Excerpt in The Art of Practicing and The Art of Communication in Financial Planning
In our profession’s recent history, we’ve witnessed significant changes that have impacted our industry. Financial advisors now face tremendous competition, a myriad of complex and evolving regulations, a cautious and skeptical client base (post Madoff), an overall slowdown in wealth creation, and an entire generation of advisors facing retirement and succession planning.
That may mean a shift in how we do business, but what hasn’t changed is how we serve our clients. Financial planning is, first and foremost, a service industry, and though our margins may be under pressure, our commitment to helping people achieve their life goals, through financial health and happiness, remains at the core of what we do every day.
The “science” of financial planning is frankly pretty straightforward. It is bringing together the analytics, number crunching, knowing and navigating the laws, rules and regulations, etc., of looking at the opportunities that apply to a client’s situation. This article is only about the “art” of financial planning. The “art” of what we do comes down to this: REALLY helping clients understand their own issues, going way beyond the surface of what they believe they want to address and achieve. It is to help them by artfully asking questions and listening such that THEY discover and articulate their true concerns, life goals, values, hopes, and dreams.
I‘ll explain further. Like most successful firms, Private Ocean prides itself on employing the best and brightest in the industry, with impressive credentials, advanced education, and skills to help any client achieve their financial goals. But what, exactly, are the client’s life goals? The key to best serving our clients is to help them really understand their own issues and concerns, not their advisor blindly telling them what they should do with their financial future. Our responsibility is to build trust and to set the expectation that our relationship goes beyond ensuring that their portfolio is structured appropriately or their only child has a college fund before they graduate from high school. It starts with asking questions and evolves into educating clients to make the right decisions based on achieving financial independence, most importantly consistent with their values while creating a sense of overall empowerment.
Asking the Right Questions— and REALLY Listening!
As wealth managers, we can’t give great advice and truly help clients in a meaningful way until we first listen— really listen— to what our clients are saying (and not saying). Once we have a clear picture of a client’s practical goals and blue-sky-thinking dreams, we can then guide them in understanding their potential roadblocks. It’s important to dig in, ask questions, and then allow clients to explore themselves, giving them enough space to achieve self-discovery about their true life and financial goals.
Here’s an example. I had a client walk in and tell me exactly what he wanted. “I make great money; I want to work ten more years, put my daughter through college, and then retire.” He also provided the typical financial information as well as specific financial goals— timing and amount of income at retirement, etc. I could have just run numbers and given him an amount to save, make sure his accounts were structured correctly, make sure his estate was in order, risk management/ insurance was appropriate, etc. Instead, in discovery, I kept asking open-ended questions about what he was telling me, and allowing him space to talk— with long silences letting him think and continue.
As a result, I discovered (as did the client) that he hated his job, that he thought he could work 10 more years but that the stress was extreme— and he didn’t really have time for himself to do what he really wanted— which was to write novels! Getting all the way down to the core of what clients truly want in life sparks a discussion about possibilities— the “what if” talk that inevitably stirs thinking beyond the surface. That’s where the science comes in, working within the client’s current and projected financial situation to see what is possible. Where you land might be developing a plan with a client that they had no idea was possible when they walked in the door! In this case, we developed a plan that had him/ her begin taking one day a week to write and cut back on work, accepting that he may work longer but with a noticeably improved quality of life. He’s now happier and excited about his future, all because we had the RIGHT conversation.
Education Is Fundamental
There’s a certain skill in creating an excitement around education, in bringing clients along in the journey, and exploring their solutions and alternatives. Otherwise, advisors are just number crunchers who may serve up an adequate plan but share no real knowledge that can help the client thrive over time. Here’s where science and art intersect again. While the science of financial planning is the ADVISOR understanding all of the real and potential barriers to accomplishing the client’s life goals and the risks they face, art is how the advisor makes sure the CLIENT understands all of this in a meaningful way TO THEM. This includes but is not limited to:
- All areas of personal, business, and financial life
- Achieving financial independence/ financial security
- Securing lifetime health care
- Long-term care, disability, overall risk management exposure
- Estate and legacy planning
- Investments and portfolio
- Income taxes
- Other areas as applicable (education funding, debt management, budgeting, etc.)
It’s the opposite approach of telling a client to “do X, Y, and Z.” It’s saying, “Let’s look at what your alternatives are and what they mean.” You don’t have to use technical terms. In fact, using “terms of art” does not foster trust with a client. Simple, clear communication is critical in educating clients and helping them understand their options, and letting them make decisions while offering guidance that keeps them on track. If they make bad decisions, then you’ve probably done a poor job educating them effectively.
The Golden Rule
We learn as children to do unto others as we would have done unto ourselves. It may seem rudimentary, but using this basic principle as part of the firm’s philosophy on service helps our advisors build meaningful, successful relationships with clients who are engaged partners. Another way we talk about this is, “here is what we would do, Ms Client, if we were in your personal situation, knowing what we know with our training and education.” True financial planning— the “art” if you will— is the manner in which all of this is delivered with:
- Generous listening
- Expert advice, expertly delivered!
Final Thought: “Practicing”
One final comment— my father told me early in my career that the definition of a profession was that it took lifelong learning to be successful, and that no matter how much you learned, there was always more to learn! I believe this is very true for the art of financial planning. It takes practice, more practice, learning, and more learning! No matter how proficient we become, there is always more to learn and personal growth to be had that will help us help clients in better, more successful ways.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Private Ocean, LLC [“Private Ocean”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Private Ocean. Please remember that if you are a Private Ocean client, it remains your responsibility to advise Private Ocean, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/ evaluating/ revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Private Ocean is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Private Ocean’s current written disclosure Brochure discussing our advisory services and fees is available for review upon requestor at www.privateocean.com. Please note: Private Ocean does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Private Ocean’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please also note: If you are a Private Ocean client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.