Values-based financial planning

When I speak to CPAs and accountants about introducing financial advisory services into their practices, they usually ask about which credentials they must get—Series 7, CFP®, CPA, and others—or the technology platform they’ll need, and of course the regulatory requirements which they must adhere to.

These are all important considerations, but one thing rarely asked about is how they should get to know their clients better. After all, they’ve been doing client business and tax returns for years, not to mention their bookkeeping, cash flow planning, and tax planning. How much more is there to know about their financial life?

Plenty.

Getting to know your client’s unique values, beliefs, and goals, in addition to their financial situation, is one of the most important first steps to creating a customized and sustainable financial plan for them. Financial advisors sometimes need to be reminded of this as well.

Unlike traditional goal-based financial planning in which you need “this much money by this age” in order to retire, values-based financial planning aims to align a person’s financial plans with their life purpose and goals.

Brendan Frazier, chief behavioral officer at RFG Advisory, told me on my podcast that understanding a client’s values is crucial for establishing a strong foundation right from the initial discovery meeting. As Frazier explained, values shape our goals and our goals shape our behaviors. By uncovering what truly matters to our clients, he said we can align their financial plans with their core values, creating a sense of purpose and motivation.

“Values provide the guiding light for our financial decisions,” said Frazier, who also hosts The Human Side of Money Podcast. “When we know our clients’ values, we can help them align their financial goals and behaviors accordingly.”

 Frazier believes financial advisors can harness the power of storytelling by weaving personal experiences into their interactions with clients. By sharing their own stories of financial challenges, successes, and lessons learned, he maintains that advisors can create a relatable and human connection that “transcends numbers and spreadsheets.” This approach, said Frazier, “Helps clients see the advisor as a partner who understands their journey and who can guide them toward their financial goals.”

Values-based exercise

Another advocate of values-based planning is my friend, Doug Lennick, CEO of Think2Perform, the organization that created the Behavioral Financial Advisor (BFA) accreditation. Think2Perform has a wonderful values-based exercise that can be used to help clients uncover the values that matter most to them. It works simply by adding and discarding cards that have certain personal values printed on them—Family, Security, Change, Education, Work—until a client has a small pile of values’ cards left that best align with their beliefs. Try the exercise for yourself!

Overriding the brain’s desire to make rash decisions

On my podcast, Lennick talked about the importance of making decisions by reflecting on our values. In a values-based reflection, he said clients can recognize when their emotional state is too charged to make clear decisions, “This recognition serves as a trigger for reflection, which engages the cognitive brain and allows clients to gain clarity.”

During the reflection phase, Lennick said clients are prompted to focus on what matters most to them, including their core values. In Doug’s case, for instance, family, happiness, wisdom, integrity, service, and health ended up being his most important values. By deliberately reflecting on their highest-priority values, Lennick believes clients are compelled to think more deeply about them. He said they can then put words in front of their values, forming affirmations such as “love your family,” “be happy,” “seek wisdom,” “behave with integrity,” “do something of service for somebody else today,” and “make healthy choices.”

Like Lennick, I’ve found that reflecting on values and affirming them helps clients engage their brains and calm their emotional centers. As a client’s brains become more engaged, Lennick said they are better equipped to consider the big picture and to make decisions aligned with their core values and long-term goals.

Types of values

Let’s take a more detailed look at values with help from my friend Amy Mullen, president of Money Quotient, which teaches financial professionals how to bring science to the art of relationships. On my podcast, Mullen told listeners that we must continually check in and assess clients as part of our regular meeting cadence—not just during tax season or during year-end planning. She added that life transitions such as marriage, birth of a child, job loss, or death of a loved one, usually cause a shift in a client’s priorities. As a result, you need to “be there for them” providing financial and emotional support.

According to Mullen there is a broad spectrum of values from which clients tend to direct their lives:

• Principles and standards: Honesty, thoughtfulness, optimism, freedom, generosity.
• Things we hold most dear: Family, friendships, health, learning, safety.
• Intangible things that motivate: Creativity, achievement, intelligence, balance, adventure, self-improvement.
• Issues and causes: Financial literacy, civil rights, environmental issues, social inequality.
• Personal preferences: In-person communication, quality time (love language), alone time to process and create.
• Tangible activities, people, places, or things: Food experiences, photography, family mountain cabin, grandpa’s popcorn bowl.

Why are values so tricky?

Mullen also told me during our interview that we can fall victim to “memetic desire:” craving something only because we see someone possessing it and enjoying it. By mimicking that desire, Mullen explained they people mistakenly believe they’ll derive the same level of happiness from purchasing that item or engaging in that activity. Often that’s not the case. She said we can fall victim to those external influences because we are bombarded with social media and clever marketing that constantly exposes us to images of others eating at five-star restaurants and going on exotic vacations, surrounded by happy friends and family. These external influences, she said, can make a person feel less whole, and increasingly susceptible to purchasing items that don’t lead to happiness.

Personally, I have found that by encouraging clients to state their values quickly, and use mindfulness techniques to recall those values when faced with financial decisions, they can stand strong against temptations, including memetic desire.

For example, if “supporting loved ones,” was one of your client’s values, you could ask on a scale from 1-10 “Where are you in terms of supporting and protecting those I love? What would your life look like if that were a 10?”

Embrace this kind of planning

I realize this kind of advisory work is more interpretative and less rules-based than what you’re used to, but once you embrace values-based planning, I’m sure you’ll come to love it as much as I do. My new book, “Holistic Guide to Wealth Management for CPAs,” discusses values-based planning in more detail, and is chock full of resources and exercises you can incorporate into your practice every day.

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