Diefendorf's Hierarchy of Planning

After observing human behavior for over 35 years in more than 10,000 client interviews, I have come to the conclusion that there exists a hierarchy in the planning process. Not only is it important for advisors to determine where their client resides on the spectrum, but it is equally as important for each individual to determine where he or she is in the planning process.

Not only will the planning process evolve over time as individuals begin to accumulate financial assets, but the planning professional must evolve as a practitioner to better service the changing needs of their client. Change is inevitable, but growth is optional. In the future, it will be mandatory for the values based advisor to go beyond the planning process as we know it today. We must rethink our purpose so that we will be the most valuable advisor to our clients.

Let’s start from the bottom up.

Stage I - Fragmentation – This is the natural result of an individual beginning to accumulate an array of financial assets. This includes IRA’s, business assets, real estate, insurance, investments, etc. There is not much thought about how these items relate to one another. Typically they are sold to individuals by financial salespeople. Fragmentation by definition is the loss of unity and cohesion. Over time it becomes quite obvious that something must change. To become financially successful we need to enter Stage II.

Stage II - Segmentation – After realizing that a fragmented approach to wealth accumulation is not an efficient manner of handling one’s wealth, we determine that we need professional advice. So, we hire an accountant, a lawyer, an investment advisor, etc. But what have we done? We have simply reorganized the individual pieces into a segmented structure. Segmentation by definition is the structure of something that is made up of a series of segments. Unfortunately, all too often each of the advisors is acting independently, leaving the client to pull the pieces into a comprehensive plan. But this structure leaves much to be desired, so we seek to move to Stage III.

Stage III - Integration – Comprehensive financial planning is the integration of all of the financial products and financial disciplines into well designed strategic plan. Integration is a combination of parts or objects that work together well. This has been the ultimate goal of the financial planner and individual client. To accomplish this, practitioners have had to expand their education, earning professional designations (i.e. ChFC, RFC, and CFP) that would distinguish them from the planners of Stage I & II. Over the past 30 years a financial planning profession has been created to service the needs of clients in State III. But is that all there is? I submit that there is more to planning than simply addressing one’s finances. A new dimension has evolved as Stage IV – 3 Dimensional WealthTM Planning.

Stage IV - Synchronization – Thirty five years of experience has taught me that there is more to wealth than money. In fact, total wealth comes in three dimensions – personal, financial and social wealth. In order to truly help clients with their total wealth planning both a new way of advising and a new kind of advisor is necessary. This new advisor will be one who must understand how to counsel clients through life’s transitions. No longer can the advisors simply be concerned about passing on valuables, but we must be equipped to help clients pass on their values. Leaving a legacy will go beyond one’s last will and testament and insurance. Personal wealth (your values and beliefs) will become part of the total wealth plan. Philanthropy will also be a methodology used by advisors to help clients leave a social wealth legacy. Exclusion of one of these three dimensions from the planning process will weaken the total wealth transition plan. Synchronization by definition is an intransitive verb that means working together at the same time. This is the pinnacle of the Hierarchy of Planning. Only those advisors who pursue this plateau will be equipped to deal with the clients at this level. It is time for the cutting edge advisors to become “Certified 3 Dimensional Wealth Practitioners” and time for clients to seek out a new kind of professional, a “C3DWP.” It is only when one reaches this final stage in the planning process that a life of success can be transformed into a life of significance.

Change is inevitable but growth is optional. The tools currently exist to help you take your practice to new dimensions. I challenge you to join today the ranks of the advisors who will dominate the landscape of “total” wealth management in the 21st century.

3 Dimensionally yours,

Roey Diefendorf, MI, CLU, ChFC, CFP, RFC, CIMA, C3DWP®