Journal of Financial Planning

Economics’ Approach to Financial Planning
by
Laurence J. Kotlikoff, Ph.D.

Executive Summary

• Economists long have shown that when it comes to consuming lifetime economic resources, households seek to neither splurge nor hoard, but rather to achieve a smooth living standard over time. Consumption smoothing not only underlies the economics approach to spending and saving, it is central to the field’s analysis of insurance decisions and portfolio choice.

Laurence Kotlikoff on Financial Malpractice, Economic Thinking, and
Pricing Out Passions

by Shelley A. Lee

He’s been a vocal critic of financial planning, even writing that “the financial institutions and advisers conveniently match our needs to the securities they’re peddling,” that “most professional advice is not worth the taking,” and that conventional financial planning “makes outrageously bad saving and insurance recommendations…putting a pretty face on risk and sell[ing] it.”