Financial planning shares parallels with science, engineering fields

By Nicholas Mercer

The Tri-Cities has a substantial population of scientists and engineers in its workforce and throughout the community. It is no surprise, then, that as a financial planner, I have enjoyed working with scientists and engineers as clients and partners.

The experience has made me aware of a synergy between the methodologies that are standard for people in these careers and the best professional practices in my own field.

Leveraging data

Analyze the data, the needs and the goals. Build what works to achieve those goals. Repeat.

Scientists and engineers review data and evidence and devote their analysis to building what solves and improves the results. This is much of our daily work in financial planning, too.

For example, I work with our investment team that specializes in using historical data and analytical methods to ascertain trends and likely financial events, creating evidence-based strategies oriented toward the results over the long term.

Communicating this process with clients in science and engineering results in a special richness because of the parallels with their work.

I understand the importance and rewards of using a quantitative approach to financial planning, sharing the charts and spreadsheets that guide our recommendations, all followed by rigorous, ongoing analysis of performance.

Here are some specifics about this approach that could benefit clients in the science and engineering fields:

• Analytical data: Financial advisors use data to make informed, objective decisions that align with clients’ financial goals. The analytical approach minimizes the impact of emotions or personal biases on our recommendations.
• Risk management: Historical data and analytics help assess and manage risk. By quantifying the potential risks and rewards of various financial strategies, financial planners empower clients to make well-informed decisions that are specific to their individual financial situation.
• Performance tracking: Financial planners regularly monitor the performance of investments and financial plans. The data-driven approach not only enables adjustments as needed to keep on track to meet goals, but best practices include multidimensional analyses that incorporate sustained monitoring and updating of investments and planning.

From data to communication

• Clear communication: Much as charts, graphs and spreadsheets model scientific and engineering tasks, the use of charts and spreadsheets enhances clients’ financial plans with a clear, visual understanding of their progress and trajectory. This visual representation helps communicate the potential outcomes of different strategies.
• Customized planning: Just as a scientist or engineer relies on data to design experiments, financial planners use data to design custom financial plans. These plans are tailored to every unique circumstance and the ultimate objectives.
• Evidence-based recommendations: As fiduciaries with legal and ethical responsibilities, financial planners don’t rely on hunches or speculation. Instead, we base our recommendations on the evidence presented in our data analysis, building and maintaining confidence in the strategies.

Less emotion

Emotions can often cloud financial decision-making. In fact, we study the emotional patterns of other investors, so that we can look for likely events in the markets, while keeping our own decisions methodical. Our approach minimizes the emotional aspect, focusing on the rational analysis of historical data to create sound financial plans.

• Long-term perspective: Our data-driven recommendations are designed to support financial success. We look beyond short-term market fluctuations and aim to create strategies that stand the test of time.
• Flexibility with evidence: As new data becomes available, we adjust our recommendations accordingly. This flexibility allows us to pivot when evidence suggests a better course of action.

In the Tri-Cities, it has been my honor to serve scientists and engineers. Sometimes in all the diversity of the workforce in the area, we can lose sight of the shared goals and even methods that many of us have in common.

We might not think of financial planning, science and engineering as overlapping types of work. Certainly, just being in one of these careers does not mean that someone could be successful in either of the others, but I have found that there is a distinct kind of appreciation and shared perspective at play regularly, and in that yet another example of the richness and dynamism of the business community in the Tri-Cities.  

Nicholas Mercer is a certified financial planner and wealth advisor of Piton Wealth in Kennewick.