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Meeghaan Lurtz

Industry Spotlight > Women in Wealth

The New Financial Planning Process That Saves Time, Empowers Clients

By Jane Wollman Rusoff

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A trend toward collaborative financial planning, facilitated by sharing planning software onscreen via Zoom, is empowering clients and speeding up plan creation for advisors.

“Doctors who have the best relationships with patients and better outcomes have collaborative discussions with them. I think we’re moving toward a similar approach in financial planning,” argues Meghaan Lurtz, a finance professor at Kansas State University and senior research associate with Kitces.com, in an interview with ThinkAdvisor.

Traditionally, “there was a lot of ‘Wizard of Oz,’ with the advisors going behind the curtain, doing the plan and then coming back out,” she says.

But “with collaborative, interactive planning, it’s, ‘Let’s [together] find the [strategies] that are best for you.’ That helps clients in a deeper way,” maintains Lurtz, who lectures on financial psychology at Columbia University and is an adjunct professor in the University of Maryland’s program for Certified Financial Planner Board of Standards certification.

At Kitces.com, she’s part of the research team that creates and runs surveys probing how advisors conduct financial planning, how they market and the ways they use technology, among other areas.

A “Wellness Study,” for example, revealed the “shocking” finding, says Lurtz, that “pay was not a way in which advisors, particularly females, were being discriminated against.”

In the interview, Lurtz, a contributing writer to the new book, “The Psychology of Financial Planning,” developed by the CFP Board of Standards’ advisory board and ThinkAdvisor’s parent company, ALM (National Underwriter/ALM, April 2022), stresses that advisors need empathy “to be on the same side as the client” to understand their goals and values.

“If you can’t understand what’s really making your client tick, it will just make your job harder,” she says.

The interview also covers clients who might benefit from financial therapy (Lurtz is a past president of the Financial Therapy Association) and when money is used to manipulate, among other issues.

Her research has appeared in the Journal of Financial Planning, The Wall Street Journal and other prominent media.

ThinkAdvisor recently held a phone interview with Lurtz, who was speaking from Monterey, California.

She points out that multi-generational clients who establish a family money motto “get everybody swimming in the same direction and feeling empowered and connected.”

Here are highlights of our conversation:

THINKADVISOR: How has financial planning changed in the past few years?

MEGHAAN LURTZ: More advisors are doing collaborative planning rather than using the financial plan as a thing they sell in and of itself.

Instead of, “I’ll do the financial plan with my planning software, and then I’ll deliver it to you,” they’re putting the software up on a computer screen and going through the numbers with the client over Zoom.

From that, there’s a simple one-page financial plan that gets delivered.

What are the benefits of collaborative financial plans to the advisor and to the client?

It can make the financial planning process faster because the clients are there to give feedback right away, talk things through and update them in real time.

It speaks a lot to the idea of collaborative leadership versus “I’m the leader, and this is what we’re doing.”

We know from health care that doctors who have the best relationships with patients and better outcomes have collaborative discussions with them.

I think we’re moving toward a similar approach in financial planning. It’s a huge deal for people to feel empowered about their money.

Describe, please, the traditional scenario for doing a financial plan.

There was a lot of “Wizard of Oz,” with the advisor going behind the curtain, doing the plan and then coming back out.

I think financial planners wanted the ideal client to be a delegator: “Just tell me what you need done. I’ll do it and then let you know what the answer is.”

The idea was for the client to delegate to the advisor and then listen to their advice. Now, with collaborative, interactive planning, it’s “Let’s [together] find the [strategies] that are best for you.” That helps clients in a deeper way.

There seems to be more financial therapy being conducted these days. Why is it needed?

People have a lot of “stuff” when it comes to their finances. At one end of the spectrum, psychologists or therapists diagnose [and treat] gambling disorders.

At the other end, we have financial planners who might discover that a client potentially has a gambling disorder.

It’s not the advisor’s job to cure a disorder, though they may be the first person to discover that’s going on.

There’s a space in the middle of the spectrum, where there’s a financial issue.

Let’s say a client grew up in a household where there was a gambling issue. When their parent won, there were lavish gifts; when they didn’t win, it was really scary.

As an adult, trying to make healthy financial choices, they have memories and beliefs that came from when they were a kid. The emotions attached to those are deep-seated.

What should the advisor do about that?

It’s the financial planner’s job to be open to this — not that they need to fully explore or work on it. But it’s helpful to know in the decision-making process.

What does a Certified Financial Therapist’s work involve?

There are clients who want to unpack how growing up in an unstable household has impacted their finances. They can do that emotional work with a financial therapist.

