As always, I am indebted to the vision, skill and faith of the people at Dearborn Trade Publishing. Advisors will want to keep a close eye on this redefinition of roles, as the fates of the climbing client and the financial guide are truly linked.
THE ALTERNATIVE: THE FINANCIAL LIFE PLANNING MODEL
Financial life planning recognizes that a majority of individuals follow an unconventional life course either by chance or by choice. Financial life planners help their clients clarify goals in all areas of life and design a financial strategy to support those goals.
LIFE AT THE CENTER
Financial life planners will help clients identify their values and priorities in all areas of life and then guide them in making financial decisions that are in sync with those values and priorities. The goal of financial life planners is to really get to know their clients in order to tailor their advice to the individual's circumstances, goals and values.
THREE KEY ROLES
Partner
No professional is better positioned for this revolutionary trend of life planning than the financial advisor. Participating in this conversation does not change the traditional role of the advisor, it simply shifts the context for the discussion to the arena where the client is most invested—his own life.
Guide
Educator
We believe that it is only possible to find the place where the clients' dreams and hopes merge with the advisor's when there is a philosophical shift in the advisor's mind from transaction-mindedness to transition-mindedness. To effectively meet the needs and expectations of tomorrow's client, you will need to force yourself to first think about connecting with the client's life needs (transitions), and then think about how you will be compensated (transaction).
GETTING PAID FOR WHAT YOU REALLY DO
As one advisor wrote, “We can talk to our clients all we want about goals and dreams and retirement, but ultimately that conversation has to lead to a transaction where I can get paid for my time.” While advisors understand the distance that often exists between product and advice, today's fee structures still combine the two and clients have difficulty determining the cost of each.
OPENING THE DIALOGUE
That's why I'm going to ask a lot of questions about your life, your dreams and your plans, as well as your money." This is an effective positioning statement for the advisor who wants to practice financial life planning, but also a follow-up to the questions you must state. This dream space contains the abstract ideas of what we could and should be in our lives, as well as the thoughts and visions of what we could do and who we could be if we could sit down with a map and map out the route from here to could map out where. over there.
HELPING YOUR CLIENTS THROUGH THE TRANSITIONS OF THEIR LIVES
In Selling with Integrity, author Sharon Drew Morgan calls this the “problem space” in our minds. This problem space includes those nagging concerns that lurk in the shadows of our minds—issues we need to deal with but don't even want to deal with.
LOOKING FOR CHANGES
YOUR ROLE IN MANAGING YOUR CLIENT’S UNEXPECTED LIFE TRANSITIONS
THERE ARE SOME LIFE CHANGES YOU CAN ANTICIPATE
THE FINANCIAL IMPACT OF LIFE CHANGES
Transition Financial implications Your chances: • Insurance • Increased insurance for children • Saving for education • Education savings.
HELPING YOUR CLIENT THROUGH THE UNEXPECTED
Financial implications of the event Your opportunities are critical • Income replacement • Discuss issues openly about illness • Insurance issues • (if the client requests). Insurance changes • in new location Job • Income changes • Remember there is a promotion • Managing new assets • can be a bit uncertain.
HOPEFUL TRANSITIONS
The Life Transitions Survey and accompanying worksheets cover over 60 life transitions related to work life, family life, life balance, financial life and inheritance. These tools will help you start and maintain a life-centered dialogue that constantly reminds you of the need for financial preparedness.
IT’S ABOUT THE CLIENT!”
What we found to be missing from the advisor-client communication process were the types of communication that connect with the right side of the client's brain, such as stories, illustrations, and analogies. This is exactly how the right side of the brain works—on the intuitive level.
SENDING THE RIGHT SIGNALS
What this means is that these numbers and facts were penetrating the left side of the client's brain that plans, organizes, counts and checks. A brief analysis of this chart leads to the conclusion that the financial services industry has placed a premium on the skills needed to provide services that appeal to the left side of the customer's brain.
ENLARGING YOUR ROLE
The most essential values that today's advisor can add for today's client are the features indicated on the right side of this diagram.
BASIS FOR THE NEW PARTNERSHIP
You might say that today's client is tacitly saying, "I will invest more assets with you when you show that you are willing to invest more energy and concern with me." Another quote by Stein and Brier is apt here: “Customer loyalty is based on more than quality number crunching.
HOW HIGH IS YOUR EQ?
