AnnaMarie Mock, a fee-only Certified Financial Planner™ at Highland Financial Advisors, discusses the dynamic interplay between art and science in financial planning. Drawing inspiration from Leonardo da Vinci's philosophy that "everything connects to everything else," she emphasizes that financial planning is an art involving subjective goal-setting and science driven by objective analysis tools. In this video, Anna explains how the scientific method can be applied to financial planning, using equity compensation as a concrete example.
1. Introduction to Financial Planning
Financial planning is a process that uniquely combines the art of subjective goal-setting with the science of objective analysis. This approach ensures that financial plans are personalized and grounded in evidence-based methods, creating a repeatable process with actionable steps. Anna underscores that understanding this dynamic is crucial for crafting a financial strategy that is both adaptable and effective.
2. The Scientific Method in Financial Planning
Anna illustrates how the scientific method, typically associated with research and experiments, can seamlessly integrate into financial planning. The process begins with observation—identifying a key financial concern, such as having a significant portion of net worth concentrated in employer non-qualified stock options. Next comes the question and research phase, where one explores how to maximize the value of the stock compensation and reduce risk. This step involves gathering all relevant facts, such as personal goals, insights into the company and industry, the type of equity compensation, and the associated tax implications. The third step, hypothesizing, involves creating a plan that aligns stock compensation strategies with overall financial health to build wealth and fund short-term goals. Predictions are then made about the expected outcomes of this plan, such as selling a portion of the stock to fund immediate goals, investing in a diversified portfolio, and planning for future awards. The analysis step follows, where these predictions are tested, and calculations are made to determine the optimal times for exercising and selling stock. Finally, the monitoring step emphasizes the need for continuous review and adaptation of the plan to ensure it remains aligned with changing personal circumstances and financial goals.
3. Importance of Monitoring and Adaptation
Monitoring is highlighted as the most critical step in the scientific method and the financial planning process. Anna stresses that as life evolves, so do financial plans. Regular monitoring allows for identifying what is working, what isn't, and where adjustments are needed. This flexibility is essential to maintaining confidence in one's financial future and minimizing stress. By treating financial planning as an ongoing experiment, individuals can ensure their strategies remain relevant and effective.
4. Conclusion
Anna concludes by reiterating that every financial plan is unique and should be approached as an experiment tailored to the individual's specific needs. This personalized approach boosts confidence and reduces anxiety about the future. She encourages viewers to take the next step by scheduling an initial consultation to receive customized financial advice.
AnnaMarie Mock is a CERTIFIED FINANCIAL PLANNER™ and Partner at HIGHLAND Financial Advisors, LLC, a Fee-Only financial planning firm that offers comprehensive financial planning, retirement planning, employer retirement planning, and investment management. AnnaMarie graduated from Montclair State University with a degree in finance and management and successfully passed the CFP® national exam in 2016. She has been working at Highland Financial Advisors since 2013 as a fee-only, fiduciary Wealth Advisor and is a member of NAPFA.