I ‘m a meat and potatoes kind of guy. I like facts, clear-cut answers. I like Monte Carlo simulations that project my portfolio’s potential returns 10,000 times to show me that I have a 90% chance of not running out of money until I am 112. “The proof will set you free!” is my motto. So I’ve been totally nonplussed by the life planning movement.
For those of you who don’t read Bob Veres’s newsletter and who have missed the trend, a growing number of planners have been asking clients touchy-feely questions about their lives and a handful of larger planning firms are hiring a social worker or psychologist to help give better financial advice to their clients. They call what they’re doing life planning. Cynic that I am, I have been challenging the planners I know and respect who espouse this mode of practice to explain what they are to me. No one could convince me of its value. Then I met George Kinder, father of the movement.
Reading his book, Seven Stages of Money Maturity, and interviewing Kinder for nearly three hours has made me a convert. And that’s sad in a way. It’s been more than 20 years since the financial planning profession was born, and it has taken this long for planners to realize that there is more to financial planning than numbers. To me, that’s astonishing. But many planners are nothing but left-brain number crunchers who do need to be told to act like caring human beings and not treat their clients like profit centers.
I’m not saying that financial advisors need to play psychologist, and neither is Kinder. I don’t think you need to hire a shrink to work in your office or turn your practice into a money ministry. But getting some training in listening skills and in pastoral counseling could help many planners help people better, and maybe the CFP licensee educational curriculum should place some emphasis on teaching empathy. Kinder makes the case better than anyone.
While reading your book, it became clear to me that you’re one of the most important thinkers in personal financial planning today. But you have a different background than most financial planners. It’s only with great affection and respect for you that I’d let my readers in on the secret that you’re a weird guy. Who are you, George Kinder, and how did you get here? I am a weird guy. I’m the kind of guy who had an 800 on the math boards in high school–a genius in math stuff–and only got a 580 in English. But I decided to major in English. You see, there’s some part of me that is interested in what I’m no good at. That doesn’t go along with the Buddhism, but there’s a part of me interested in filling the holes, seeing if I can develop the holes into strengths. I come from a middle class background. My dad was a small-town lawyer in Appalachia. We were not wealthy. No inheritances, nothing like that. But my parents knew the value of a good education and sacrificed so that my siblings and I could get a good education. While at Harvard, I became interested in creative work–poetry and painting and in the world’s religions. Of course, this was the late 1960s–it was from 1966 to 1971 that I was at Harvard.
Then you did something unusual, kind of a sabbatical. Please tell us about that. Right after school, I made a deal with the woman I was then married to: I could take two years off to do whatever I wanted and she would support me, if I would later do the same for her. So I took a couple of years to do meditative internal work and practice the world’s major religions. Starting with Christianity, moving to Judaism, then Sufism, and on to Taoism, Hinduism, and Buddhism, I explored the meditative practices of each. Harvard was intellectual, but I was interested in the experience of these religions, in getting an understanding of the profound experiences they are known for–being born again, attaining nirvana. So I dove into the practice of each religion four or five hours a day, practicing each tradition for several months. And I did a lot of writing and painting. In a way I’m back to that now, but that’s how it all started. I’m interested in human experience, the depths of human experience. These were six different expressions of the way people live at their greatest passion.
What happened after those two years? I had to earn a living, so I had to move back into Boston. My math skills were still my best skill set, and my parents suggested that I pick up taxes. I’d work part-time at it and the rest of the time I would work on the things I was passionate about. I went back to graduate school at Northeastern for accounting and took the CPA exam. I left grad school one semester short of graduation because it was just too much up in the head and I wanted experience. But I took the CPA exam and received the bronze medal in Massachusetts for scoring third highest in the state. I prepped with a Big Eight firm for a summer and I saw a lack of integrity in the CPA profession even back then. I didn’t want a life where you work 60 or 80 hours a week and don’t have a moment free to reflect on the fact that you’re living without integrity.
After purchasing a 15-volume set on the tax laws and tax court cases, I started filing tax returns in the mid-1970s. Clients came in and had problems, but I knew I had the solutions in those 15 volumes, and I got good at helping them with their tax problems and charged less than H&R Block. I made a couple of thousand dollars the first year and it tripled or doubled each year through the early 1980s.
