Building an Advice Relationship Based on Financial Wellness
• Mac Gardner • June 3, 2021
It’s a sad reality that most people are not proactively managing their financial lives. They often only turn to a financial professional when they can’t seem to find the answers to some of life’s most difficult financial questions. And when that happens, the stress the client endures until a solution is found can have a profound effect on their well-being. Imagine how taking a more proactive approach to planning could benefit their financial wellness and their financial future.
One of the main reasons people don’t act is fear—fear of not knowing the right approach for handling a financial situation or dealing with a subject they aren’t familiar with. This fear can be alleviated through exposure to educational resources regarding their finances, along with the right financial guidance and support. I have found that once people understand their situation and recognize that there are numerous ways to overcome their financial hurdles, it is easier to continue down their respective financial path.
Financial planning is heavily influenced by the emotions and feelings we have about money. It’s essential to dig into these in order to forge a more meaningful financial professional-client relationship. To build deeper advice relationships with your clients, start by understanding where they are coming from, where they are currently, and where they want to be.
By learning about the driving forces that influence them daily, you can help your clients gain insights into their financial lives that will positively impact their well-being.
The 3Fs of Financial Planning
My method for discovering this deeply personal information is through discussions about family, finances, and future—or the 3Fs—and I believe this strategy is critical to building a path to financial success.
When I sit down with a client for the first time, I introduce this concept to them and explain that it will give us an understanding of where they are in life, where they have been, and where they want to be.
Start with the client’s family. Money is worthless if it can’t provide options to your clients and their families. Each generation wants their children to have greater advantages than they did. Financial professionals help with this aspiration by setting the next generation up for financial success.
Family influence and outreach is a fascinating aspect of personal financial planning and financial motivation. Financial professionals often focus solely on their client’s immediate family needs. This strategy completely disregards the impact those outside the direct family can have on their finances.
I discover these further influences by using the “up, down, and around” method. Begin with the client and their spouse, if they are married, as the core family unit. Then we go up and talk about the clients’ parents, then down to talk about their children, if any, and finally, around where I ask about siblings.
Asking questions about this group will give you and your client a better understanding of how core and extended family can influence their financial decisions. Ask questions that give you the details about who and how many people there are in this extended family and ask questions that can help you and your client think about what kind of support those individuals might need or give in the future.
For example, is there a possibility that any of these family members could become financially dependent on your client in the future? Could your client have an inheritance coming their way? By understanding these family dynamics, your client’s plan becomes a comprehensive picture of their past, present, and future financial needs.
Talking with your clients about family first gives you both the opportunity to learn and understand their financial motivation.
The next F in our process is finances. This includes talking about everything that makes up the estate of the individual or family. These client discussions should include their assets, liabilities, income, and expenses.
Even though we’re talking about objective information involving tangible values, this discussion is steeped in emotions. There are stories behind every financial asset a person purchases or invests in. For each asset you discuss, ask the simple question, “What can you tell me about that account?” You’d be surprised how this simple question can evoke some deep and unexpected answers.
By understanding the reasons a financial decision was made, it is easier to piece together a financial timeline that provides insights into the priorities in your client’s life at the time of the decision. Everything in their financial portfolio should have an understood purpose.
Uncovering the stories behind financial decisions provides not only an overall picture of financial net worth but more importantly, a behavioral insight into the habits of the client. The purpose behind the pieces that make up the financial picture must be uncovered to get a true understanding of current and future goals.
Once you understand the family dynamic and how financial assets are structured, the next step is to talk about the future.
When you sit with clients and ask them to tell you about their long-term goals, you will get a variety of answers. Every person’s view of their future self is unique, and for the most part, positive. Everybody has the best intentions of working towards these goals, however, many do not achieve them.
The first step to reaching a financial goal, especially a long-term one, is to have a financial plan. After working through the discussions about family and finances and listening to your clients tell you about the goals they hope to achieve, it’s time to do your job as a financial professional. Help them bring together their dreams and their reality.
Once you have prioritized the family needs and goals and aligned them to the appropriate financial tools and strategies, you are ready to add clarity to the overall financial picture and begin to do some earnest planning.
The Ongoing Process of Discovery
By having discovery-based conversations with your clients about their 3Fs—family, finances, and future—you will get to know and understand their motivation for the financial security they are seeking. Continually revisiting the 3Fs and pursuing ongoing discussions about the emotional aspects of financial planning will help ensure your clients maintain the alignment of their goals as their lives change. Bottom line: This will lead to a more rewarding financial professional-client relationship overall.
DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.
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