Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
I have read many of the things you and others have written about advisors needing to dig more deeply into client’s lives including their values and their reasons for everything they do. Conceptually, I understand this helps us to make better financial decisions because most everything in life ties back to what people want and what they most care about.
But I find it difficult to act as a social worker. I’ve no background in psychology. I’ve no skills to help warring couples find their bliss and agree on a center point when they have differing opinions. I have no interest in whether a client wants to leave their money to their kids or whether they want to finance an expensive lifestyle during their life – outside of the fact in one scenario I hopefully keep the assets and the AUM fee and in the other I am helping myself lose money.
I do not mean to sound callous, but I don’t care. I’m a finance guy. I have a master’s in finance, I’m a CFA® and spent years working toward my CPA. I value my education and I am not trained to get people to open up and to get clients to talk about their values in a manner that correlates to good investment decisions.
Isn’t there a place for good, old-fashioned investment advice and creating portfolios to meet target rates to ensure clients have enough money for retirement and beyond? We use a simple formula that takes current expenses, adds in other activities or goals the client might have, changes up the appropriate expenses to fit a retirement lifestyle and figures out what target percentage we need to achieve each year to get there based on the client’s desired retirement age. It’s not complex, but it works. We have 50+ clients who have now entered retirement after working with us to plan and every single one of them thinks we are the best decision they’ve ever made.
I get the “dig deeper” idea. But having a blanket approach saying we all need to do things this way diminishes the education we’ve earned and the work we’ve done. I’m not going to play psychologist when I’m not a psychologist and I don’t think that is highest and best value for my clients either.
H.D.
Dear H.D.,
Your inquiry brings up main points and I’ll address them in my response. One is the role of the advisor – what it is and how it can best work for clients; the other is marketing-related and has to do with how you position yourself and what your target market needs from you.
You say you have no education in therapy and yet you are learning, along with your client, about what they want to do in retirement. You are somehow preparing financial projections and budgeting using some information about what they want to do. You may not term it as “values,” but the choices anyone makes about how they will spend their money is underlined by their desires. When I talk about advisors needing to have higher emotional quotient (EQ) and be more like a therapist, I’m speaking about the Socratic approach therapists take when working with clients. If you went to a therapist to lose weight, for example, a good therapist is not going to hand you a diet plan and a membership to the gym and wish you good luck. They are going to be inquisitive and ask you questions about why you’ve not lost weight in the past, what you like to do for exercise, whether there are stress related aspects to your inability to lose weight etc. They may find you can’t lose weight because you hate your job and you are stress eating as a result. If the right problem isn’t identified, it can’t be solved. It’s similar for advisors. If I tell you I want to retire at 62 and right now I spend $10k a month for everything, if you don’t know why I chose that age, where my $10k is going, what else I care about in retirement, what my plans are for once I retire and so on you are going to put together a portfolio that gives me $10k per month starting at 62 until whatever age you think I will expire at and be done with it. You haven’t really solved anything for me, you’ve just created a target portfolio.
You could – without being a therapist – be curious with me and work to understand why these are my decisions. Maybe I haven’t thought things through very well. Maybe I chose 62 because my father or mother retired at that age and that’s all I know. You don’t have to become a skilled therapist; you need only to learn what therapists do well around interest, curiosity and questioning and be sure you understand your client before you provide answers.
And clients do need the life coaching aspect. How many people have retired and have plenty of money but are miserable? One of my partners in elder care tells a story about a client who worked with an advisor for years. The advisor helped the couple save plenty of money so that when the time came the couple was able to move into a very fancy, high-end assisted-living facility in Florida. The place was beautiful and expensive. The wife started to have deep depression, bordering on suicidal tendencies, because she hated being there so much. She wasn’t ready to make the move, but the advisor had never explored from a life coaching perspective what mattered to this couple. They worked with my partner, an elder care advocate, and made some different decisions. Through the process they came to dislike their advisor very much. They felt he had done them a disservice by not discussing the pros and cons of this move. They took their $25 million portfolio and moved from not only the over-55 complex, but also the advisor, to somewhere they felt a better fit.
If advisors don’t know why or don’t care, they are not going to be able to make the best decision for, and with, the client along the way.
This brings me to the second point which is marketing and your ideal client. All of this said, you can always carve out a niche wherein you offer financial wealth management in a way that fits your personality and your firm culture, as well as your target market. Maybe you, your team members and your clients are the no-nonsense, never-talk-about-feelings types of people. Maybe you like facts and data and like to run numbers and make decisions based on those numbers. That’s okay as long as you position what you do to align with this, and you communicate the process to prospects and clients. Some clients don’t want you to pry into their personal lives; they are very private. Others are hard-core businesspeople who don’t see a need to talk values or life goals. If this is your target market, your approach could align very well – just be clear about who you are, what you offer and who best benefits from what you do.
The best advisor is one who cares enough to ask the hard questions and to stay open-ended and to listen like a good therapist would do. You are not trying to psycho-analyze the why about the values, which is what the therapist is trained to do. You are just trying to understand the what so you can align the how. In my experience, everyone can benefit from having someone ask the life-coaching questions. Everyone can benefit from having someone who is curious enough to help them think. Everyone can benefit from taking that step back to consider their decisions. But there are many ways to deliver excellence in wealth management, and you need to stay true to who you are and what your clients want and expect from you.
To get good at this, you don’t need to go back to school for the psychology degree. You simply need to be interested and curious and care a bit more about matching the solution to the underlying problem your client is trying to solve.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry, in 1995. The firm also founded and manages the Advisors Sales Academy. She is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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