In the early part of the new century, a group of software developers got together to develop a set of principles that could be used to develop software more efficiently. Prior to this meeting, the most common method for software development was what is known as The Waterfall method. This method is linear in nature, requires substantial documentation, and calls for a large portion of the projects time to be spent upfront on determining any and all requirements of a particular software. Many people believe that this leads to a process that requires too much documentation, spends too much time on features that ultimately aren't useful to the end-client and provides little flexibility if the needs of the project change or there are unexpected hurdles. The waterfall development model originated in the manufacturing and construction industries; where the highly structured physical environments meant that design changes became prohibitively expensive much sooner in the development process. At that first Agile meeting, the group of developers determined they found more value in individuals and interactions, collaboration with customers, working software (delivered quickly), and responsiveness to change than what was typical within the waterfall methodology. The focus became building a Minimum Viable Product to satisfy early customers and then gathering feedback to consistently provide better iterations of the product.
How does this Relate to Financial Planning?
In many ways, there are parallels between the waterfall method and how many Financial Plans are developed today. You may receive initial homework from your advisor to fill out a lengthy data gathering worksheet prior to meeting to begin discussing your financial situation. If you are new to the process, the worksheet and discussion to follow may seem overwhelming and involve answering many questions about things you don't know, can't remember or haven't even ever thought about. They will then determine all your "objectives", take 2 weeks to develop a plan and then deliver an excessive document (often times 100+ pages) to cover every area of your financial life. This document may become obsolete if not updated over time, as your life may look completely different than when you initially met.
In most cases, you will experience some level of change as we are designing and implementing your financial plan. You could lose a job or get a new one. You could inherit some assets. You or a family member could become sick or even worse die prematurely. You could have a child or even decide to start a new business. Is your comprehensive one-time financial plan flexible enough to adapt?
What if instead, we first explored all the possibilities the future could hold, THEN set goals based on those possibilities and finally ranked those goals according to priority? We could then determine which objectives could be accomplished in a specific, short time frame and focus entirely on those tasks.
Agile Financial Planning - Scrum Framework
Cloud based financial planning portals play a huge role in making this a dynamic, collaborative and interactive experience. Ultimately, we still need to have an initial "Fit" meeting, spend time Getting organized, exploring the possibilities and setting goals. However, after that we would follow a specific flow, which we have loosely borrowed from what is known in the tech world as Scrum Framework:
In this process, the "Sprint" is a set period of time, usually anywhere between 2 weeks and 6 months, where we focus intently on our top priorities. Depending on the length and complexity of the "Sprint', we may have intermittent "Stand-Up" meetings, where we discuss what we have done so far, what we still need to do, and address any roadblocks that may have come up. During the "Sprint Review" we would look back on what was accomplished, what, if any, issues arose and how they were solved. We also look back at the Possibilities list we developed to determine if it needs to be adapted based on changes in your situation. We then begin the process again and start another "Sprint".
Although this isn't a perfect process, we believe that it has many advantages over traditional financial planning. We are continuously working to uncover a better way to develop financial plans through doing it and helping others do it.
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