All of these skill sets can be thought of as emotional competencies, because a counselor needs emotional investment to be successful with a client. Can you read between the lines and respond in a persuasive and reassuring manner?
FROM THE CLIENT’S POINT OF VIEW
The second diagram simply reiterates the financial products and services in terms of the client's life. After contrasting these two views on financial products and services, we cannot help but conclude that the client's view on financial planning is largely emotional in nature.
UTILITY MAN
When they talk about financing their children's education, they may think about the competing financial needs of aging parents. We may discourage revolving debt, but our clients can think about what they need in order to make them feel successful.
A DIFFERENT SORT OF CONVERSATION
The purpose of this question is to get across what the clients want financially and why they want it to happen. This question taps into the spirit of life satisfaction and prompts clients to consider whether or not they are getting their money's worth out of life.
WHAT DO YOU WANT FROM ME?
A doctor, whose husband was also a doctor, felt that she was missing out on too much of her young children's early years.
Relationship Clients
Fear-Based Clients
Curious Clients
Greedy Clients
MANAGING CLIENTS WITH THE WEALTH MANAGEMENT INDEX
Levin and his clients set goals for measuring success that are measured against the Wealth Management Index—and not against popular indexes. The index—replacing other popular metrics as the standard for success—is the centerpiece of the life-planning strategy Levin uses.
Individual Components and Percentage Allocations
- Asset Protection (Preservation)
- Disability and Income Protection (Protection)
- Debt Management (Leverage)
- Investment Planning (Accumulation)
- Estate Planning (Distribution)
Each year, the client's set goals are measured against an agreed wealth management index. You honestly assessed the client's situation and took co-responsibility for the effectiveness of the financial plan.
WHY DO YOU ASK?
WHAT INFORMATION DO YOU NEED?
Clarifies the client's short-term and long-term life priorities in all areas of life. Finally, in the client-centered model, customers want transactions and processes in place that are directly tied to the goals and transitions in their lives.
PAST, PRESENT, AND FUTURE
Reason for asking: Reveals the client's vision (or lack thereof) of retirement (Do they have a realistic picture of what will satisfy them in their retirement years?). Reasons for asking: reveals transitions that will affect the client's financial picture; it indicates the lifestyle the customer wants.
FOCUS ON TRANSITIONS
Inquiry
Connections
Trust
Access
A good example of a financial tool moving in the right direction is the Lutheran Brotherhood's Life Map™ – a financial life planning process that focuses on clients' values, goals and plans for their lives. The Life Map process helps clients plan their lives and estates and includes all their financial foundations in the process.
ESTABLISHING A NEW CONTEXT
SETUP
In this case, the counselor informs the client of the importance of thinking through all the implications of such a transition. After reviewing a Life Transitions worksheet, the client now has a highly relevant context for the many services that the financial advisor may choose to introduce.
POSITIONING STATEMENT
It is good for the advisor because it creates more understanding of what is going on in the client's life and it ensures more cohesion in the relationship. That would be all well and good if we were still in the ashes of the information age – but we're not.
FROM INFORMATION TO WISDOM
The bigger problem is that we've been told for the past few years that more information and better information technology are key to building better business in the information age. Another important intuitive principle that comes into play when dealing with a financial services professional is that the more important the decision, the greater the intuitive inclination.
INTUITIVE RELEVANCE
REARRANGING THE FURNITURE
THE REINVENTION OF
THE FINANCIAL ADVICE INDUSTRY
Long-term asset accumulation was primarily the marketing approach used by most financial planners. Money management lost its connection with people's lives because of the long-term savings approach to financial planning that was drilled into the minds of boomers in the 30s and 40s.
IF IT AIN’T BROKE, DON’T FIX IT!”
With trillions of dollars of retirement assets tied up in mutual funds, IRAs, RRSPs, group pension plans and individual stock holdings earmarked for retirement, the core market hasn't reacted as dramatically to fluctuating stock market activity. While not all of that money went toward retirement, a significant portion of North Americans' retirement savings was wiped out.
TESTING THE RELATIONSHIP
The financial advice community has created its own monster by focusing the financial planning discussion on facts, figures, figures and analysis.
YOU VERSUS THE MACHINE
With increasing access to an abundance of financial material from the Internet and the media, investors are faced with information overload. A similar study conducted in 1997 by the International Association of Financial Planners (now the FPA) confirmed these results.
