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Financial
Planners Challenge
Ray Chodos
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What
does the phrase "financial planning" mean?
Many financial services
providers are self labeled as "financial planners". This includes stock
brokers, insurance salesmen, bank financial services, and a plethora of other sales
and transactional product purveyors. Some are very useful in guiding families to
informed choices and reasonable expectations. Others are salespeople seeking situations
that suit the product they offer. Consumers understandably have difficulty identifying
what sort of planning is being offered, how the provider is expecting to be compensated,
and most importantly, how the client will benefit. Even the most able and professional
planner has difficulty distinguishing his/her service from the sea of available "planners"
offered by advertising across the financial media spectrum. The phrase has been abused
and stretched to the point of lacking clarity and uniform definition or credability.
Psychological
perspective.
When do people
seek a financial planner?
Generally when a catalyst such as poor investment performance, sudden windfall of
earned or inherited assets, life change event such as marriage, divorce, widowhood
etc. sound a call to action. Since these events are rare, we can safely assume that
the small window of opportunity to uncover, interact with and earn trusted adviser
status is easier said than done. To further the challenge we face, a seemingly intractable
bear market trimmed our client's portfolio significantly and quite a few want to
kill the guy "that took them to the dance". This sort of event can unwind
years of success and relationship building. Once burnt, twice shy. Human nature sometimes
defies logic and the need to "blame" someone lies latent in many of us.
Clients tend to associate us with the sound bite phrases and products we label ourselves
with. Often clients do not fully comprehend the scope of planning alternatives available,
and need for their conscious involvement in a learning process rather than simply
a product procurement and then forget about these things for a while.
Few clients have a good understanding of the investment stocks and bonds held in
their own portfolio. When the value of their holdings is on the rise, all smiles;
no details needed. When a forty percent drop occurs, no explanation can salve the
pain, or vindicate the investment adviser. "You are my investment guru,
(Or whatever your area) how could you let this happen to me?"
If we claim to do only one thing, we had better do it quite well or risk customer
retention. If clients join us based on expectation of results that we encouraged,
should we be surprised when they depart for the same reason? Do clients have a right
to expect planning to actually mean "planning" rather than a euphemism
for selling or providing access to product, documents or programs?
Should an otherwise successful and informed individual commit to a strategy or financial
strategy poorly understood largely on the advice of a sales person? We see evidence
of this unfortunate phenomenon when we ask the client explain their insurance program
or even their will. We often hear them say that these issues were reviewed by my
"adviser" and do not need attention right now even though the client can't
explain the salient issues or even concept intended by their creation. How sad that
some clients don't have the ability to understand a document that is intended to
express their last wishes for those they love the most with all they have.
Professionals engaging in such practices have much to explain when their client signs
a document or enter in to a financial commitment they do not understand.
What causes such illogical behavior?
We can't allocate the needed time to manage everything. Perhaps our business
and family lives are harried and complex leading us to believe that "specialists"
likely know best. If and when we become disillusioned with the results of a particular
specialist or his/her financial institution, we simply move to a new environment
and hope for better luck. Many affluent individuals become sheep following various
shepherds in a confusing and difficult to comparison shop environment. For example:
Disposition documents
(wills and trusts) vary widely in scope of sophistication and addressing of vital
issues such as taxation, asset protection, custodial management for those in need.
How is one to discern which lawyer is truly learned and experienced in such matters
when hundreds of firms label themselves as "estate planning" experts? Can
you imagine an attorney saying that he/she isn't well versed in their specialty?
Could a client be expected to review a multi page legal document and know where lapses
and improvement opportunity lie? Should we visit several attorneys and have each
one critique the other's documents so we improve the likelihood of quality? What
about cost? Legal clients generally don't understand the right questions to ask or
walk in with a well thought out understanding of death and the impact of the myriad
of events that follow to the survivors.
Similar behaviors
occur with CPAs, financial planners, insurance and most other financial service providers.
What can be done to help?
It is not the aim of this writing to lay blame to any particular group or discipline.
It is inherent upon the planning/financial services community to improve the level
of adviser awareness of client's need to be educated and participatory in the planning
process.
Planning is best achieved when the client feels passionately about the end result
sought and adopts a participatory involvement as a "co-pilot". Advisers
should be motivated to have written records of client expressed and considered objectives
and concerns. Specialists should be consulted (at least by the adviser, if not with
client) to surface ancillary issues such as the impact of taxation, divorce, and
future claimants to be integrated into the planning process.
It is in the best interest of the client adviser relationship to surface possible
issues before committing to a plan. Concern for the client's best interest is evident
when a holistic approach is followed. Written mission statements prepared by the
primary adviser and shared with the client and ancillary advisers avoids the "lone
ranger" appearance that leads to turf wars among advisers. As advisers it is
difficult for some of us to separate our own values and preferences from those of
our client. We may tend to lead people unwittingly to where we want to go. This phenomenon
may help to explain the scorn clients may express when plans go awry and the planner
is vilified for leading the client there.
