MONEY Financial Planning

A Simple Tool for Getting Better Financial Advice

financial advisor with couple
Ned Frisk—Getty Images

If a financial adviser doesn't know what's going on in a client's life, the advice will suffer. Here's one easy way to fix that.

True story: Many years ago, I was meeting with a married couple for an initial data-gathering session. Halfway through the three-hour meeting — the first stage in developing a comprehensive financial plan — the husband excused himself for a bathroom break. As soon as the door shut, the wife turned to me and said, “I guess this is as good a time as any to let you know that I’m about to divorce him.”

That’s just one example of why exploring a client’s financial interior is a worthwhile investment for both the adviser and client. All the effort we had expended on their financial plan, for which they were paying me, was for naught.

So how can an adviser really understand what’s going on with his or her clients?

A great first step is to fully explore the simple question “How are you doing?” Not “How are your investments doing?” or “How is your business doing?” but “How are you doing?”

As financial planners, we are quick to put on our analytical hats. We will gladly examine numbers down to three decimal places, but we often fail to delve below the superficial on a relational level.

Here’s a tool that can help. I include it with permission from Money Quotient, a nonprofit that creates tools and techniques to aid financial advisers in exploring the interior elements of client interaction. It’s called the “Wheel of Life”:

Wheel of Life

The instructions are simple: you rate your satisfaction with each of the nine regions of life listed on the wheel. Your level of satisfaction can range from zero to 10—10 being the highest. Plot a dot corresponding to your rating along each spoke of the wheel. Then you connect the dots, unveiling a wheel that may — or may not — roll very well.

If you’re wondering what value this could bring to your client interaction, consider these five possibilities:

  • It’s an incredibly efficient way to effectively answer the question, “How are you doing?” In a matter of seconds, you know exactly where your client stands. You now have an opportunity to congratulate them in their successes and encourage them in their struggles.
  • It demonstrates that you care about more than just your client’s money. It shows that your cordial greeting was something more than just obligatory. It shows that you recognize the inherently comprehensive nature of financial planning.
  • It helps in gauging how much value you can add to a client’s overall situation. For example, if this is a new client, and all the numbers are nines and tens except for a two on the “Finances” spoke, then it stands to reason that good financial planning could have a powerfully positive impact on the client’s life. If, on the other hand, a prospective client’s wheel is cratering, you might conclude that his or her problems lie beyond the scope of your process. Your efforts may be in vain, and a referral to an external source may be in order.
  • It could tip you off to a major event in a client’s life that should trump your agenda for the day. Many advisers use this exercise as a personal checkup at annual client meetings, sending clients the “Wheel of Life” in advance. Doing so encourages clients to share if they have suffered one of life’s deeper pains, like the loss of a loved one. That’s likely your cue to recognize that now isn’t a time to talk about asset allocation. It’s simply time to be a friend and, as appropriate, address any inherent financial planning implications.
  • You’ll likely find it a beneficial practice for you, too! I don’t recommend putting a client through any introspective exercises that you haven’t completed yourself. So please, complete your own “Wheel of Life” exercise. You’re likely to see this tool in a new light and find valuable uses for it that I’ve not uncovered here.

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Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

MONEY financial advisers

Dealing With the ‘Personal’ in Personal Finance

Two people shaking hands above restaurant table with laptop
Tom Merton—Getty Images

To really help people, financial planners have to delve into the the feelings and emotions that drive their clients' financial decisions. One planner explains why that's so hard.

While most of us financial advisers want to do the best for our clients, we often struggle at the task.

The main problem, as I recently wrote: We don’t know our clients well enough. We may say that a client’s values and goals are important, but most of us don’t adequately explore these more personal (a.k.a. “touchy-feely”) parts of a client’s life.

Why is this?

One reason we avoid deeper discovery with clients: No matter how we’re paid—whether by commissions or fees—most of us don’t get compensated until the financial planning process has neared its end.

Let’s use the six-step Certified Financial Planner model as an example. The information-gathering stage, when we have the chance to really understand who our clients are, is the second step. But most advisers don’t get paid until step five, when clients implement our recommendations.

Advisers, therefore, have an inherent economic bias to get to step five as soon as possible.

The second reason we don’t dig deep: Having in-depth conversations with clients can be uncomfortable—mostly for us. We, as advisers, may feel underqualified or inadequately trained to delve into the beliefs, feelings and emotions that drive their financial decisions.

I get it. About seven years ago, I decided that I needed to give and get more out of client interactions, not merely through questions at opportunistic times, but by a deliberate process.

On the day I decided to implement this new strategy, I saw I had a data-gathering meeting on my schedule. Perfect. I was ready to jump right in.

I had met the woman in this husband-and-wife household before—she was a human resources executive at a large company—but not the man. And he turned out to be a “man’s man.” His shoulders were so broad that he had to turn sideways to get through the doorway to my conference room. Scowling, he extended a bear-sized arm and squeezed my hand hard enough to send the clear message that he’d rather be anyplace but there.

“Really?” I asked myself. “I’m going to ask this guy about his values and goals? About his history with money and about the feelings and emotions evoked by his personal financial dealings?”

After I could delay no longer, we got down to it. My assumption that this guy would recoil from an introspective conversation was completely wrong. In fact, my nonfinancial questions clearly set this visibly hesitant client at ease.

The truth is that we’re all capable of communicating more meaningfully with our clients. We do it with our family and close friends all the time. Aren’t we capable of simply getting to know someone?

