Broker Check

Evidence-Based vs. Case-Based Financial Planning

October 23, 2020

In medicine, evidence-based research is the standard by which the best care is achieved. Evidence-based information points to proof that something works in a given situation. When it comes to biological pathways, the human body often signals similar responses to a given treatment. Conversely, case-based treatment strips out the science and focuses on goals of the patient in that particular case, ignoring previous data of similar cases. In practice, I think physicians use both evidence-based and case-based medicine regularly. Combining the science of how a disease should be treated with the art of listening to the patient’s desired outcome is using both. Utilizing only evidence-based science seems to be completed in research projects, and relying solely on case-based “science” is fraudulent at best.

While medicine focuses on the human body, financial planning focuses on personal values. As human beings, our core values often drive our decisions on where to place the most focus in life and where to cut corners. Our values are individualized and shaped by our experiences and relationships. Values can change over time, but the core set of values often stay consistent and influence our decisions.  

Like medicine, financial planning engages both evidence-based thinking and case-based skills. An example of evidence-based financial planning might be found in investing. Evidence-based investing might suggest a young physician starting her own practice to invest in risky stocks or ETFs in a passive manner. While that’s a great starting point for a conversation, the case-based financial planning aspect will ask her some questions to reveal her core values and validate the evidence for her specific case. It could be that she feels starting her own practice is risky enough, and coupled with significant student loans and delayed lifestyle adjustments, risky stocks might not fit into the current comfort zone and value system.

If there weren’t infinite choices to life’s journey, evidence-based planning might be the only pathway necessary. Since everyone has their own preferences, desires, and values for their own lives, the only way to deviate from formulaic plans that don’t really fit anyone is to ask original questions on a case-by-case basis to find why pathways will or won’t work for any given situation. While a formulaic route may preferred by some, many of us want our financial matters customized to accommodate our core set of values.