• broadened your job description from financial advisor to fi- nancial life planner, and
• removed some of the obstacles that cause clients to compart- mentalize life matters and financial matters.
After working through a Life Transitions worksheet, the client now has a highly relevant context for the many services the financial ad- visor may choose to introduce. In the example of transitioning through a job loss, the client had both the opportunity to talk through her op- tions and to confront the financial implications and opportunities brought to the fore by the transition. The client now understands that going through this transition cannot be compartmentalized from her financial life. There are financial implications to be dealt with.
In the case of transitioning through a job loss, the financial implica- tions include: changes in income, changes in standard of living, re- tirement plan adjustments, insurance coverage review, cash flow planning through the transition, and the long-term financial impact on retirement plans.
As a financial life planner, you also have the opportunity to make other observations or suggestions that might facilitate a successful life transition. Maybe a job loss is a time to sample a new lifestyle such as “downshifting” in order to experience a better work-life balance.
Or maybe this is the time to shift careers. Is there something else the client has really wanted to do? Or if finances permit, you could sug- gest a sabbatical—a time to rest, refresh, and reflect on the next steps.
This process has now given the client much to think about re- garding the impact of life on finances, and vice versa. This contem- plation will help the client appreciate the expertise that a competent financial life planner—a partner, guide, and educator—can bring to the table. The client will want to know what he could (and should) do. The client will need to comprehend obstacles and options. Fac- ing financial implications of life transitions alone is a daunting and draining task, and the odds of dealing with each issue appropriately are negligible. The need for professional financial help is obvious.
important decisions because you and your family members are the ones who have to live with those decisions. My job, as I see it, is to advise you of the financial pitfalls and opportu- nities at each transition in your life.
The life transition conversation allows the advisor-client rela- tionship to grow in a manner that is advantageous for both parties.
It is good for the advisor because it creates a better sense of under- standing for what is happening in the life of the client and it creates more cohesiveness in the relationship. The advantages for the clients include a greater understanding of the relationship between their money and their lives, an appreciation of what impact sound finan- cial advice can present, and an opportunity to talk through impor- tant life decisions with someone who has observed similar transitions with many other clients.
In short, the Life Transitions Survey is the beginning of new sort of conversation between advisor and client where the client’s per- spective is broadened and the advisor’s role is expanded and more defined. Figures 6.3 through 6.5 are samples of Life Transitions work- sheets clients would receive upon indicating the life transitions of loss of a business partner, a new job, and education/retraining.
Using these types of “know thy client” instruments will not change the products or services you offer, but these tools will change the context in which you present those products and services. This approach will work best for those advisors who have a network of professionals who can offer services that fall outside the advisor’s per- sonal arena of expertise.
Some life transitions will require insurance solutions. Other tran- sitions will require estate or tax work. These are common referrals for advisors to make. By placing this tool in the discovery phase of your interaction with clients, you begin placing yourself in the role of general contractor as you either perform the service(s) they need or coordinate the appropriate referral.
In this age where transactional brokers and advisors abound, it is of paramount importance to set yourself apart with a process that dif- ferentiates you from the transactional crowd. We believe that estab- lishing a fresh context for your relationship with clients is a critical step in that process. This sort of tool can help you do that. Opportu- nities are the offspring of well-thought-out questions. The Life Tran- sitions Survey is an example of the kind of tool that can help you in that process. This tool and this process are premised on the princi-
ple of asking questions to find out where clients are before telling them what they need to do. In this approach, clients are convinced of their need for your services before you ever discuss the service or transaction because the recommendation you make is directly tied to a life event or expected transition.
6 / Using the Life Transitions Survey 67
FIGURE 6.3 Life Transitions Worksheet Work Transition: Loss of a business partner
1. How does this transition affect your business goals?
2. How does this transition affect the day-to-day operations of your business?
3. How does this transition affect your outlook?
4. Has this change revealed any vulnerabilities in your business?
5. Will this transition have an impact on your personal financial situation?
6. How will this transition affect your business planning for the future?
7. Have your priorities changed as a result of this transition?
Financial Implications
• Impact on estate plan
• Impact on personal retirement plan
• Disability issues
• Emergency fund planning
• Effect on revenues
FIGURE 6.4 Life Transitions Worksheet Work Transition: New Job
1. Does the new position have a pay increase or decrease?
2. If there is an increase, what plans do you have for the additional money?
3. Are there increased or decreased retirement benefits with the new position?
4. How will the change in benefits affect your retirement plan?
5. Have you made arrangements for transferring your 401(k), IRA?
6. Do you plan on living standard adjustments?
Financial Implications
• Change in income
• Relocation expense
• Managing new assets
• Insurance adjustments
• Retirement plan adjustments and transfers
• Tax planning
• Living standard adjustments
• Cash flow planning
6 / Using the Life Transitions Survey 69
FIGURE 6.5 Life Transitions Worksheet Work Transition: Education/Retraining
1. What will the education costs be per year? How long will it take?
2. What impact will this have on your current earning power?
3. How will this education impact your future earning power?
4. Are you contemplating lifestyle changes through this period? If yes, what changes?
5. Are you contemplating selling assets during this period?
Financial implications
• Tuition costs payment plan
• Loss of income
• Cash flow planning
• Impact on retirement plan
• Impact on lifestyle
7
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The Intuitive Advisor
Great technologies eventually reach a point where they surpass the capacity of humans to manage them. For example, we could build automobiles so that they all had the capability to go over 200 miles an hour, but if we did, our highways would become one large demolition derby. Our information technologies have now reached the point where we are being deluged with more information than our finite brains can successfully manage. While the world of infor- mation technology operates according to a law that demands doubling capacity and speed every 18 months, the human species operates ac- cording to an opposing law because our capacity for processing in- formation diminishes with the passing of time. Consequently, even though technophiles still laud and extol the virtues of voluminous overload at breakneck speeds, the information age has already reached the point of diminishing returns with its intended audience. Perhaps nowhere is this truth better illustrated than in the financial services realm.
Consider the following facts regarding the growing tension be- tween technological progress and human capacity as it plays out in the financial services arena. The typical Morningstar report con- tains 167 statistics. The average prospectus contains 390 numbers. If you were to type in the keyword invest on Yahoo!, you would receive 10,381 responses. Now contrast those figures with statistics from the human front. If you were to read 24 random numbers to a 20-year-
old, a 40-year-old, and a 60-year-old, and ask them to recall as many of those numbers as they could, you would see the following results.
• The average 20-year-old would be able to recall 14 of 24.
• The average 40-year-old would recall 11 of 24.
• The average 60-year-old would recall 9 of 24.
There is a simple physiological explanation for this recall prob- lem: short-term memory diminishes as we age. While information technology races in one direction, the human capacity for it with- draws in the opposite direction. You’ve probably heard statistics re- garding the “graying” of America such as the fact that there are now 31 million Americans over the age of 65, and that there will be over 63 million in that age group by 2025. You may have also heard that the average 65-year-old’s nest egg is nine times larger than the aver- age 40-year-old’s nest egg. However, this issue is more influential than the maturing of the marketplace and the impact of that demo- graphic trend on your business.
The larger issue is that for the past few years we have been told that more information and better information technologies were the keys to building a better business in the information age. That would be all well and good if we were still in the axis of the information age—but we are not. Because of the superfluity of information and the paralyzing effect of receiving excessive and seemingly contradic- tory input, the consumer has quietly crossed into a period that we would characterize as “the intuitive age.”