EXASPERATION
For example, one advisor reported, "My clients look to me to help them make sense of the tremendous amount of information available to them." With so much information available on the Internet, some advisors try to position themselves as the center of the investment information flow.
YOUR NEW JOB DESCRIPTION
Your future is about teaching, coaching – strategically and inspiringly – and connecting with clients' lives. This does not mean that you will not present the products and services that you have presented in the past.
PROVIDING VALUE TO TOMORROW’S CLIENT
What's the point of building a nest egg if we're going to put it in a dying tree? There is no template retirement solution available that allows us to handle each client's assets.
IT’S THE RELATIONSHIP, STUPID!”
A key to success for advisors in the future will be the quality of their relationships with their clients and their understanding of each client's unique needs and circumstances and their life priorities.
REDEFINING THE TERM CLIENT
Given the resources and the opportunity, we would have jumped at the chance to survey these clients to get their views on their adviser. If you only deal with part of a client's financial situation, that makes them a "half client" or less.
MEETING CLIENT EXPECTATIONS
A rookie at the table turned to us and said, "When I grow up, I want to be just like them!". The perception of what a client is or is not will become increasingly important to both parties as they look at the benefits of the relationship.
THE CLIENT’S VALUE CYCLE
Many times it's the intangibles - the things on the margins that a client doesn't always think about - that determine whether a client finds value. We have identified six areas in the value cycle against which customers measure their expectations.
THE CLIENT VALUE EQUATIONS
Life Insurance To help our customers protect those who matter most to them. Helping our clients build assets for the future in ways they may not realize.
IS THAT YOUR FINAL ANSWER?
At the same time, these individuals understand the connection between having money and the ability to pursue things they say are more important than money. It's not about having money for money's sake, it's about having money to deal with the issues they think are important.
HAVING MONEY DOESN’T MEAN YOU’LL HAVE A LIFE
From these answers, a portrait begins to emerge indicating what the intangible product mix is that people hope to have money to buy. How much better would you sleep knowing you had a plan in place that takes care of the people you care about and covers the big transitions you will face in life.
ROOT OF ALL EVIL
According to an article by Susan Jacoby in Modern Maturity ("The Allure of Money," July-August percent of divorced or divorced men said they were able to save money from their current income, while only 59 percent of divorced or divorced women said they managed it.Divorced or divorced women are twice as likely as men to rate themselves as below average financially.
THE RICH AND ACHIEVING
Eighty-one percent of the wealthy expect to pay for their children's college expenses, 36 percent expect to contribute to the cost of graduate school, and 25 percent plan to provide support after college. It is ironic to note that over 40 percent of wealthy parents are concerned that their children will be spoiled and will not share their work ethic).
CONNECTING WITH HIGH ACHIEVERS
The one thing that is indicated by the different groups mentioned in this chapter is that in the mind of the client life is central. Is this because they have suffered more from the condescension caused by wealth in their lives?
I CAN’T GET NO SATISFACTION
Your efforts just need to adopt a context and description of prosperity that connects you to the customer. The spoiled, silver-spoon-fed, daddy-rich legacy is hardly the case with the modern, wealthy couple.
HOW RICH IS RICH?
One cannot help but conclude that the marker for wealth is always moving forward in the mind of the customer. But we find it surprising that these three groups together make up only 51 percent of the population.
MAKE UP YOUR MIND
They differ in income levels, with low achievers having the least and high achievers the most. The Settled and Satisfied group were very satisfied with their financial situation and were hesitant to desire more wealth.
MONEY CAN’T BUY ME LOVE
High achievers (98 percent) work hard for a lifestyle they say they're happy with, but they'd probably be the first group to tell you they want more time and less stress. The Settled and Satisfied (80 percent) are more likely than any group to say they are saving and investing for their future, but this group says they place little importance on acquiring and having more.
Money Can Buy
If and when they get the money they expected to relieve their stress, they awkwardly discover other areas of their lives and may no longer be able to relax. Money can buy freedom, exciting experiences and relief from stress to some extent; but the world is full of people who had all these qualities in their lives before they even had a million dollars.
Money Can’t Buy
An inescapable and undeniable conclusion we can draw about people and money is that for most people there is a constant wrestling match going on in their relationship with money. 80 percent of baby boomers say they intend to continue working in some form in retirement.
