Whatever role you take with clients and whatever questions you seek to answer, your objective should always be to enable them to make good decisions and maintain actions that advance their personal (or business) lives and goals. If your presentations and deliverables don’t achieve that objective, then the quality of your conclusions will not ultimately matter.
So how do you deliver advice usefully?
Start with my “Final 5% Rule”: the last 5% of the job that you do is the first thing the client (or audience) sees. If you are still assembling the package as you walk out the door, you may not notice that the client’s name is misspelled on the cover sheet, or that there are two copies of page three and no page four. You can have a beautiful PowerPoint prepared and forget that it’s really hard to see things projected in the color red. Great in print, horrible on the screen. You might not notice, but the client will.
Clients rightfully expect perfection in what the financial providers present. Numbers have to add, addresses be accurate, and children’s names spelled correctly. Clients can’t know everything about the content of what you say, but if you make mistakes where they can catch them, they lose confidence in the accuracy of whatever else is being shown. Advisors are allowed to make mistakes in forecasts, but the columns and rows had better be correct.
After all, how long would you stay with a bank that regularly has mistakes in your monthly statement? How much would you value a relationship with someone who cannot remember how to pronounce your name? Only by getting the basics right do you get to try to keep a client’s trust.
Americans have been taught that finance is important and mostly about numbers. Most also think that numbers are inherently dangerous and complicated, so that makes financial planning both necessary and something to be avoided. Usefully-delivered advice is most effective when it focuses on behavior and objectives, not numbers. As I said in my prior article, financial numbers are always inaccurate and often misleading.
It’s been said that no one wants a quarter-inch drill bit – what they want is a quarter-inch hole. Similarly, no one wants two million dollars – they want what (they think) it takes two million dollars (or whatever the amount is for them) to obtain: financial security, peace of mind, capital for a new business, or something else of value. Your plan cannot promise a particular number, so offer a path to what it is they actually want.
Some clients really enjoy this financial stuff, but others do not. Some are very competent in this world, but others are good at other things. Tailor your plan to fit the client’s level of competence and interest. That means you cannot use the same plan template with the same level of detail for all clients. If you demonstrate that you have paid attention to what they can do and want to do, you will be delivering advice in a most valuable way.
Here’s an example from the world of art: Some of the pictures painted by the Venetian artist Tintoretto and displayed at a recent exhibit in the National Gallery of Art look off-center and badly balanced. It turns out that several of his pictures were painted to be hung in a long narrow hallway, and thus would be first viewed from the side, not the front. The artist took the time to examine carefully the space he was going to decorate before beginning the actual design, and the masterworks were perfect fits for the places and purpose they had been commissioned.
How will your plan be approached? Design it for the specific needs of each client.
To provide advice usefully, reduce the number of decisions and actions you ask of the client to match their desired level of involvement. The world of finance is inherently complicated: Not only do they need to figure out what they should own, for example, but how it should be held, and where, and when to acquire it, and how to pay for it, and how to title it. Doing any of those things wrong feels like it could lead to disaster.
Returning to Tintoretto, he would first envision the overall picture (or sketch or design), and only then decide on specific colors or which saint or angel (in Renaissance Venice) should appear in the sky. You show your finished design – whether cash flow or asset allocation or risk profile – in the context of the overall strategy. You may design a mixture of asset characteristics, tax advantages, ownership specifics, and so on, to pursue a goal in the desired time frame. The key decision you want is on a total design – either what you first prepare or what you and the client develop together. Once that is obtained, then the next layers of specifics can be approved and implemented.
Delivering advice happens over time, not just once. One of the most challenging parts of being a useful advisor is keeping yourself and your client moving toward their goals.
Clients will look in the direction that you point. They learn what is important from you. Thus, if you regularly contact them when markets drop, even if it is to encourage them to stay the course, they will learn that you are afraid of market drops and that you fear they lack confidence in your shared plan. If you give them quarterly reports, then quarterly variations must matter.
Make sure that your reports – whether at the delivery of a plan or on periodic reviews – stress the factors that you believe are important. It is likely that the authors of the software you use do not share your planning approach or emphasis, so you may need to add on a layer of analysis. If your reporting only focuses on investment performance, then that is what you will talk about, whether or not it is critical to the client’s plan.
The useful planner returns regularly to three topics. How is the client doing over time? Movies and photos each have their place in providing information, but movies (or before-and-after photos) are much better than single pictures. Longer-term charts are common in showing investments, but similar charts can be equally useful in showing changes in income levels or even the number of vacation days taken, if that is a client goal. Think of ways that client progress can be illustrated, and show them to the clients.
What is changing in the world around the client? We plan in the context of certain assumptions (both personal and on a larger scale). As these assumptions change over time, new opportunities and new threats arise that should be addressed. Perhaps a business opportunity is now available, or a second home is less secure in the face of rising dangers of floods, fires, or severe storms. Changes in pension laws could create new risks to the client’s planned retirement benefits, while new estate tax laws mean more money can go to heirs rather than the government. Be proactive and specific as years go by. It is easy to miss changes in an established relationship.
Finally, always return to the clients’ goals. If they are ahead of the plan, can the goal be expanded (or accelerated), or can resources be made available for a new goals? If things have not worked out on schedule, should the effort be increased or the goal reduced – and what happens to other goals and dreams if those changes happen? As the clients age, return to the start of the planning process and listen to what they dream about and fear today. You have changed, too, in skills, capacities, and wisdom. Let you clients see that their hopes remain your guiding star.
Richard Vodra, J.D., is the president of Worldview Two Planning of McLean, VA. He is retired from a 27-year career as a personal financial planner, and received the 2019 Lifetime Achievement Award from the National Capital Area chapter of the Financial Planning Association. He is an original member of the Nazrudin Project. He currently focuses on the linkages between financial planning, climate change, and resource constraints. He can be reached at [email protected].
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