What is Financial Design?

More than just financial advice with style

Have you ever found yourself planning for a specific outcome only to be disappointed when your plan doesn’t play out the way you wanted? I love traveling and often find myself planning my vacations with meticulous accuracy- what time I’ll wake up, where I’ll eat breakfast, my exact walking route for the day (complete with bathroom stops!), and what time I’ll get back to my lodgings.

When my plan works out, I’m happy. But guess what happens when I wake up and it’s raining out- I find myself with no plan. Or if I am delighted with last-minute matinee tickets- I have no plan. And, when I don’t have a plan, I end up missing things I would have enjoyed.

Many of us have had similar experiences with planning. When the setting is ideal, we can execute on the plan. But where there are complications or complexity, we often don’t stick with our plan, or find that the plan no longer works as well as we would like.

The same is true for financial planning. Typical financial planning engages in a series of exercises and projections that assume that more or less EVERYTHING stays the same between now and the end of your life. But we know that the likelihood of anything staying the same is rare enough, and almost certainly a good deal of your life WiLL change, along with the financial markets and the world at large.

So, why not consider moving beyond a planning-based approach to a design- based approach? The US Army/ Marine Corp Counterinsurgency Field Manual describes the difference in this way:

"While both activities seek to formulate ways to bring about preferable futures, they are cognitively different. Planning applies established procedures to solve a largely understood problem within an accepted framework. Design inquires into the nature of a problem to conceive a framework for solving that problem"

So, design is focused on inquiry before action, while planning is focused on the application of procedures. This, of course, is especially important for women whose lives have not followed the “traditional” (read: male) path of steadily increasing income and rising up the ranks of the corporate ladder. Many of the women I work with have had multiple careers, taken breaks from working all together, and have more complexity around their financial future. As the manual goes on, it states:

"When situations do not conform to established frames of reference — when the hardest part of the problem is figuring out what the problem is—planning alone is inadequate and design becomes essential. In these situations, absent a design process to engage the problem’s essential nature, planners default to doctrinal norms; they develop plans based on the familiar rather than an understanding of the real situation. Design provides a means to conceptualize and hypothesize about the underlying causes and dynamics that explain an unfamiliar problem. Design provides a means to gain understanding of a complex problem and insights towards achieving a workable solution."

Indeed, many women find that their paths “do not conform to established frames of reference”. Maybe she took some time off from her career to raise children, or left her six-figure job to start her own business from scratch, or finds herself on a new and unplanned financial path. Maybe things have already happened that she didn’t plan for- a death, a divorce, a lay-off. In situations like this, gaining an understanding of the real situation, the complexities, and the dynamics involved are the critical first steps for a designer.

Too often, typical financial advisors skip the information gathering step because it takes a good deal of time and patience. It’s a lot of work, a lot of conversations, to get to the “real” problem.

However, I believe that only once the situation is fully analyzed and understood can we begin to think about next steps. Workable solutions are much easier to generate once a complex problem is understood.

Just as you can never watch the same sunrise twice, design is not something you do once and walk away. It’s an ongoing conversation about the nature of problems. It’s a relationship that considers different factors and relationships to help improve outcomes. Constantly analyzing the situation from a design perspective helps gauge the effectiveness of the planning and subsequent actions.

If we don’t periodically reassess the situation, we might be solving a problem that no longer exists, or miss an opportunity to plan for a better outcome. A well-designed financial life is one where a trusting relationship between advisor and client has contributed to a framework for conversation, a baseline for discussion, and a responsiveness to adjust for whatever comes next.