THE TIMES ARE A CHANGIN’
But such full-time pursuits make no sense when faced with 20 to 30 years of retirement. It is a much broader picture of retirement planning, the dimensions of which include not only the finances of retirement, but the dimensions of the client's lifestyle (with its myriad non-financial issues).
FINANCING LIFE
However, it is important to keep in mind that this redefinition of retirement as a time for self-. The redefinition of retirement raises a number of issues for both advisor and client to establish a dialogue around.
TOO YOUNG TO RETIRE
Despite the salary reduction, he is "in the plus" both in terms of income and self-realization. In the late 1960s, labor economist Seymour Wolfbein wrote that baby boomers would have at least five different careers—.
A BETTER LIFE
Now that I have it, I want to do things I've never done before, and yet a lot of society is trying to tell me what to do." Instead of looking at each client and asking "When do you want to go in retirement?” we could begin to ask “What kind of life do you want?” and work toward that goal.
PHASED RETIREMENTS
For 80 percent of baby boomers, this retirement design will be a must—simply from the aspect of psychological fulfillment. Growing numbers of workers will be able to negotiate such agreements as more and more companies begin to embrace the phased retirement concept.
COLLECTING A PLAYCHECK
According to Michelle Conlin, who writes about workplace trends in an article titled "9 to 5 Doesn't Work Anymore," the things that aren't working are workplace childcare and the Family Leave Act. There are many who feel stressed by the disproportionate place that work plays in their lives.
RETIREMENT’S DIRTY LAUNDRY
The wheel diagram of life in Figure 13.1 delineates the aspects that contribute to a satisfied life in retirement. The Wheel of Life diagram in Figure 13.1, borrowed from Carol Anderson's seminar on Designing Your Life in Retirement, illustrates how quality of life requires a plan and strategy for all nine areas of life.
FREUD’S COUCH
In preparing for retirement, money was viewed as the purpose of life, rather than being used as a tool to achieve goals in all other areas of life. As a result, they live the best years of their lives – instead of being disappointed by a modern mirage.
WHO’S ZOOMIN’ WHOM?
Many modern clients approaching retirement will be better recognized as “zoomers” because the lifestyle they lead will defy traditional, laid-back retirement stereotypes. Many will be part of households where there are not just one, but two earners, with multiple retirement savings accounts accumulated over the years at different jobs.
THE IDEAL WEEK
The cost of a thing is the amount of what I will call life that is required to be exchanged for it, immediately or in the long run. Let's assume that today's worker wants more out of life than 40 years in the workforce, a gold watch, and a condo in Florida.
WORKING TRANSITIONS
In The Power of Purpose, Richard Leider points out the crucial distinction between one's work and one's job. Retirement may be the end of one's job, but not the end of one's life's work.
RAMPING DOWN
However, the advisor would do well to be better equipped to facilitate the dialogue about the work transition. The advisor referred him to a career coach and suggested that they revisit the issue when he had a clearer sense of direction.
ILLNESS AND MONEY
The part-time job freed him to pursue the more meaningful goals that became so apparent through the loss of his wife. Although the outlook for his wife's health doesn't look good, Chuck feels he has a valued guide to help keep an eye on his family's financial well-being.
THE DAY OF REST
Workplace and human resources experts confirm that this is indeed a trend in the making as mid-lifers reconsider how much "lifeblood" they want to donate to the business. Many in the downsizing want to go into a sabbatical to consider how to go from having a successful career to having a successful life.
RESTRAINING JUDGEMENT
THE END OF THE 70 PERCENT RULE?
The new rule for the times we live in is to do everything you can to have the highest quality of life now while preparing for the future. Anyone can say to them, "It can't be done." It takes creativity and a genuine interest in the well-being of clients to help them find that quality of life now and in the future.
INVESTING OURSELVES
Bill was always interested in financial matters and his faith was always important to him. A person who is 65 years old today still has a lot of reserves of time, energy and creativity to invest.
ENLIGHTENED SELF-INTEREST
The tagline on this particular ad is: "Do more." This is the satisfaction that future generations of retirees will want—to know they did something. In many ways, The Work Connection offered [the volunteers] a second chance as much as it did for the children - the chance to redeem themselves from past failures, to be the father they hadn't been before, to the value of their own life experience.
GENERATIVITY
For some it is a non-issue; for others it is a priority: the motivating factor to earn more. Sources: “The New Face of Giving,” by Lisa Fichenscher, Family Money, November/December 2000, and “Charity Gets Personal,” by Ronaleen R. Roha, Kiplingers Personal Finance, September 2000.).