To claim lack of expertise is a cop-out. There is plenty of help out there for gathering information about intangibles. Here are three resources I’ve found extremely useful:

  • George Kinder: Kinder is a Harvard-educated financial planner who is often dubbed the “Father of Life Planning.” Personally, I find the term “life planning” problematic. It seems to brand intangible data-gathering as something apart from good financial planning, which lets the rest of us off the hook. Kinder’s work, however, should not be discounted. Kinder’s book, The Seven Stages of Money Maturity, effectively started a movement that continues to grow as new generations of planners look for more personally rewarding practices. Another of his books, Lighting the Torch, provides planners with a practical methodology to incorporate into their process.
  • Rick Kahler, Ted Klonz, and Brad Klontz: Kahler, a financial planner in South Dakota, teamed up with psychotherapists Ted and Brad Klontz on two projects that have immeasurable value to the financial planning community. The Financial Wisdom of Ebenezer Scrooge is a short, easy-to-read volume that will help both advisers and their clients examine the motives behind our financial decisions, successes and failures. I had the privilege of studying with Ted and Rick immediately following the release of their second collaboration, Facilitating Financial Health. Written for the serious practitioner, it’s one of the most highlighted books in my library.
  • Carol Anderson and Amy Mullen: Last, but in my opinion the most important, is what I believe to be the ideal resource for financial advisers who truly want to institute more meaningful conversations with their clients. With Money Quotient, Anderson and Mullen have created something very special: a nonprofit devoted to providing advisers with tangible tools designed to elicit intangible information from clients. Various degrees of licensing allow advisers to merely dabble with some of Money Quotient’s tools or transform their entire practice in a way that puts client values and goals at the center of their process.

Acknowledging that personal finance is more personal than it is finance is a great beginning. But the light-bulb moment is only valuable if it leads to the application of the associated theories and concepts.

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Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

MONEY Financial Planning

People Ignore 80% of What Their Adviser Tells Them. Here’s Why.

man putting fingers in his ears
moodboard—Getty Images

A financial planner explains why so many clients ignore good advice. Hint: It's not the clients' fault.

I’ve heard it estimated that out of all the financial and estate planning recommendations that advisers make, their clients ignore more than 80% of them. If there’s even a shred of truth in this stat, it represents a monumental failure of the financial advice industry.

Unfortunately, I think there’s a lot of truth to this number.

To explain why, let me tell you a story about a financial planning client I worked with a few years back. In one of our first meetings, she and I were reviewing her three most recent tax returns. As I discussed them with her, it became clear that the accountant who had prepared those returns — an accountant who had been recommended to her by her father — had filled them out fraudulently. A bag of old clothes that she had donated to charity became, on her Schedule A, a $10,500 cash gift. She also deducted work expenses for which she had already been reimbursed.

The client, a young single woman, wasn’t aware of these problems, as far as I could tell. So I gave her my best advice: Turn yourself in — and turn in the accountant, too. Tell the IRS about this before they come after you. “You’ve got to do this,” I said.

That was the last I ever saw of that client. I tried getting in touch with her, but she never communicated with me or my firm again.

Upon reflection, have a pretty good idea why.

Her accountant had been doing her father’s returns for even longer than he’d been doing hers. By telling her to turn in her accountant, I was also telling her to turn in her dad — the person who recommended the accountant and who, perhaps, had fraudulent statements on his own returns. I had crossed a line. And she, I assume, had decided to pretend that we had never had that conversation.

So why did she ignore my advice — or any of the advice I never got to give her? For the same reason that so many clients ignore so much of their advisers’ advice.

To say that clients are just not good at follow-through is a cop-out. I think the real problem is that advisers fail to apply the key discipline I learned early in my training as a financial planner: Know Your Client.

For Certified Financial Planner professionals, of which I am one, a key part of the Standards of Professional Conduct is to “Gather client data and establish goals.” It’s primarily in that step, when we gather client data, that we have the opportunity to get to know our clients. The standard-setting CFP Board offers some further guidance in that area:

The financial planning practitioner and the client shall mutually define the client’s personal and financial goals, needs and priorities that are relevant….”

Please note that the CFP Board specifically mentions both a client’s personal and financial goals. While I’m confident that planners are well-equipped for the collection of tangible, financial information, I’m less sure that advisers are effectively gathering intangible personal information about our clients.

So how do you gather and apply data about your client’s personal life, goals and values? The CFP Board offers further guidance:

…the practitioner will need to explore the client’s values, attitudes, expectations, and time horizons…”

OK now, this has gone a little too far, right? I mean, how exactly am I supposed to explore a client’s values, attitudes and expectations?

Most advisers relegate this warm and fuzzy talk of exploration, values and attitudes to a niche within financial planning called “life planning.” These advisers picture an entirely different breed of Zen planners meditating on a yoga mat with clients, and discount the practice entirely. According to the CFP Board, however, knowing our clients on a deeper level is just plain good, by-the-book financial planning.

So back to my client: Maybe if I’d gotten to know her on a deeper level, I could have helped her with her tax returns — and the rest of her finances. But I’ll never know. I may have been pleased with myself for uncovering her problem, but my recommendation didn’t bring her relief. It went the other way.

Since then, I’ve learned that planners, myself included, can have a more meaningful impact on the lives of our clients by recognizing that personal finance is more personal than it is finance.

And I believe that better understanding our clients’ intangible hopes, dreams, values and goals is also the key to higher implementation rates. So how do we do that?

That’s another story.

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Financial planner, speaker, and author Tim Maurer, is a wealth adviser at Buckingham Asset Management and the director of personal finance for the BAM Alliance. A certified financial planner practitioner working with individuals, families and organizations, he also educates at private events and via TV, radio, print, and online media. “Personal finance is more personal than it is finance” is the central theme that drives his writing and speaking.

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