Story-Based Planning vs. "Numbers"-Based Planning

January 25, 2010 Victor Medina Family, Priceless Conversations 0 Comments

One of the things that guides my practice is the gap between what clients want and what most advisors and planners can deliver. In my experience, clients want a caring advisor who can help them build and leave a legacy to their loved ones (financial and otherwise). However, most professionals lack the skills and tools help clients build that legacy. I work very hard to meet my client’s needs and provide the experience and results that they want.

One of my “secret weapons” is my association with the Sunbridge Legacy Builder Institute and , run by Scott Farnsworth in Harmony, FL. You can learn more about Sunbridge by clicking on their name. I wanted to share something that Scott wrote on the difference between Story-Based Planning and “Numbers”-Based Planning.

This article is written as a note to other advisors and planners, but I share it with you because I think it is an excellent illustration of the gap that I referenced at the beginning of this post. I want to comment further on all of this, especially regarding why I’ve adopted this model in my practice, but I don’t want this post to run too long. For now, enjoy Scott’s article.

The Power of Story-based Planning – Part 1 – By Scott Farnsworth

Virtually all my “official” training as an estate planning attorney and a Certified Financial Planner has been about numbers. Tax rates, code sections, rates of return on investments, asset allocation models-the unwavering focus has been on something quantifiable. The underlying message always came through loud and clear: unless something can be tallied on a ledger sheet, it isn’t worthy of our professional attention and probably isn’t all that important. Only “numbers-based planning” is real planning.

But my gut-and my real-life experience-told me something different. They told me that when numbers-based planning collided with human beings, i.e., our clients and their children and grandchildren, either the planning was never actually implemented by the clients, or the wheels came off when the planning landed with a thud on the succeeding generations. They told me that the most clever and tightly-wound estate or financial plans could and would be unraveled by the people they were designed to “help” or “protect.” They told that we planners ignore the human issues at our peril, and at the peril of the beautiful numbers-based plans we crank out.

My sense was often that with numbers-based planning, the tax tail was wagging the dog-driving the planning instead of riding in the back seat along with all the other significant but not critical factors. One significant study found that the likelihood of a family-based business surviving into the second generation was inversely correlated to the amount of tax planning the first generation had done. (Correlates of Success in Family Business Transitions, Morris, Williams, Allen, and Avila, Journal of Business Venturing 12, 365-401, 1997) In other words, the tax doctors were actually killing the patients they were hired to “save.”

Numbers-based planning might work if we were planning for robots, but we’re not. We’re planning for real flesh-and-blood people. I recall a series of conversations with a couple from New York City who had spent tens of thousands of dollars for one of the premier law firms in the country to draft a plan to care for their estate and their two teenage children. The plan touched all the legal and tax-planning bases, but in the words of the wife it was “cold and impersonal, not what I want to leave for my children.” The expensive, well-drafted plan was never executed but remained nothing more than a pile of paper, glistening with lawyerly brilliance on the surface but empty and meaningless underneath.

Unfortunately, that couple’s experience is repeated all too often. In my view, such outcomes will not change until we take a fundamentally different approach to this whole business of estate and financial planning. They will not change until we spend more time listening to client stories than tallying up their balance sheets; until we tailor their plans to the human hopes, dreams, and fears imbedded in their stories; and until the plans we create help them tell the story of their legacy-of who they really are and what impact they have had and hope to have on the people and causes they love. I call this approach story-based planning.

-Scott Farnsworth

Posted by Victor J. Medina, Medina Law Group, LLC

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