PURPOSEFUL PHILANTHROPY
Like giving circles, this is cheap to set up and allows for a lot of creativity. The administrative fee for overseeing donations and bookkeeping varies, but generally ranges from .45 to 1.00 percent of funds. and a copy of the charity's most recent annual report, which must include a list of the board of directors, a mission statement and the most recent audited financial statements.
THE ETHICAL WILL
We challenge clients, especially as they retire, to consider what they value and how their actions align with their values." In addition to the traditional form of estate planning, Levin helps his clients draft an ethical will. A ethical will is not a legally binding document, but is one that tells the client's personal story, including dreams, goals, successes and failures.
A FRESH MAP OF LIFE
This perspective does not constitute a compelling ideal of how to spend the new third of the life we have been granted. The new card of life in the new retirement reflects the balance and purpose needed for this period of life: working with a purpose.
RESOURCES FOR GIVING
The financial life planning approach is comprehensive in nature and acknowledges both the financial and non-financial implications of life transitions. One of the most effective ways to differentiate yourself as a financial life planner is to enter into a referral agreement with other professionals who can enhance the services you provide.
ENHANCING YOUR ROLE AS GUIDE
In this way, counselors avoid taking on the role of being an expert in all areas, and instead draw on the knowledge of other professionals. previously employing a part-time counselor who helped family members communicate their deep feelings about money and happiness.
DEVELOPING A LIFE PLANNING TEAM
YOU ARE KNOWN BY THE COMPANY YOU KEEP
A good example of professionals who are beginning to embrace the life planning model versus the transaction itself is a group of estate planning attorneys who belong to the National Estate Planning Attorney Network. According to Brad Wievel, an estate planning attorney in Dallas, there are approximately 400 attorneys in this network who have adopted a life planning process called the "Three Step Strategy."
THE PERSONAL COACH
The majority of estate planning is simply word processing," says Wievel, "and there is a great need for personal counselling.". These life planning attorneys offer clients an upfront fee option that reduces their estate settlement costs and makes associated expenses more predictable.
USING OUTSIDE PROFESSIONALS IN CLIENT WORKSHOPS
The coach is available if and when the counselor needs services, and the counselor advertises in a brochure available to clients. According to recent statistics, the growing popularity of life coaches does not appear to be a fad.
KEYS TO DEVELOPING
The fee they agreed upon includes a fixed number of hours that the coach makes available for clients. The International Coach Federation in Washington, D.C. states that there are now approximately 10,000 full- and part-time life coaches working in the United States.
SOLID REFERRAL RELATIONSHIPS
All building blocks listed in Figure 18.1 are assessed in the QM Self-Assessment. I fully understand the important financial issues that need to be addressed at this stage of my life.
RAISE YOUR MQ
The client gave this answer when the advisor asked how disciplined she had been with saving in the past. The client's response indicates how out of touch clients can be with the undercurrent of personal history, beliefs and behavior patterns that directly impact their financial well-being.
BUILDING BLOCK 1: REFLECT ON MONEY HISTORY, BELIEFS, AND PATTERNS
The Money Quotient approach to recognition – as with all MQ components – is to combine the hard science of information and logic with the soft science of understanding the role of emotion in the process. Growing up in your family, money was mainly used to reward, punish, survive, impress, control, help others, have fun, buy love, achieve goals, or...
BUILDING BLOCK 2: CLARIFY FINANCIAL GOALS AND PRIORITIES
To facilitate this process, clients are invited to write their goals in the diagram in Figure 19.2, whether it is obtaining an MBA, building an extension to the house, touring France or obtaining long-term health care. They are invited to list what they consider pipe dreams and what they consider essential achievements.
BUILDING BLOCK 3
ASSESS RISK TOLERANCE
Defining Risk
At one end of the continuum are those who are at risk and focus on the loss part of the equation. At the opposite end of the continuum, there are those who are addicted to risk and focus on the profit part of the equation.
Understanding Risk
Individuals on either side of the risk continuum operate more on gut feeling than facts. To become a calculated risk taker, clients must first become aware of the underlying emotional motivators that repel or attract them to financial risk.
BUILDING BLOCK 4: EVALUATE SATISFACTION WITH FINANCIAL LIFE
