Journal of Financial Planning: December 2012
Lazetta Rainey Braxton, CFP®, is founder of Financial Fountains, a holistic financial planning firm in Baltimore, Maryland. She is a 2011 FPA Diversity Scholarship recipient.
The financial planning profession should instate a “do ask, do tell” policy to encourage meaningful conversations with clients. This policy challenges financial planners to courageously address biases and deficiencies that prohibit in-depth analysis of a client’s situation. Asking engaging questions that inspire clients to share their life journeys and listening intently to their responses promotes a productive financial planning engagement.
Trust and Clarity
Clients come to financial planners battered by economic circumstances that leave them uncertain about many aspects of their lives. Concerning good financial management, they question what they know and are vulnerable about what they do not know. They come to financial planners, not only with their financial statements, tax returns, and policy documents, but also with their fears and insecurities about money. To ease the mounting pressures, clients seek a financial planner—one they can trust to add clarity to their life.
Financial planners frequently advertise trust and clarity as guarantees of the financial planning engagement. The scope of these guarantees, however, is not always evident. A financial planner could easily mask restrictions without the client realizing that they deserve deeper analysis from the engagement.
If some financial planners confessed to the unwritten fine print, the disclaimer would read: “Providing trust and clarity to your situation is limited to managing your investable assets and analyzing your financial documents. Values clarification, assessment of your attitudes and expectations, and any other non-financial circumstances do not apply.” Although contrary to CFP Board’s Practice Standard 200-1, many financial planners continue to struggle with analysis beyond financial figures and documents. A lack of training in or resistance to interpersonal interaction may contribute to this struggle.
In such cases, financial analysis easily evolves into a comfort zone for planners whose academic and professional training primarily revolved around the traditional core financial planning areas. While playing it safe makes financial planners feel in control of the engagement, clients are reduced to suppressing critical aspects of their lives. The client’s best interest cannot be served by a financial planning engagement embedded in misdirection through intentional omission or blatant overemphasis. A “do ask, do tell” policy invites financial planners to reexamine due diligence and delivery processes by identifying biases and deficiencies that prevent a thorough financial planning engagement.
Building on Facts and Figures
Financial planners who focus solely on the numbers drive an obsession that some magical return, account balance, and income stream will improve a client’s quality of life. Financial planners should discuss these facts and figures within the framework of the client’s current circumstances and envisioned future. Financial planners should build on what the client owns, owes, earns, and spends and should explore sensitive details that shape the realities of a client’s goals, needs, and priorities.
Many financial planners equate asking questions and digging deeper into a client’s situation with triggering a Pandora’s box-type situation. In Greek mythology, Pandora opened a box given to her by Zeus despite his insistence that the box remain closed. Pandora disobeyed, and her curiosity caused evil to be released from the box into the world. Using this analogy, financial planners imagine that asking certain questions will reveal the client’s “evil” relationship with money and dampen the financial planner’s ability to lead a successful engagement. Contrary to this belief, shedding light on perceived negative findings cultivates trust and clarity for both the financial planner and client by offering direction to the planner-client engagement.
Continuing the analogy, financial planners also should host the spirit of hope, as personified by Elpis in the Pandora myth. Although Elpis remained trapped in the bottom of Pandora’s box, the same hope should not remain similarly buried in the planner-client relationship. Financial planners should help clients embrace the hope that seems hidden behind all of the numbers and despondent thoughts. After all, a goal of the financial planning profession is to help clients use financial resources to support their life’s dreams and transitions.
Digging Deeper
“Mov[ing] the client’s well-being from functional to optimal,”1 as defined by Paula Hogan, requires that financial planners ask more questions and encourage clients to tell their stories. By helping clients delve into matters of the heart, financial planners can segue into discussions that invite clients to embrace how financial resources support—not dictate—their overall well-being. As a result, clients are empowered to make positive changes with their finances when they “discover—or rediscover—what is most important in their lives ... and plan accordingly,” as suggested by life planning expert Roy T. Diliberto.2
Financial planners who venture into an in-depth discovery process should note that boundaries do exist. Paula Hogan clarified that the life planning model differs from a medical/therapeutic model. Financial planners should not assume responsibility for “mov[ing] the client’s well-being from dysfunctional to functional.”3 Financial planners should refer clients to a medical professional when a client demonstrates repetitive, destructive habits and thoughts that consume resources and sabotage a client’s well-being.
There are many tools and exercises offered by the life planning community that facilitate robust discovery processes. A cultural framework that also taps into discovering the client’s values, priorities, and current and desired use of resources focuses on three areas: time, talent, and treasure (income and wealth). By employing the “3 Ts,” financial planners can help clients understand if they are optimally using their resources to enhance their overall well-being. These resources are interrelated; addressing one aspect will have implications for the other two resources.
Time: Financial planners should consider the current and desired use of time when helping clients define their goals. How the client divides time between work and leisure and the nature of his or her activities reveal whether the client’s use of time truly reflects his or her values and goals. Planners can help clients determine whether their use of time reflects a necessity, a choice, or a combination, as well as the implications of those findings. Key, open-ended discovery questions may include the following:
- How is your time spent?
- How would you like to spend your time now? Five years from now? Ten or more years from now?
- What is prohibiting you from spending your time as you desire?
- Are you spending time on activities that enhance or detract from your overall well-being?
Talent: A client may use his or her talent in a career, leisure activities, or not at all. Financial planners should help clients gauge whether they desire to hone their talent and, if so, the investment of time and treasure necessary to realize this goal. Financial planners may recommend personal assessment tests to help clients confirm or discover their talents.
The financial planner must also conduct an analysis of how much the job market values the talent. Some clients might fear testing their talents in a profession or career that seems less prestigious or less lucrative than their current job. Financial planners can help clients understand key factors when considering a transition to a more fulfilling position. Questions for consideration may include the following:
- What do you do well?
- Are you able to do what you do well in your career or as a hobby?
- How would you rather use your talent?
Treasure: A financial planner can use the client’s net worth statement and cash flow statement to open the conversation on how the client has used (and should use) income and wealth to enhance his or her well-being. Having adequate savings grants clients flexibility with their use of time and talent. However, an obsession with accumulating assets may deter clients from realizing their dreams and goals. Close examination of these documents reveals whether a client hoards, thoughtfully spends, or overspends income, and whether the income generates wealth. Questions for consideration may include the following:
- Are you spending your money in ways that are important to you?
- Are you spending money on activities and purchases that enhance or detract from your overall well-being?
- How do you envision using your assets to support your goals and values?
Financial planners must incorporate tools and techniques that support a “do ask, do tell” approach to the financial planning engagement. Learning more about a client’s values, goals, and circumstances allows financial planners to understand how best to guide the client. By engaging in deep conversations, the discovery process can help solidify the trust and clarity needed to help clients realize their envisioned life.
End Notes
- Hogan, Paula. 2012. “Financial Planning: A Look from the Outside In.” Journal of Financial Planning (June): 54-62.
- Diliberto, Roy T. 2006. Financial Planning—The Next Step: A Practical Approach to Merging Your Clients’ Money with Their Lives. FPA Press.
- Hogan, Paula. 2012. “Financial Planning: A Look from the Outside In.” Journal of Financial Planning (June): 54-62.