Allan Roth is one of the financial planners whose independent opinions I have come to respect, and he shares seven takeaways from 40 years of financial planning. Financial Planning is an industry trade magazine targeted at (obviously) professional financial planners, but many of the articles are quite useful for DIY investors as well.

Read the article first, but here are my personal interpretations of his lessons (not his words):

  • A solid income and frugality both matter, but either one is not enough. He’s advised a high-income doctor with a net worth smaller than an emergency fund, and a 10X millionaire who is still afraid to spend their money. Both needed help.
  • Many people overestimate their ability to handle real-world risk. He has seen firsthand how clients answer the theoretical, as compared to how they later react during a real-world market crisis. Same idea as how paper trading is not real trading.
  • Indexing and low fees = higher returns. Some things take time to work out, especially when billions are spent on marketing against it.
  • You can’t predict the future. Other people can’t predict the future. Market cap indexing means that you will own the winners, many of which will be companies that don’t even exist today. Own bonds for safety, and accept whatever yield there is. You can’t predict rates either. The problem is that someone will always get it right any given time, and they’ll be loud about it.
  • The CFP designation doesn’t mean much (good or bad). CFP wants to be the gold standard for a professional financial planners, but they don’t do enough to put the clients first. It just means they have a minimum level of education, 2 years of industry experience, and chose to pay the annual dues that year. You could be a great planner without being a CFP, or a bad planner with multiple complaints and still be a CFP.
  • Financial planners provide the greatest value in: “real planning, improving tax-efficiency, behavioral coaching, and insurance analysis.” That means this stuff is harder and often benefits from an outside perspective. Note that this list excludes stock-picking and market-timing.

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Financial Planning Advice From Allan Roth’s 40 Years of Experience from My Money Blog.


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