Financial Planning Tools That Aren’t “Penske Material”

November 16, 2020
By Matt Cohen, CFP®, CIMA®

I’m of the opinion that many things in life can be referenced back to Seinfeld, which has been the enduring genius of the show. A memorable episode involved the character George Costanza at a job he wasn’t sure if he actually got, doing work he wasn’t quite sure he knew how to do. At the end of his first week, George met with his boss to go over the assigned “Penske file.” George’s boss quickly realized that George spent the entire week reorganizing the pages from a standard manila file folder into an accordion file folder. There were no conclusions or analysis of the material, just a reformatting of the known information.

I’ve spent time looking at the financial planning tools offered by various financial institutions, and the conclusion I’ve arrived at is that most are offering a “Penske file” solution to financial planning — data entry to reorganize the balances of existing accounts, projections of growth or depletion, and not much of a conclusion drawn around the results.

Many sites offer retirement funding analysis, a simple calculator where you enter the balances of existing accounts and some assumptions, and the software indicates whether you are “on track” or not. But on track to what? Typically, these tools ask how much the person would like to spend in retirement as a percentage of current income, or they show how much you can safely withdraw at retirement. While this is a good start, and can serve to motivate individuals to save more to reach their intended goal, they tend to ignore the fact that life is more complicated than simply “guaranteeing” an income flow for a period of time. 

Other calculators are geared towards specific goals like college saving, down payment for a house, etc. The issue here is that, while savings can be “fungible,” there is a tradeoff when underfunding one goal (retirement) for the sake of another (college expenses). The interplay between several financial goals is typically the most important consideration for our clients, and it is lost with these tools. Your financial story is a complicated, choose-your-adventure feature, not a static tale with a foregone conclusion. 

In our 38 years of financial planning experience, we find that this “goals-based” analysis has limited usefulness. Throughout your life, other decisions come into play that will impact your spending needs, such as moving to different parts of the country, downsizing a house, caring for aging parents or supporting adult children. Planning for these life events requires more than just determining one or two specific goals, and blindly saving to fully fund each one. It requires coordination of competing interests and prioritizing of goals. In short, a goals based analysis simply reorganizes the existing information and projects, without any context, whether the expressed goal is met or not. What our financial planning team aims to do is provide you a roadmap that you can use to address these life events and make informed decisions. 

As mentioned above, while these online tools can be good for “sanity checks,” they are no replacement for a thorough financial analysis. Even when the results from these tools show positive outcomes, we still encourage you to speak with your client service team about any changes in your life or your financial goals. Sometimes, you may not know what questions you need to be asking, in the context of your total financial wellbeing. We’ll gladly review what is in your accordion file folder to present some meaningful conclusions for you to consider. 

Our goal at West Financial is to not only provide you with the tools required to succeed, but instill you with the knowledge and confidence you need to make sound decisions on your own and be a trusted resource for all of your financial questions. To that end, we will be hosting several educational webinars starting in 2021, that will highlight financial planning topics. We will start in January with what we are referring to as, “Financial Planning 101.” This webinar will detail the importance of financial planning and highlight the steps necessary to set yourself up for long term financial success. If you are unfamiliar with our planning services, please join us to see where we start as a co-author to your financial story. And, if you have children or know of younger people who you feel might find value in learning about planning, feel free to share the invitation once you receive it. 

It is important that anyone who needs planning, can have access to planning. We look forward to working with anyone willing to start putting their “Penske file” in order and writing a happy ending to their story.

Meet Matt Cohen, CFP®, CIMA® »

Read the November 2020 Financial Planning Focus »


Important Disclosures

  • West Financial Services, Inc. (“WFS”) offers investment advisory services and is registered with the U.S. Securities and Exchange Commission (“SEC”). SEC registration does not constitute an endorsement of the firm by the SEC nor does it indicate that the firm has attained a particular level of skill or ability. You should carefully read and review all information provided by WFS, including Form ADV Part 1A, Part 2A brochure and all supplements, and Form CRS.

  • This information is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept. These materials are not intended as any form of substitute for individualized investment advice.