The Five Questions interview series features advisors throughout the BAM ALLIANCE community sharing their insights on different topics of wealth planning and investing. In this interview, Manisha Thakor of MoneyZen Wealth Management discusses the value of building a financial plan and how it helps clients achieve their goals.
The BAM ALLIANCE: Do you think people place enough emphasis on defining their goals?
Manisha: Yes and no. I think people are very good at defining their goals and identifying the things that bring them joy. What’s difficult is moving to the next step of identifying a specific price tag that goes along with each goal. That’s where integrated, holistic financial planning and investment management can really play a huge role. I’m not talking about doing deep tax or estate planning work. What I’m talking about is translating goals into clear numbers that both client and advisor can work with to craft a well-constructed portfolio to increase the odds that the client’s goals are met.
BA: Can a written plan change how we approach saving and investing?
Manisha: I have seen numerous examples in both my work with wealth management clients and in doing general financial literacy education where simply having a goal changes behavior. For instance, before having a plan, people wanted to save but they didn’t know how much. After establishing a written plan, people have a road map to show them how much to save and how their money should be divided. Giving someone a measurable goal doesn’t necessarily mean that they’ll meet the goal, but it does dramatically increase the odds that they’ll make progress toward the goal.
BA: Do people understand how much risk they are able, willing and need to take?
Manisha: Not as much as they should. I think a core reason for this is people do not have an innate understanding of how much they are currently spending and how much they will need to spend to maintain the lifestyle they want. A remedy for this is Monte Carlo simulation.
I am stunned when I sit down with individuals who assume they need something like a 90/10 portfolio only to discover after reviewing their willingness, ability and need for risk that they don’t need to take on that much risk. Conversely, an investor with plans to retire at 55 but didn’t start saving for retirement until 35 would have what I would call a very aggressive goal. In this situation, Monte Carlo simulation can demonstrate how that kind of goal would require either taking on more risk or making an adjustment to the time horizon of that retirement objective.
BA: How can having a plan change how people make decisions?
Manisha: Done appropriately, the financial planning process enables people to clearly see where they are, where they want to be (often through Monte Carlo simulation) and their sensitivity to the different life choices they can make to get them from point A to point B. Simply having that basic framework can relieve so much stress.
Financial planning defines — and delineates — your options so your brain can actually process them. I’ve seen time and again how the mere act of planning can help clients feel more comfortable. The reason is this information empowers them to make the optimal decision for their situation.
BA: What kind of effect can investment clarity have on our daily lives?
Manisha: Investment clarity offers a release from stress. It also means you have the ability to take the energy being drained from you by those worries and refocus it on what you want, which is living your life and pursuing your joy.
About Manisha Thakor, MoneyZen Wealth Management, Santa Fe, N.M.
Manisha Thakor, CFA, is the founder/CEO of MoneyZen Wealth Management. Known for making the complex simple, Manisha and her team provide holistic, joy-based financial planning and investment management services for women and families. Money Zen resulted from Manisha’s personal quest to try to find a way to increase the sanity and security that comes from appropriate financial management.
Manisha is also an ardent financial literacy advocate for women of all income and wealth levels. She is the co-author of two personal finance books: On My Own Two Feet and Get Financially Naked. She serves as a financial fellow at Wellesley College and sits on the national board of The Girl Scouts of the USA. She is also a Wall Street Journal expert panelist. Manisha earned her MBA from Harvard Business School and bachelor’s degree from Wellesley College.
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