The Financial Therapy Association provides the Certified Financial Therapist designation [Certified Financial Therapist-ITM].

You’ve held client interventions not only to fix something that’s broken but so-called “good” interventions too. Tell me about the latter.

This is where we talk about what’s good and try to turn it into something that’s great. For instance, I’ve been a part of multi-generational meetings working together to develop a financial motto for the family.

People go through their different money stories about how they think and feel about money and then collectively find a theme and designate a motto for the family.

That gets everybody swimming in the same direction and feeling empowered and connected.

What sorts of mottos?

Sometimes they’re about, “This is what the money is for,” or, “This is how we want the money to be [used] in the world.”

It creates a nice touchstone for any financial decision for a family member to come back and say, “Here’s a representation of the family motto.”

In the new CFP Board book, “The Psychology of Financial Planning,” to which you’re a contributing writer, you write about when money is used to manipulate, among other topics. Please talk about financial manipulation.

It’s pretty striking that in an estimated 98% of domestic physical violence situations, there was usually an earlier sign where money was used in an abusive and manipulative way.

Sometimes it’s demanding that one person quit their job, for example.

What about money manipulation where there’s no violence?

There are situations where parents may say to their kids, “If you come over, we’ll go to Disneyland.” That’s manipulation: They’re trying to buy attention and love.

Often parents go along with their adult children’s manipulation to give them money if, say, they’re unemployed. Your thoughts?

It’s very difficult for a lot of people to turn that off because the parents or the kids will justify it. The parents think that if they stop doing it, maybe the love will stop too.

So it’s not [so much] that they care about the money — they care about the emotional relationships and the fallout.

Please discuss financial infidelity, which you also write about in the CFP Board book.

There are many shades of financial infidelity, and the [incidence] statistics range from 50% to 90%.

It can be lying about a purchase or rounding down, like, “My husband thinks my new sweater was on sale. I didn’t tell him it was a $2,000 sweater marked down to $1,000.”

Why isn’t the spouse open and truthful?

It goes back to what people think and feel about their money, depending on how they grew up and what they were taught.

A lot of rules that we act on when it comes to our finances are things we learned quite young — some people say, around 7.

What you know as an adult is totally different from what you knew [or thought] when you were 7. Yet we’re acting on rules that were set up when we were that age.

So it tends to be very emotionally laden.

What else can contribute to financial infidelity?

Money can be a taboo [subject]. People aren’t quite sure how to talk about it. Many times we don’t have good examples of how to talk about finances and have many unspoken rules about it.

This can make the whole process of discussing finances quite difficult.

In the CFP book, you also write about advisors “identifying and responding to clients’ values and goals.”

Should advisors ever suggest that a client go in a different direction when their values prompt them to invest in, say, a particular sector?

For example, the client would like to put money into an ESG fund, but the advisor wants to recommend something else with a higher return.

It’s not the advisor’s job to challenge someone’s values. The client might say, “I’m fine with an 8% return over a 12% return because I know my money is going towards something I believe in.”

Not everything can be solved with a time value of money calculation. While that and a Monte Carlo [Simulation] can be very useful and efficient tools, they don’t speak to the client when they’re trying to solve something else.

What’s one main reason to understand clients’ goals and values?

In order to be on the same side as the client.

It’s: “I’m hearing you say that making the world a better place through this ESG fund is what’s most important to you, and one way to do that is to invest in this fund.”

It’s not: “This is wrong because there’s a more efficient way to [invest].”

Please elaborate.

[You need to] ask the client what they think: “Let’s explore this value a little more and see if there are other ways that would maybe allow your portfolio to have gains the best way it can but also allow you to serve this particular value.”

A lot of times clients are doing things with their heart. We have to take that into account and use a more collaborative approach with three or four options, all of them speaking to [the particular] client value.

Using psychology and having empathy can clearly help advisors relate to clients. But many advisors think they don’t need to develop “soft skills,” that they need focus only on the technical. Thoughts?

Empathy is huge, and I think that advisors very much want to do that work.

In the past, CFP Board education was purely [about the] technical [side]. Now it has aspects of client psychology and the psychology of financial planning.

You can be as technically skilled as you can be — and you should be — but at the end of the day, it doesn’t matter how technically brilliant your financial plan is. If you can’t get the client to come on board, they’re not going to do any of it.

If you can’t understand what’s really making your client tick, it will just make your job harder. You’re constantly going to run into clients that won’t do what they said they would.

(Pictured: Meghaan Lurtz, finance professor at Kansas State University and senior research associate with Kitces.com)

Jane Wollman Rusoff

@jrusoff2

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