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In financial planning, just as in medicine, there’s a big difference between collecting data and gaining wisdom. In both professions, it’s easy to misjudge the gap between having the facts and knowing what they really mean.
Data is raw. It is the blood pressure, the pulse, the adjusted gross income.
Information is more useful. It is a patient’s history — the context that his or her blood pressure usually “runs on the low side.” Information also reveals how a financial planner’s client responded to the stock market volatility of 2008-09. Did the client panic and sell, or remained focused on long-term goals?
Knowledge runs even deeper. It tells a physician the acceptable range for blood pressure, or a financial planner the history of a client’s spending patterns. Knowledge is the collective information you have acquired in your field of expertise. In medicine, it is the physiology and pharmacology of the body’s organ system. In finance, it includes the rules that govern retirement plans.
Wisdom puts it all together. The patient with a low pulse or low blood pressure who appears healthy is very different from the pale and clammy individual with the same “numbers.” The financial planning client who desires an expensive family vacation but who has a robust retirement account, is different from the person who lacks savings.
Wisdom is also understanding that how much one spends is not nearly as important as how much one saves — in the past, the present and the future. Wisdom is the ability to help clients enjoy the fruits of their labor in a manner that does not leave them in poverty late in life.
Wisdom goes even another step or two. It is the art of talking to patients in a way they understand, and perhaps in a way that will lead to more healthful behavior. Wisdom is having the ability to size up the likelihood of financial success for a family in just a few minutes of conversation. Wisdom is the ability to fit an investment profile to the risk tolerance of a family.
Who do you want giving you either medical care or financial advice? A salesman? Someone with lots of data and perhaps even a bit of knowledge? Or do you want something else, something more?
Do you have an expert with that “something more” to help you with your financial life? Or are you managing your finances without data, knowledge or wisdom?
Gaining wisdom about financial matters can make an extraordinary difference.