Get a Life

Many an amiable financial advisor is quick to boast: “I’m a people person.” But in crafting financial plans, how many FAs take that cordiality a giant step further to understand on a deep level just where clients are coming from and where they want to go?

Seeing clients as more than mere numbers — assets, brokerage statements, tax returns — is what financial life planning, also known as holistic planning and life planning, among other tags, is all about.

With clients hungry for advice in light of the longevity revolution, global meltdown and Great Recession, the time for this sweeping financial-planning process has indeed arrived.

“People today don’t want to be sold XYZ product. They want a customized, personalized financial plan for life,” says Mitch Anthony, founder of the Financial Life Planning Institute (www.flpinc.com) and who, in his book, Your Clients for Life: The Definitive Guide to Becoming a Successful Financial Planner (Kaplan Business, 2002), introduced the financial life planning concept, melding financial planning with attitudes and experiences about money throughout the client’s life.

Anthony shockingly discovered the link between money decisions and quality of life in the 1980s running Midwest suicide-prevention centers. “Farmers who had lost their farms were stringing up nooses in the barn. I found out it was a poor financial decision that led them to that point,” Anthony recalls.

By 2000, he’d started the firm, Money Quotient, to train advisors in financial life planning. Since 2002, when he founded the Institute, MQ has been helmed by his former partner in the first venture, Carol Anderson.

Anthony, whose client list includes LPL Financial and Investors Group, describes the Institute as “a discovery laboratory” continually hatching new methods to learn about people’s relationships with money. One recent innovation is scalable technology pegged to 66 life transitions — from birth of a baby to a death in the family. Using client input, the Institute generates customized reports for FAs’ use in creating financial strategies that meet clients’ specified life transitions.

“A large firm can customize this technology and give 10,000 or 15,000 advisors access to it at one time,” says Anthony, who has a deal in the works with a major bank.

It is critical to bear in mind that the life planning approach simply won’t work unless the advisor is adept at eliciting from clients their financial attitudes and experiences, along with future lifestyle needs and goals.

Armed with exercises from trainers like Anthony and The Kinder Institute of Life Planning, whose founder, George Kinder, wrote The Seven Stages of Money Maturity (Dell, 2000), advisors can learn to be potent questioners en route to constructing three-dimensional client portraits.

“Planners need very desperately to understand the client. Life planning is that bridge,” says Michael F. Kay, president of Financial Focus, based in Livingston, N.J. The RIA, who converted to a life planning practice four years ago, is author of The Business of Life: An ‘Inside-Out’ Approach to Building a More Successful Financial Planning Practice (Advisor Press, 2010).

Kay continues. “By digging deep enough to get people to open up and talk about what they really want, you’re dealing with their life, not just how much money they can accumulate but all the components of financial planning.”

Though requiring an above-average dose of handholding, time-intensive financial life planning’s biggest plus for FAs is client retention — still a huge issue following the financial crisis that prompted countless clients to switch FAs.

“Advisors,” says Anthony, “will have much greater retention of clients because understanding the client well — their needs, not just their goals — is one key to that.” Further, “clients are inclined to bring more money to the table once they know that the advisor ‘gets’ them — what they’re all about — and not just trying to sell them the latest hot fund.”

Advisor Training is Key

Asking the right questions the right way is pivotal to obtaining the all-important client information required for the life planning process.

“Today’s business model places the emphasis on a) how good an inquirer and listener you are and b) how good you are at integrating what you hear into a financial strategy,” says Anthony.

His distinct process focuses on probing clients about money related to four critical life areas: history, transitions, principles/philosophy and goals.

A good deal of training in financial life planning zeroes in on developing empathy and honing listening skills so as to first, connect, then create a dialogue with clients.

“It’s actively listening to what the client is saying, not thinking about what you should say next,” Kay notes. “It’s looking for non-verbal [clues] too. If someone is sitting with their arms and legs crossed, you know you’re probably not going to get a very open answer.”

Advisors who aren’t trained in a structured process run the risk of posing questions that make clients clam up. “If they just poke around or are too pushy, there’s a danger of totally turning them off,” notes Kay.

The Kinder Institute’s goal-oriented process probes deeply with questions such as: If you had only five to 10 years to live, would you change your life? If so, how?

Anthony considers such queries psychotherapist territory and inappropriate for FAs to put forward.

“I place emphasis on how advisors need to expand their competencies in the art of dialogue and integrating the plan they come up with into the life of the client,” Anthony says. “I don’t think we need to turn advisors into therapists. The FA should become a facilitator of dialogue, not a psychologist who’s going to read into clients’ issues.”