This is one of a series of blog posts covering the principles that underpin the work we do with clients. If you find yourself sat alongside one of our financial planners at some point (and we hope that you do), chances are, they’ll be referring to these principles. This blog is about planning. There are a lot of pithy quotes related to planning, but one of the most straightforward comes from the author Alan Lakein “Failing to plan, is planning to fail”. Assuming you’re not planning to fail, you’ll want to read on.

So what is a plan? In its purest form, it’s a detailed proposal to achieve something. A good plan should always include a goal (B), an appraisal of the current position (A) and detail regarding how to get from A to B. Think of it as a gap analysis. In considering how to get from A to B, you might include a strategy, tactics, a roadmap and risk analysis. If there are financial consequences to the success or failure of your plan, it should be supported by financial analysis.

There are several distinct approaches to planning. You can make plans from existing one’s or you can start from scratch. Whichever method you use, planning is an iterative process, so this approach won’t necessarily produce a different result, just make it easier to do. We like to start with the end in mind. Set some long-term goals by exploring the life you’d like to live. Long term goals often have less detail, as it’s difficult to be certain about things when the timeline is long. A lot can happen in a year, let alone ten. The discipline here is to visualise the life you’d like to have, without dismissing scenarios because of practicality.

Next, we look at the current situation. Where are you right now, how did you arrive here and what resources do you have that might help you move towards the goal? It’s very important to be practical and above all, honest in your assessment of your current situation. If you’re planning to achieve something with little or no resources, that should cause you to ask some questions. This is part of the value of the planning process.

Once you have a start point and an end point, you can look at what sits in the gap. What needs to happen in order to get from A to B? This is when you want to think about strategy. There’s always confusion around strategy, but in simple terms, strategy is an integrated set of choices that positions you on a playing field of your choice, so you can win. A good strategy should include the domain (ie playing field of choice), a hypothesis (if I do this, I think that will happen), resources required and how performance will be measured. Strategy development mirrors the scientific process. Take a guess, identify possible outcomes and then conduct controlled tests. And strategy doesn’t need to be competitive. Your strategic domain can absolutely be you. More on that below.

Once you’ve crafted a strategy, you can think about priorities and timelines. Then you can run the numbers and figure out if the plan will work. Once you have a first draft of the plan, you can start to think about risk. What if x or y happen? How would it affect your plans? Could you make small adjustments or would you need to re-think the whole thing? What you end up with is a plan that has helped you turn unknown factors into risks, that you can quantify. You should expect several rounds of iteration at this point, depending entirely on the complexity in your plan.

The fragility in almost every plan is the assumptions. You assume your goal will do something positive for you, that you will still want it when you get there. You make assumptions about your current situation, why things are how they are, the resources you have at your disposal and so on. You assume what happened in the past, will happen in the future and you make your plan to move from A to B in a linear fashion, free from impediment.

Anyone that’s ever constructed a plan, for whatever reason, will know that it doesn’t take long for your plan to be wrong. Mike Tyson once said “Everyone has a plan until they get punched in the mouth”. Your failure may not be as painful, but it will probably still knock you off course. So, how do you swing the odds in your favour? How do you increase the probability of success? There are two primary factors: self-awareness when constructing the plan and a commitment to reviewing progress and adapting as you go.

The first of these probability-enhancing factors, self-awareness, is difficult to address in isolation. If you’re planning on your own and there’s no one to challenge you, you risk making flawed assumptions without even realising it. We are creatures of habit and emotion, often believing we are entirely rational, when we are anything but. If you work with another person, someone who is able to respectfully challenge your assumptions, you gain additional insight that often leads to more rational assumptions and stronger plans as a result.

The second factor that improves your odds of success, is the appreciation that planning is an iterative process. As you review your plan and adjust, you start to create a picture of the assumptions you’ve made and your margin for error. This is also easier to do with another person, someone who can hold you to account and help point out where improvements can be made. This process leads to better decision-making and less regret, which is always a good thing.

When considering how to plan and whether to work with someone or not, the issue of complexity is important. You may have a relatively straightforward life, a simple plan to retire at a given age, few obligations to consider and a known target in terms of a retirement pot. On the other hand, you could have a big family, own multiple businesses, have assets in a variety of jurisdictions and a limited amount of time to hit some important goals.

The approach should alter for each scenario. The former requires a basic understanding, limited challenge and no more than an annual review. The latter may require a financial planner to understand you at some depth. To challenge some long-held beliefs while formulating assumptions and to review your progress several times a year. The key variables here are complexity and consequence. Use them to inform your decision as to how much help you might need.

Regardless of why you’re planning or who you work with, the development and periodic review of a plan will help you to find clarity about where you’re headed, where you are now and your various options for getting from A to B. This should reduce those nagging feelings we all get from time to time: uncertainty, fear, doubt. And that must be a good outcome.


By Con Lillis – CEO, MBA