s look at the reasons some investors choose to live without any sort of plan in place for their household budget and economics.


Among the 74 percent of investors who have a financial plan, 83 percent established the plan in order to prepare for the financial needs of their retirement. That is the overwhelming reason investors request a financial plan.


That makes you wonder about the 26 percent who do not have a financial plan. Are they just winging their retirement plans?


The next most popular reason for setting up a financial plan was that investors felt it was an important step to plan for all future financial needs. Forty-two percent of investors set up a financial plan for that purpose.


The only other response given by at least 10 percent of investors surveyed was that they set up the financial plan on the advice of their financial advisor. Seventeen percent set up their financial plan with that as a basis for doing so, and it would be interesting to know how many investors receive that advice and do not heed it.


Only 9 percent of investors who have a financial plan had college planning in mind when they created the plan. Paying for college is on the minds of nearly every investor who has children, and those investors are often looking for the proper way to fund that future need. Promoting the idea of using a financial plan to better prepare for the cost of college education and other expenses might work.  


Of the 26 percent of investors who do not have a financial plan, there were multiple reasons given. Forty-one percent claim to be able to create their own financial plan, and that may or may not be true, depending on the complexity of their financial status and accounts.


Nineteen percent said the cost associated with the time spent with an advisor to create the financial plan was prohibitive. Thirteen percent said they did not have the assets necessary to require a financial plan, while 11 percent said a financial plan is not useful since there is no way to predict one’s financial future.


But, interestingly, 31 percent said they “just haven’t gotten around to it”, while 16 percent admitted they have no interest in having a financial plan.



©2019 Spectrem Group



Keywords: financial planning, retirement, education, investors, advisors, Spectrem