Fitness Training Principles in Financial Planning

I was at the gym last week, going about my normal workout routine when I noticed a lanky guy, skinnier than me, undergoing personal training with the in-house fitness trainer. Looking at the types of exercises that the trainer made the trainee went through, I realized that the trainer was focusing on the core body muscles. The trainee was made to do exercises such as squats, rows, lunges and combination exercises that hits the several major muscle groups at the same time such as the back, the abs, and the quadriceps.

This set me thinking... Many D.I.Y. gym-goer only focus on building the 'showy' muscle groups, such as the arms and the chest. These are the muscles that are most visible, especially for guys who wear tight-fitting tees (yucks!). They are also the stuff that get girls ogling and drooling (Captain America anyone?). And therefore many gym-goers focus only on building their arms and chest, and not the ones that get covered up.

However, true body-building enthusiasts will tell you that it is even more important to train up your core muscles, the ones that you can't see. Not only do they stabilize your body when working out, they also keep the other muscles groups in balance to keep you looking proportionate, as well as to reduce injuries.

For example, one who only focus on building the chest without training his back muscles will in the long run suffer from backaches and pains. This is due to the disproportion in strength between the front and the back. With the relatively weaker back muscles, he will be getting lots of back pain when he's older and when muscles start to deteriorate.

This is the same for personal financial planning. In my work as a financial consultant, I meet many clients who only want to focus on investments and their career and their primary goal in life is to make more money. They will put almost all of their available financial resources into speculative and risky investments, with the hope that it will quickly double or triple in value. They do not regard protecting what they have accumulated and insuring their future income as important priorities.

As someone who is in the business of risk management, it worries me a lot when I meet clients with such mentality. The most difficult part is that they usually have a unshakeable belief in their methodology and is closed to other ideas which may seem 'not exciting enough'. This mindset is the same as only focusing on building the 'showy' muscles and neglecting the core muscles, which increases the chance of injury in future.

In life, balance is the most important of all. A well structured personal financial plan should include the right mix of the following:

  • Short term cash bank deposits (for emergencies and necessities), 
  • Medium term savings for important things in life (such as a house or marriage), 
  • Long term investments (for retirement and children's education funding), 
  • Life and health insurance (to protect against the financial implications caused by illness, disability or death), and a
  • Estate distribution plan (such as wills, nominations and trusts).

Furthermore there should be a overall master plan to spell out the person's objectives and a general strategy to achieve those objectives. This is what I commonly refer to as a 'financial blueprint'. Many people have investments, assets and insurance policies. But what they do not have is a financial blueprint. Therefore it is obvious that their financial instruments are all over the place and lack direction. Their policy purchases and investments are made on an ad-hoc basis and may not be in harmony with the rest of the holdings.

This is where the role of a financial planner is important. And there are similarities with that of a fitness trainer. Let's go back to the example of the fitness trainer.

The fitness trainer helps to design a fitness regime for the trainee to undergo, so that he can achieve his fitness goals. He is the expert authority in his field, and he knows that training the core muscles is the foundation for building a strong body, and is more important than building the 'showy muscles'. He monitors the progress of the trainee to ensure that he's on track. He also gives the trainee the push and motivation for him to perform that extra rep, that extra set.

Similarly, a qualified financial planner will help you in designing a financial blueprint. He helps in  qualifying and quantifying your financial objectives. He devises a strategy to meet your goals. He provides recommendations of the asset mix suitable for your risk profile and situation, recommends a suitable rate of return and the financial instruments to achieve that RoR. Most importantly, he monitors and reviews the blueprint periodically to ensure that you're on track.

Therefore in a way, financial planning and fitness training have common principles that will help lead you to success, be it financially or physically. The next time you are thinking of doing some D.I.Y financial planning, why not consider engaging the help of a certified financial planner? You will be glad to have done so when you achieve better results  for lesser effort and money. And remember to train those core muscles!

By Cai Junhao, AFC, AEPP