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Aligning a client’s values with their financial decisions is often touted as a best practice for financial advisors.
It’s time to reexamine that premise.
What does it mean to align values with money?
Aligning values with money means ensuring clients’ financial decisions – like investments, savings, and spending – reflect their personal beliefs, ethics, and life goals. A client who values environmental sustainability might prefer to invest in green energy companies or avoid businesses with high carbon footprints. While this alignment might seem ideal, it’s important to recognize that values are deeply personal and can be fluid, evolving over time or depending on life circumstances.
Everyone’s values are unique, shaped by their experiences, culture, religion, and personal beliefs. As a financial advisor, you work with clients from diverse backgrounds, each with their own priorities and moral compass. What one person deems essential may be entirely irrelevant or even objectionable to another.
For example, two clients might both be interested in socially responsible investing, but their definitions of “social responsibility” could differ dramatically. One might prioritize environmental issues, while the other might focus on corporate governance or labor practices. Attempting to apply a one-size-fits-all approach to value alignment could disconnect the advisor’s recommendations and the client’s true intentions.
You aren’t trained for it
You’re trained to manage money, assess risk, and create strategies to grow wealth. You aren’t typically trained in psychology or ethics, which are crucial in understanding and interpreting clients’ complex and often conflicting values.
The financial planning process is rooted in objective analysis, which includes calculating risks, returns, tax implications, and more.
While understanding a client’s goals is essential, translating abstract values into concrete financial strategies can be fraught with challenges. You may not have the tools or expertise to gauge what clients value or how best to reflect those values in their financial decisions.
When you attempt to align your clients’ values with their money, you may unintentionally project your biases onto the client’s financial plan. For instance, if you value charitable giving, you might overemphasize philanthropy in a client’s plan, even if the client has other priorities.
Do clients need your input?
There is little evidence to suggest that clients cannot identify and align their values with their financial decisions. They may require guidance on the best financial strategies to meet their goals, but they can fully understand their values and how they should be reflected in their finances.
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Clients are often positioned to define their values, as they understand their experiences and priorities more deeply than anyone else.
Your focus should be on providing the tools and knowledge clients need to make informed decisions rather than on trying to dictate how those decisions should align with their values.
Other reasons
There are other reasons that should give you pause before you engage in discussions concerning the alignment of your client’s money with their values.
Changing values: Values change over time due to life events, financial status changes, or personal growth. Aligning a financial plan with a client’s values at a single time may not hold in the future, requiring constant reassessment and adjustment.
Overstepping boundaries: Advisors who focus too much on aligning values may overstep professional boundaries, venturing into areas requiring counseling or ethics expertise. This could lead to poor financial outcomes and damage the client-advisor relationship.
Diversion: A financial advisor’s primary role is to help clients achieve their financial goals through sound investment strategies and planning. Focusing too much on values alignment can distract from this core responsibility and potentially compromise the quality of the financial advice provided.
Final thoughts
While it is important to consider a client’s values when offering financial advice, it is not the advisor’s job to ensure that those values align with the client’s financial decisions.
You should focus on your core expertise – providing sound financial advice – while respecting each client’s personal values. By doing so, you can avoid the pitfalls of bias and ensure that you serve your client’s best interests.
Dan coaches evidence-based financial advisors on how to convert more prospects into clients. His digital marketing firm is a leading provider of SEO, website design, branding, content marketing, and video production services to financial advisors worldwide.
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