Evaluating Financial Planning Strategies & Quantifying Their Economic Impact
Kitces Report

From: kitces.com

For any financial planner who charges for their advisory services, quantifying the value (or value-add) of good financial planning advice is crucial in order justify the cost. At the most basic level, no service business is viable – financial planning or otherwise – if the value of what’s delivered fails to exceed its cost.

Yet ultimately, the exercise of trying to determine the economic impact of financial planning strategies is more than just a self-serving exercise about the value of a financial planner. The ability to appropriately measure the economic consequences of a recommended strategy is crucial to assessing whether the supporting tactics are even appropriate to implement in the first place. After all, advice that has a negative value isn’t just “not worth its cost” – it’s a recommendation that perhaps shouldn’t be given at all. Viewed another way, demonstrating the value of a financial planning strategy is as much about validating the appropriateness of the strategy itself, as the value of the advisor who recommended it.

In this issue of The Kitces Report, we explore the issues to consider when trying to evaluate the benefits and economic impact of various financial planning strategies, from the importance of deciding how to measure the outcomes in the first place, to the challenging “compared to what” problem that makes it difficult to objectively assess the value of advice, and how for many financial planning strategies the economic impact is actually negative… but reduces risk enough that it’s probably good advice anyway!

For the full report: