In one of the opening sessions at the FPA Retreat in Scottsdale, Ariz., on Saturday, David Yeske told attendees that the role of financial planners is one of true strategists and, more specifically, he explained to the audience how to work with clients in the context of ongoing and enduring change.
“As Gautama Buddha said, change is the fundamental nature of reality,” Yeske, co-founder and a managing director of Yeske Buie, a wealth management firm, explained. “But man constantly struggles with change. The leading cause of illness is depression, and the leading cause of depression is change.”
Adapting to change, he added, is our only option, and how we do it is what matters.
He then described three types of change: environmental change, such as death, disability, divorce and other “negatives,” as well as inheritances, financial windfalls and other types of “positive” change; volitional change, or aspirations for a better life; and life-cycle changes that inevitably come from simply living our lives.
“Financial planners’ most powerful role is that of strategist and change agent,” he said. “He has to help the client to position for, and adapt to, change. He must facilitate volitional change and help smooth environmental and life-cycle change.”
Yeske then moved to a discussion of the five financial strategy modes. They are:
1) Planner driven. The planner supposedly knows what the client wants and needs before the client ever walks through the door. It’s a case in which “every problem looks like a nail, and every solution is therefore a hammer. Our literature is aspirational, and shuns this mode, but this usually ends up the predominant mode.”
2) Data driven. This is the “ancient thread” in financial planning, one that was adapted from economics and finance and applied to the planning field.
3) Policy driven. This is centrally planned; one that involves rapid decision making.
4) Relationship driven. This involves life planning and “interior dimensional work.”
5) Client driven. This is all about client validation. When it comes to earning client trust and commitment, Yeske said financial planning has “high credence properties.” Since it is hard to judge the quality of advice, even after the advice is given, due to the fact it is often given decades in advance of the payoff, how the advice is given takes on added significance.
“As Sharma and Patterson noted in their study in 1999, the higher the level of trust and commitment by the client, the higher the probability that the advisory relationship will be successful,” he added.He then moved to a discussion of the five predictors that trust and commitment will be gained:
1) The cost of relationship switching. Too low and clients switch advisors; too high and they will not.
2) The quality of the relationship.
3) Whether or not advisor and client have shared values.
4) Communication. This is most important of the five, according to Yeske.
5) Opportunistic behavior. If clients sense this, it has an adverse effect on trust and commitment.
“It is more important for advisors to help their clients be resilient, rather than be nimble,” he concluded. “There is too much uncertainty to rely on being able to get out of the way all of the time. Position the client for environmental change, adapt the client to environmental change, and prepare the client for volitional and life-cycle change.”
Check out AdvisorOne’s full coverage of 2012 FPA Retreat.