It was Plato who first said that necessity is the mother of invention. He could have been talking about my situation.
In my early days as a financial planner, when I worked with a part-time secretary whose job was to bring order to my chaos, I worked Monday to Friday until 8 or 9, and a half day on Saturday as well. I had little time for my family and even less for myself. I was focused on growing a successful financial planning business and keeping my expanding list of clients on board and happy. Life was frantic, certainly, but I was determined.
I was accustomed to the four grueling months of tax season from my previous career as an accountant. I felt comfortable with my ability to provide solutions using quantitative analysis and the solidity of numbers. After I became a financial advisor and had to deal with the vagaries of financial markets and products, I realized I had built a business that resembled a 12-month tax season, without the comfort of hard answers.
In those early years, my income was based on commissions, beginning again at zero with each new year. This was not a formula for a satisfying business, or life. The stress was killing me. Have you ever woken up one morning, looked in the mirror and asked yourself, "What happened?" I did and, frighteningly enough, didn't know the answer.
THE INSIDE-OUT APPROACH
On a shopping trip with my wife to buy clothes for our children, I watched her turn the garments inside out. I asked her why she did that, and she explained that if the clothes were not assembled properly, they would just fall apart.
That was my "Aha!" moment, when I realized that I had to begin my rebuilding process from the inside out. I needed to visualize what I wanted, then explore and research what it would take to get there. I had to begin at the end and work backward, creating a foundation and process for every aspect of my goal.
I believe in the old saying, "Everything happens for a reason." And I resolved to find another way.
I read how advisors were integrating financial planning and fees into their practices and that fee-based compensation was the newest wave. It sounded right. I began asking questions and learning more.
Integrating fee-based financial planning into my practice shifted my thinking and my process. I was fortunate to hear Michael Gerber, author of The E-Myth, talk about "working on the business rather than just in the business," and the importance of processes that would result in consistent performance. Another "Aha!" moment.
I was motivated and excited, and most clients were happy to give this new platform a shot. As with any new undertaking, there were moments of doubt, failure and more doubt, which could elicit one of two reactions: Go back to what you did before or examine the reason why you created the change and make adjustments.
In financial planning, there are only a handful of issues to consider: income, expenses and investments. The ability to control any of these varies and, in most cases, is limited. I believe the success of a plan has more to do with a client's willingness and ability to articulate his or her true values and align them with reality than with complex planning software, probability analysis or projected outcomes.
The flaw in all the planning became obvious. The results of our meetings were inconsistent-some were fantastic bull's-eyes, some were not. Sometimes clients would change their goals at our plan presentation meeting; sometimes, they would not follow up. I was perplexed. I reexamined my processes of data gathering, analysis and plan output and began to assemble the reasons why my system wasn't working.
The answer became clear: I simply wasn't gaining the trust necessary for clients to feel safe enough to tell me everything. I had the technical side down cold; my accountant brain was firing on all cylinders, numbers moving with ease around spreadsheets created to find optimal solutions.
Although I tried to ask the right questions-"What are your goals?" "What do you care most about?"-I failed to hit the right buttons consistently. My solutions were based on numbers, not on real life.
The answer came to me when I attended a meeting of advisors and heard someone talk about financial life planning and how the work of an organization called Money Quotient had totally changed his relationship with clients. This struck a chord, and I began researching life planning, including the two-day Kinder Institute training and Carol Anderson's three-day Money Quotient workshop. I had already decided why I needed this and all that remained was the how. I had to find a way to connect with clients on a deeper level if I were going to build plans that were uniquely theirs.
As a result of the training and research, I realized I needed to integrate life planning concepts into my process. Money Quotient, a nonprofit based in Poulsbo, Wash., offered an easy, translatable and transferable process with a set of proprietary tools.
The objective is to understand your clients, including their past, present and the future that they wish to create. It is essential to understand your clients' history-in MQ terms, their Money Biography. In his book, The Seven Stages of Money Maturity, George Kinder describes money history, which either supports or prevents an individual from taking appropriate steps to change.
For example, someone who grows up believing "money is the root of all evil" or that "all rich people are greedy" is unlikely to have a healthy money life. People who experienced the deprivation of the Depression tend either to save every last nickel or spend extravagantly. Neither script is healthy.
At my firm, we use financial life planning tools as part of our process, and we take the time to understand the client's past, present and future. For example, we devote a fair amount of time to discussing life transitions and their impact on planning. This helps clients zero in on issues they may face in the future and determine how much energy they wish to devote to preparing for these events.
Transitions that usually have a significant financial impact include retirement, job loss, sending a child to college, a newly empty nest, divorce, or death of parent or spouse. Considering potential transitions helps clients focus on their financial musts (what must happen in order for them to feel satisfied) and allows us to build a plan based on their values, not just a set of numbers.
LIFE PLANNING IN ACTION
When I was in the process of integrating financial life planning into my practice, a client stopped by, a gruff fellow who didn't mince words. He walked into my conference room, tossed some papers on the table and said, "I need to know if I have enough to retire. I can't stand it anymore-I'm done!"
To his surprise, I pushed the papers aside and said, "What are you going to do when you retire? How will you spend your life? You're not going to sit in the house and watch Oprah while your wife has her own life. What will you do?"
Stunned by my questions, and looking like the proverbial deer in the headlights, he stammered, "I-I-I have no idea." I slid the papers back across the table. "Well, then the amount of money on that paper has no meaning. You need to consider what life will look like and what you wish to explore and do with your life. Until you do that, you cannot retire."
The meeting was over. I saw him to the door and offered my hand. Instead, he put his arms around me and gave me a hug. "Thank you. This has been the most important meeting I've ever had."
Does life planning make a difference? You bet.
Michael F. Kay is president of Financial Focus, a RIA firm in Livingston, N.J. He is the author of The Business of Life: An "Inside-Out" Approach to Building a More Successful Financial Planning Practice.