An Overview of Financial Planning Checklists

I’ve spent some time this past week investigating the topic of financial planning checklists. These are my rough notes:

1) I completely agree with Michael Kitces’ 2013 article on the topic where he notes that checklists should be – but are not yet – implemented as the workhorse of professional practice standards in the financial planning industry. (For anyone who does not know, Michael Kitces is well-known and respected as a thought leader in the financial planning industry). Every other profession I can think of relies on checklists more so than the financial planning industry. Moreover, other than the CFP checklist noted below, I don’t see any industry standard that indicates that failure to follow a checklist is an indication of poor professional practice (as would be presumed in other professional fields).

2) Many of the published financial planning checklists are actually sales tools, designed to lead to one conclusion. For example, the National Association of Personal Financial Advisors (NAPFA) checklist for screening a financial adviser” will logically lead to selection of an adviser who adheres to the standards of practice of that organization. Of course some bias is to be expected as a privilege of authorship, but many of the checklists I see published online are just obviously single-purpose sales tools as opposed to fact-checking instruments for the purpose of setting a uniform standard of practice.

3) The Certified Financial Planner (CFP) Board of Standards has a very specific checklist for financial planners on the steps necessary to avoid professional liability exposure. The checklist is cross-referenced to its by-laws. While this is great for planners, it is not the type of checklist I had in mind in this research. An ideal industry checklist, IMO, could be used by all planners (not just CFPs) and any member of the public as well in an attempt to achieve similar results with the planning process. In other words, the best checklists should not be focused on who is using them.

4) The handful of financial planning checklists I’ve written over the years would be classified as “niche checklists” and I have noticed that they have generally been more widely viewed, on average, than other types of articles on similar topics that are not published in checklist format. This leads me to the conclusion that I should follow this format more often.

5) Checklists on Affordable Care Act compliance and response have not been as popular as other types of financial planning checklists. I don’t know why but I published another blog post that discussed some speculation.

6) Many of the financial planning checklists available online are actually checklists of documents requested by the financial planner. This is different from a financial planning checklist, IMO, because a list of documents does not capture the essence of the procedure to be performed.

7) The most common flaw in financial planning checklists is that they tend to omit areas that are not within the firm’s area of practice. For example, Investco, an investment company, published a well-designed checklist that omits tax planning from its topical listings. If I continues to read further into Investco’s publications (I did not, I’m simply presuming for the sake of discussion), I would expect to see a disclaimer that “we don’t provide tax advice”. While this is entirely appropriate,  it does degrade the value and usefulness of the checklist.

My conclusion is that it is well past time for standardized financial planning checklists to be developed within our industry. These checklists would represent industry standards and, as such, would logically developed on a collaborative basis within our industry associations. They should emerge and evolve over time yet that really has not happened. If our industry associations can’t make progress on this issue, I wonder if grass roots efforts by individual planners might make some headway.