Madison Avenue marketing/advertising techniques borrowed.
Some of the most successful sales results are more attributable to consumer awareness
of the product by reputation than its quality or even value. The inverse is equally
true, great products unknown to buyers sit on a shelf and collect dust. If successful
marketers waited for a consumer perceived need for a product to trigger a sale, most
businesses other than basic life needs would fail sooner or later.
Marketers sell to "wants" by enticing or disturbing us from our complacency.
Sexy advertising, cute jingles and celebrity endorsements get our attention and create
a "want" for items we don't really need. Without our attention to the message,
any information that follows falls on deaf ears. Financial services providers need
to get the intended prospect's attention focused on "benefits and gain"
more than on firm size, rating, years of experience, and recent hot deals and such
which is of little interest to those not in the market for your wares at this time.
Planning is not of itself pleasant to successful people since they become "students"
to be led rather than captains that do the leading. These successful people can be
lured into investigating opportunities and perils associated with asset protection
that often leads to planning and deep involvement on their part since it affects
them now while among the living.
Strong individuals that were responsible for amassing large assets usually are infected
with the thirst for more knowledge and methods of problem solving sometimes beyond
the enthusiasm felt by even the planner.
How do I do this? Disturb and entice.
As an attorney we can ask our client if they understand their will and how their
family would get along with the provisions. We could ask if the client has calculated
the death tax due or the probate costs. Few responsible people would like to remain
in the dark about such vital issues. If we simply say that we do wills or "when
was your will done?" where is the compelling reason to act now?
As an insurance sales person we could ask what the client risk exposure to losing
their most valuable assets is. What risks will insurance not cover, what do
other informed people do? If we simply offer to "review" their policies
and "quote" another company should we be surprised at their reluctance
to cooperate and labeling us a vender?
As a CPA/tax preparer we can ask the client to articulate their financial objectives
and how their current approach is expected to achieve their aim. By focusing on preparing
tax forms after the fact, how can we be seen as anything other than tax reporting
facilitators?
Investment salespeople can discuss methods of wealth retention rather than
simply offering the latest "hot investment". The strategy being suggested
is one by which an advisory relationship can be earned by bringing substantive value
to the client in addition to offering our products for which we are compensated.
Ultimately most people will purchase many products and services relating to financial
advisory, to lead them to do most of these transactions with us or our alliance partners
is our challenge. It seems every financial institution would love to "help us
mange our wealth". Most relationship managers (euphemism for sales representative)
tell us how wonderful their resources and large they are. What problem of mine
are they solving for? Who are we to believe? Is anyone offering to protect what
I have already accumulated and paid tax on?
Often those referring to themselves as planners tout their credentials as evidence
of their value to a prospective client. Training and education are certainly desirable
in an adviser. Even more desirable is the honest desire to hear out and understand
the client and their concerns. Even a non-credentialed adviser can collect data,
feelings and values for discussion or collaboration with specialists when and as
needed. Conversely a highly credentialed adviser can not be a specialist in every
financial aspect of asset protection, tax minimization, investment strategies, estate
planning and business disposition. Clients often admire an adviser that knows his/her
limitations and brings in specialists to add fine tuning. The medical and legal communities
often operate in this fashion as well.
We do not think less of our general practitioner for calling for a consult with a
specialist. We expect them to act this way.
Planners it seems should behave as an advocate for the client's best interest by
understanding where they want to go and why. The planner should help
to educate the client to an awareness of the opportunities and pitfalls of getting
clients to their destination. It is not essential to have the relationship live or
die by the performance of any one aspect of their programs. How we position ourselves
at the onset has much to do with the attention and respect we can expect from our
clientele.
Consider asking yourself what a client has a right to expect from your planning services.
Consider defining "planning" for yourself and client. Consider offering
a written summary at the time of engagement as to the client's objectives and concerns.
Your summary can outline concepts and strategies to be employed and reviewed periodically.
This helps the client and you focus on what is really important to them; getting
where they want to go.
Exceeded expectations make for loyal clients and reference centers, even in occasional
down market. Trusted advisers are engaged for what they know; venders are transacted
with for what they have.
Ray
Chodos is a member of the Wealth Preservation Group, LLC of Greenwich Connecticut.
A firm specialized in serving the concerns of business owners and their advisors
for tax minimization, wealth preservation, and business succession. WPG also consults
for financial and professional institutions in areas of marketing and practice development.
www.WealthPreserve.com Ray
Chodos can be reached at: Chodos@WealthPreserve.com
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