While clients who are much too clever in matters financial can be annoying, they're also rare. The more dangerous, and common, breed of client is (how shall we say it) challenged when it comes to investing, retirement, taxes, estate planning--the whole spectrum of planning issues. But you can help educate your client by suggesting they read the following books. Even better, give them to your clients. They'll thank you, and you'll reap the benefits.
If you're looking for a painless way to increase your clients' knowledge of, and appreciation for, financial strategy, you couldn't do better than to steer them toward The Lack of Money Is the Root of All Evil: Mark Twain's Timeless Wisdom on Money, Wealth, and Investing (Prentice Hall, 2000) by Andrew Leckey.
Twain pulled no punches in his outspoken commentary on the attitudes and morals of his day. He was equally candid about finance. His comments are no less true today, and the way in which Leckey has skillfully woven them into a primer for fiscal responsibility is nothing short of wonderful.
Leckey, of CNBC and the nationally syndicated "Successful Investing" column, has written other books, but probably none is as accessible to the general public as this one. Yet it will still appeal to those whose financial education is more sophisticated. It is realistic, straightforward, and vastly amusing--and brooks no illusions about one's own financial strategies when viewed under Twain's merciless microscope.
What relevance could Mark Twain have on modern finance? You'd be surprised. For example, if your clients are so worried about the downturn in the market that they are reluctant to "send good money after bad," send them to Chapter 1, "No Time Is Really the Worst Or Best Time To Invest." The lead-in quote, from Twain's book Pudd'nhead Wilson, is: "October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August and February." Thus Twain, and Leckey, will help educate clients on the futility of market timing and the inevitability of the rise and fall of market cycles.
Or, for the client who is reluctant to part with a dime lest he jeopardize an already well-secured retirement, there is Chapter 31: "Enjoy Life, But Not On The Cheap." The quote here is, "I would rather live on $100 a month and live like a human being, than have $8 more and live like an owl." Both Twain and Leckey will then acquaint the reader with the difference between frugality and cheapness, while cautioning against outright extravagance for extravagance's sake.
Twain's comments introduce each chapter, and facts about his own financial successes and failures offer excellent examples of how someone so smart can mess up his own finances--but also bail himself out again (Twain lost everything due to various errors in judgment, but repaid his debts and died a wealthy man).
This book is fun, educational yet painless, and definitely worth your--and your clients'--time.
If you have family business owners among your client base, you no doubt field quite a few questions about the more complex financial facets of their businesses. You, and they, might want to take a look at Arthur Andersen Answers the 101 Toughest Questions About Family Business, by Barbara B. Buchholz, Margaret Crane, and Ross W. Nager (Prentice Hall, 2000).
While often repetitive, this book offers help on situations peculiar to family businesses--how to groom a successor; how to distribute equity in a family business; what constitutes fair compensation for several members of a family employed in the family concern; even psychological factors such as whether to consider a non-family member as the successor in a family business.
Clients will find real-world examples of business situations to illustrate each question.
Bambi Holzer's Set for Life: Financial Peace for People Over 50 (John Wiley & Sons, 2000) is a good book to give to those clients nearing retirement age who need most of the process explained to them.
It explains how to determine one's own net worth, set retirement goals, and select a place to retire. Beyond that, it goes into real estate, taxes, insurance, and arranging your affairs to maximize benefits and minimize taxes for heirs after you die.
There's a lot of very useful information here, on a broad spectrum of subjects that will be of real interest to those approaching retirement. There are some drawbacks to this book, however. For one thing, it singles out annuities as a very worthwhile retirement vehicle, without enough discussion of the circumstances under which they are appropriate and without enough enlightenment about their rate of return. It also tells the reader that without at least $100,000, he or she should completely forget about owning individual stocks, since adequate diversification cannot be had for under that amount. While relying primarily on mutual funds is fine, discouraging the ownership of stocks in this market atmosphere of independent investing is neither helpful nor realistic. However, if you make sure that you discuss these two subjects thoroughly with your clients, Set for Life is an excellent book.
Ernst & Young's Personal Financial Planning Guide, Third Edition, by Robert J. Garner, Robert B. Coplan, Martin Nissenbaum, Barbara J. Raasch, and Charles L. Ratner (Wiley, 2000), is an exhaustive explanation of just about everything you could want to know about setting up your own finances. Lest you fear that if you hand this book out to clients they will promptly leave your practice to fend for themselves, bear in mind that the opening chapter will explain to them just what financial planning is. By offering a dialogue between a fictional planner and client, it points out that many people have not considered what their financial goals are. This alone will make them consider how valuable your guidance can be.
After opening with worksheets to help the reader determine his or her net worth and financial status, the book explains financial concepts such as risk and return, explains how to set up a portfolio, and talks the client through insurance, IRAs, estate planning, and living wills, among other things. That makes up Part I of the book. Part II deals with specific life events that make drastic changes in one's financial status--like the birth of a child, paying for college, divorce or widowhood, retiring, buying a home, getting married.
There is a wealth of information here, and the client who wades through all 500+ pages will be well educated and a good partner in planning his or her financial future.
Terry Savage's book, The Savage Truth on Money (John Wiley & Sons, 1999), is also a broad education on things that everyone should know, but in a different way. Instead of relating only hard facts on processes, Savage deals more with concepts--and she does it well. From women's issues with money to how to budget, pay for college, and many other areas, Savage has put together a fine primer on the financial realities of life.
You may be wondering if people need another basic, explains-everything book. And the truth is that there is an abundance of them out there, with more coming out all the time. But people are individuals; the explanations provided by one author may not penetrate, whereas another author may strike the right chord and enable someone to either understand a difficult concept or realize that yes, estate planning or budgeting really is necessary for them too. Savage's book, and the next book I'll mention, are both pretty basic, but they relate those basics in different ways: one covers concepts, and the other handles nuts and bolts. The differences in approach and in information may make the difference between a client "getting it" and yet another session of eyes glazing over.
The Wall Street Journal Guide to Understanding Personal Finance, Third Edition (Lightbulb Press, 2000), by Kenneth and Virginia Morris, is another very explanatory book. This one, however, explains concepts rather like an illustrated dictionary (lots of pictures, very basic definitions of such things as grace periods and finance charges). Its elementary approach will appeal to the totally clueless, those with gaps in their knowledge that they might be embarrassed to admit, or teenagers and young adults starting out with little or no familiarity with the world of finance. But don't overlook its usefulness for those who might know one area pretty well--stocks, for instance--but are clueless about bonds.
As with most books, there will be personal preferences when it comes to what a client needs to know, or even wants to know. But any of these books can provide a foundation on which you can build your planner-client relationship.