What led you into financial planning? My clients would say they needed to know what to invest in but I didn’t know and suggested they find an advisor. They’d come back the next year and tell me about limited partnerships they bought and how they were going to save on taxes, but they were just horrible investments, of course, with very high fees. They were sold a bag of goods. I got pissed off that they were being taken advantage of by salespeople, and I started to read about financial planning. At the same time, the National Association of Personal Financial Planners (NAPFA), a group of fee-only advisors, was just getting started. I joined NAPFA in 1984 when it was a year old or so, and began to attend their conferences and educate myself about financial planning. That’s how I became a financial planner. People started coming to me because I developed a reputation as someone good with numbers who cared about his clients.
People are calling what you’re doing life planning. Does that work for you? I coined that term in an interview I did with Bob Veres. I’m not attached to the term. There are people who love it and some who hate it but it seems to be the one that’s catching on. It’s planning for a person’s whole life and planning for what’s absolutely most important in life. We call what we do financial planning, but that focuses on the math side of what we do as planners. Life planning is human work and focused on the human side.
Give me some practical life-planning tips that advisors can use. The easiest thing for the financial planning community to get has been the three questions I ask clients. You ask the questions in progression. You start off with, “What if you have all the money you need for the rest of your life? You’re not as rich as Bill Gates but have all you need. What would you do differently with your life?” After you get the answer, you ask the second question, “Say you discover that you have only five or ten years to live. You’ll be healthy for those years, but death can come at any time after the fifth year. What would you do with your life?” Finally, you ask this one, and this is the kicker that gets to bedrock: “You’re told that you have only 24 hours to live. What did you miss? Who did you not get to be? What did you not get to do? What do you regret?” Right there, the answers to that question seven times out of ten are the focus of the financial plan, or ought to be. Instead of focusing on the traditional version of retirement and funding your kids’ education, or buying a second home or downsizing by moving to Florida, the focus is on that question. That’s helpful. Often, the answer is simple, like I regret not spending more time with my kids. That’s the most common response but it appears in only 40% of the responses–and I’ve asked these questions to about 500 people in my career. Other responses have to do with spiritual life or a creative side to the person that never found fruition. Another common response, in 20% or 30% of the people I’ve asked, is, “I work too hard.”
The beauty of this is that what we’re doing is getting to what is often the secret side of a client, a side they didn’t come in to tell us about. They came in to discuss how to get a second home and look at a traditional retirement in 15 years. They’re coming in with expectations of what we do, and there’s probably a bit of them that expects to deal with a salesperson, and often that’s what we are. Often we are pigeonholed as engineers of money or salespeople, so clients come in with their guard up. And it means we’ll do a lousy job because they won’t tell us what they really want, what really matters to them. They will be tied to a treadmill longer than they have to be because we never got to what they really wanted. And that’s a hell of a life. Many will die with regrets because we never found out what it is they would regret. Financial planning is really about freedom. Money frees us to fulfill our potential. But it’s our relationship to money that does that. Most of us can find freedom by downsizing and living more simply. We all talk about how materialistic the world is as if it is everybody but ourselves. The fact is we all get trapped by it. One of my main focuses is looking at whether the freedom a client describes calls out a simpler life and whether he or she already has the resources to make a lot of it happen. I’m not just about assets under management, I get juiced bringing someone to what they’ve always dreamed of doing. That’s why emotional skills are useful as an advisor.
Tell me about the interest being shown in your ideas and how it’s affected your work. After 1999, when my book was published, the first couple of years were an intense on-the-road experience. There was enormous enthusiasm and a feeling that this was the beginning of something big. In that time, I was looked to for leadership, and it was very exciting but also a lot of work and I was on the road too much. I got tired of being out there working long hours and being away from home so much, so I withdrew a bit from the speeches. What we’re seeing now, however, is wonderful. It’s another wave of interest manifesting around what is being called the life planning movement, and you have the coaching movement rising in popularity as well. So there are now many facets of this life planning movement. I kind of pulled back and rearranged how I did business. I combined my planning practice with Sherman Financial in Philadelphia, which is run by Spencer Sherman.
I essentially sold my firm, so I wouldn’t have to do any more administration and management and could do what I love. When Sherman has a business strategy or investment committee meeting, I’m part of that. Otherwise, I just do client work and none of the administrative work I do not like. This gives me enormous flexibility to get more reflective about the life planning movement and other things I want to do. I’m working on several books now. Meanwhile, we’ve sold about 30,000 copies of the book, and by far the majority have been sold to financial advisors. I’ve spoken to tens of thousands of people at conferences and given my three-day seminar to about 1,000 advisors. My six-day training is something I think will take off in the next couple of years and I’ve done that with between 50 and 100 people. So there are that many people deep into this, and many of them have joined The Nazrudin Project, a community of about 250 planners that includes many of the leaders of FPA and NAPFA.