Managing life changes in financial planning

At conferences I attend, advisors tell us they really know what clients want. But research finds some significant big gaps between an advisor’s assumptions and what clients say they are getting from their advisors.

In my interview with Amy Mullen, president of Money Quotient, Inc. and vice president at MQ Research & Education, we talked about a study her firm did with the Financial Planning Association about developing and maintaining client trust and commitment in a rapidly changing environment.

Among the study’s key findings:

• Seven out of eight financial planners (87%) believe they are open to discussing what clients value most in life, but only half of the clients (50%) believe their advisors are open to discussing what they value most in life.
• Ninety percent of financial planners believe their recommendations are based on a client’s personal goals, needs, and priorities, but less than half of the clients (49%) felt that way.
• Eight out of 10 financial planners believe they communicate to clients the importance of incorporating all areas of life when creating a plan, but less than half of the clients (47%) felt that their advisors are taking that approach.
• Seven out of eight (85%) financial planners say they contact clients regularly to see what life changes may be affecting their plan, but less than four in ten (39%) clients say their advisor contacts them regularly.

I’m not surprised by the findings. As professional service providers, we haven’t been trained to look beyond the numbers to get to the heart of a client’s values and life goals. For example, if you’re a CPA or tax accountant, I know it can feel like a full-time job just getting your clients’ books in order so you can get tax returns done on time and correctly.

But do you have any idea what they want most out of life? Do you know how to put together a life plan? A life plan is a living document that can help you and your client regularly assess their satisfaction in all aspects of their lives, not just investments and taxes.

Why life planning should come first

Many people regret they didn’t start working with an advisor and creating a life plan earlier in life. Traditionally, people start financial planning after they have some form of financial success or when they’re on the cusp of retirement. But how many people’s lives could be transformed if the advisor could start helping people whose financial lives haven’t been successful?

Accountants are the financial professionals many people encounter first. How many small- and mid-size business owners could improve their businesses and sense of well being by undergoing a comprehensive life plan early in their relationship with their CPA?

Values-based planning 

As discussed in my last article, values-based financial planning is an approach to financial planning that takes into consideration an individual’s unique values, beliefs, and goals—in addition to their financial situation—to create a customized, sustainable plan. Unlike traditional or goals-based financial planning, which may not fully consider the role of personal values when making financial decisions, values-based financial planning aligns a person’s financial plans with their life purpose and goals. 

My new book “Holistic Guide to Wealth Management for CPAs” discusses values-based planning in more detail, with resources and exercises you can incorporate into your practice every day.

Speaking of goals, this is certainly a hot topic when we get ready to flip the calendar over to a new year.

Volumes have been written about why so many New Year’s resolutions fail. Many life coaches and productivity experts espouse the SMART goals principle (Specific, Measurable, Attainable, Realistic, Tangible). Mullen says that when goals are presented in such a rigid way, clients may perceive them as just another chore on their already full plate.

“A large portion of our society doesn’t like goal setting,” said Mullen. “The word ‘goal’ can have negative connotations either because society failed in the past to reach certain personal goals or they’re in a work setting in which rigid performance goals are pressed upon them.”

Mullen said they might also lack the knowledge or skills to reach certain goals, so they have low self-efficacy that causes them to avoid goal setting. As a partner and educator for your clients, Mullen said advisors should try to give clients a fresh perspective on goal setting that gets them excited about engaging. The key is to help them set goals that are “aligned with their values.”

According to Mullen, clients shouldn’t just say: “Retirement is a goal” or “Education is a goal.” We want them to picture a “wonderful retirement with the people they love, doing the things they like to do.” As an advisor, Mullen said don’t be afraid to ask clients to envision their retirement years. Ask them: “Where will you be? Who are you with? What are you doing?”  This, she said, is a really fun way to help people shift their perspective around goal setting.

Mullen created a different set of SMART goals that are more likely to resonate with many of your clients. The key, she said, is to set goals that are significant and meaningful.

“Clients should be attracted to reaching a certain goal and you want to talk to them about how reaching the goal will be rewarding at the end,” she said. “You could say, ’Let’s set up some benchmarks that we can celebrate along the way to make reaching this goal fun and rewarding.’”

You also want to talk about the timeliness of the goal. According to Mullen, one thing we don’t do enough of as advisors is take the time to recognize when clients are overwhelmed because they already have too much on their plate already. By helping them prioritize small, manageable steps, they are more likely to stick to, and reach, their goals.

Next best action (NBA)

Personally, I’ve found the Next Best Action (NBA) approach can be very helpful for goal setting. Start with the ”why” to establish a significant and meaningful vision, then shift to the ”how”’ by becoming focused on the process.

Once the client has a goal in mind, the NBA becomes the actionable step that keeps them moving forward. For example, if your client’s ultimate goal is to run a marathon, the ”why” might be to lead a healthier lifestyle. The “how” could be something as simple as running a mile, or simply putting running shoes on and walking around the block to get them on the right path. NBA creates positive momentum and helps clients stay engaged with the process, even when the big picture feels daunting.

I realize it may take some time to get comfortable going from a financial-first approach to a values-first (SMART) approach with your clients. For 2025, why not do it at your own pace, with small, manageable steps?

DISCLAIMER: https://www.arrowrootfamilyoffice.com/disclaimer/