What is financial planning for?
One answer is to help clients to achieve their objectives. But what objectives? If you create a financial plan that aims to enable a client to buy a bigger house that they don’t need, and which requires the client to work longer hours and not see their children during the week, is this a ‘good’ financial plan?
Financial wellbeing means helping clients to identify objectives which will make them happier, not just wealthier.
In my experience, most financial advisers do not explore this question of objectives with their clients in sufficient depth. Having something purposeful in our lives is a significant source of wellbeing.
Clients typically offer objectives based on little thought to this aspect of their future. They often describe something that they would do, rather than something that would bring them wellbeing.
To illustrate this point, let’s take a look at Hank’s rocks. “Your rocks have arrived, Hank.”
If your response to the sub heading above was to mumble to yourself: “They’re minerals, Marie!”, then you are clearly an afficionado of Breaking Bad!
I work with firms to put financial wellbeing at the heart of their process
For those of you who are not, let me explain. In the American TV show Breaking Bad, Hank was a cop working for the Drug Enforcement Administration (DEA). At one point in the series, he got shot. This necessitated several months in recovery, stuck at home.
Used to catching drug dealers and saving lives, this enforced layoff drove Hank stir crazy. To replace the purpose and meaning of his previous job, Hank began a mail-order course collecting minerals. When a new pack of minerals would arrive, Hank would analyse and catalogue them, chuntering angrily.
I work with firms to put financial wellbeing at the heart of their process. A key part to this is training advisers to help clients identify objectives
His wife, Marie, would arrive home, and bring him a package. Trying to buoy him up, she would cheerfully say: “Look, Hank, your rocks have arrived.” To which he would reply through, gritted teeth: “They’re not rocks, Marie, they are minerals. “
Collecting minerals gave Hank something to do. It did not, however, bring him any joy.
I work with firms to put financial wellbeing at the heart of their process. A key part to this is training advisers to help clients identify objectives.
To start with, we need to consider what actually is an objective. One exercise is to ask for the client objectives from the last 30 or so suitability reports. Why don’t you try this yourself?
Seeing all clients objectives listed can be very revealing. Sometimes, they are rather similar (occasionally, they are actually cut and pasted!).
Often (usually), they are actually the adviser’s objective, not the clients’ (for example, ‘your objective is to beat inflation with your investments’).
Sometimes, they do go a little deeper, often mentioning travel, perhaps playing more golf. I would put these in the same category as Hank’s rocks. They are something to do, not something that necessarily brings meaning and purpose to life.
Finding something to do may well be enough for some people.
One response to this argument I have heard from financial advisers is that they don’t think it is their job to help clients to uncover objectives that will increase their wellbeing
But for someone who has spent a career doing something meaningful and impactful, such as a nurse, doctor, teacher, business owner, or even a financial adviser, then a financial plan with these types of objectives will do little for clients’ long-term wellbeing.
Is it your job? One response to this argument I have heard from financial advisers is that they don’t think it is their job to help clients to uncover objectives that will increase their wellbeing.
Fair enough. However, it is something that many clients are looking for from financial advice (there is lots of research that proves this).
I would suggest that is most certainly a requirement of the financial planning process. And there are many financial planners out there who are doing exactly this.
If you don’t think it’s your job, that’s fine, but be aware that it is only a matter of time before your clients meet someone who does believe it is their job.
Helping clients uncover meaningful objectives can take time. Often, years.
Your clients may not be used to having a conversation with their financial adviser about wellbeing.
It is important to allow time in a meeting to have such discussions. This is true of an initial meeting, but also in the reviews.
Research shows that understanding where joy comes from is a far greater contributor to long-term wellbeing than wealth.
Make an effort to understand this research yourself and share it with your clients. Uncovering meaningful objectives will make your advice so much more impactful.
Chris Budd is author of The Four Cornerstones of Financial Wellbeing. His new Financial Wellbeing Pulse is a way of measuring the relationship with money and demonstrating the impact of your advice.
