ABSTRACT Financial planning impacts individuals and families in unique and powerful ways, and it does so across time and even generations. Through advances in financial planning, we are now not only aware of important psychological and relational dimensions and impacts of financial planning, but we are also becoming more aware of how financial planning affects non‐financial aspects of one's life and wellbeing. Consequently, theory development in personal financial planning is critical to advancing our understanding of how financial planning impacts consumers in myriad and profound ways. This study therefore sought to (1) review the financial planning literature in terms of its theoretical underpinnings and (2) propose a more robust and comprehensive theoretical framework that more clearly defines the value of professional financial planning in a more holistic way. After synthesizing the literature, we propose the following definition: Financial planning is the process of establishing financial goals and managing resources in ways that are expected to promote health and wellness . We propose three mechanisms through which financial planning impacts health and wellness: (1) goal alignment, (2) decision quality, and (3) resource management. Importantly, we introduce an outcome model that distinguishes proximal outcomes (e.g., improved financial ratios, increased flexibility, reclaimed time), intermediate outcomes (e.g., stress relief, identity congruence, time autonomy), and distal outcomes (health and wellness). We further posit that engaging a professional financial planner enhances the efficacy of the three mechanisms through both a moderating role and a direct input role. Nine testable propositions are advanced. The terminology and constructs associated with this framework were assessed through a pilot study of 1204 consumers and 654 advisors. Results suggest that the proposed terminology resonates with both groups, with “well‐being” generating stronger agreement than “health,” providing preliminary guidance for future operationalization of the theory's outcome constructs.
Heckman et al. (Thu,) studied this question.