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For planners to help clients identify and articulate their values, goals, and purposes planners need a deep understanding of the interplay between technical and personal decision-making factors.
Did you ever make financial decisions for nonfinancial reasons? It happens all the time because emotions are part of the decision-making process. The process of financial planning is both technical and personal. The personal side gets more credit and respect these days, but we’re still anchored in the thinking that it’s subjective, squishy, inconsistent, and tough to measure. Furthermore, there is a perception that their feelings are thier’s, making it the client’s responsibility. The technical is easy to define and measure; it’s where a CFP® professional can claim expertise.
Skill on both sides is necessary; neither is sufficient on its own. Continued development of both sides fulfills the mandate of a financial planning engagement.
The CFP Board’s definition of financial planning
The definition of “financial planning,” as outlined in the CFP Board’s code and standards (hereafter referred to as the Standards) is, “A collaboration process that helps maximize a client’s potential for meeting life goals through financial advice that integrates relevant elements of the client’s personal and financial circumstances.” The technical competency requirement for serving a client is met through the rigorous testing and ethical standards when obtaining the CFP mark.
The CFP mark benefits and protects the public, provides standards for delivering financial planning, and advances financial planning as a distinct and valuable profession. But it assumes that an individual has had adequate training on the personal side.
But where is everyone getting their personal-side training?
If the personal needs of a client determines the scope of the engagement (which needs to be documented to comply with the Standards), how are planners determining those needs?
The personal and technical sides are equally important and complex
“Personal” encompasses one’s private life, relationships, and emotions rather than matters connected with one’s public or professional career. Personal is about you – as opposed to the outside world or to anyone else. That information, required by the Standards, such as the development of goals, preparing for retirement, pursuing philanthropic interests, and addressing legacy matters, can be accomplished with the tools provided by programs such as the Financial Transitionist Institute and its training in Financial Transitions Planning.
Understanding and removing barriers to processing advice
The application of the Standards requires the integration of the client’s personal and financial circumstances to act in the client’s best interests. For example, a client may be exhibiting a certain behavior that may compromise their ability to seek or process a CFP’s advice: anger, resentment, recalcitrance or disorganization. Individuals whose mental and emotional resources have been depleted often do not want to listen, but, in reality, they simply aren’t able to listen.
Furthermore, the priorities and goals that a client shares are directly related to the stage of transition they may be in when asking for advice. Those stages include anticipation, ending (the event occurred), passage (living through the chaos or change), and a new normal (life is different now). In addition, there can be multiple, overlapping transitions, and most transitions last for years. Most of your clients are in transition, exhibiting the traits appropriate for the stage they are in. You might reason that they aren’t compliant or unengaged. Understanding the stages of transition goes a long way to interpreting client behavior.
Understanding and removing barriers to implementation
The Standards require the CFP professional to understand the barriers to modifying the actions necessary to implement financial advice. To address this, you should be cognizant of the traits that the client is exhibiting, including confusion, fractured focus, mental fatigue and withdrawal. Each trait has its unique expression, and there is a skillful way to help a client work through that trait and move forward. This removes the barrier so that the advice may be implemented.
Continuous documentation
Most importantly, in order to comply with the Standards, a CFP professional must prudently document information, as the facts and circumstances require, taking into account the significance of the information and the need to preserve the information in writing. Qualitative or subjective information, such as the client’s health, family circumstances, values, attitudes, expectations, needs and goals, can be captured and analyzed with the appropriate tool specific to the client. Continually monitoring the client’s progress is also required by the Standards.
Personal-side training is more important than ever
It is of the utmost importance that, from the beginning of an engagement, the planner is able to elicit personal information from a client while maintaining an atmosphere of safety and compassion. We know this as practitioners; we feel the gravity of it. The call to address the emotions and concerns of those before us is strong, but are we up to the task?
Most planners eventually realize they are ill-equipped for what could be the most important moments of their professional lives – facing a prospect or client with all their human vulnerabilities and anxieties – and they have no idea of the appropriate response. This can lead to an unfortunate loss of opportunity for the client and advisor. Few experiences strengthen the relationship between a planner and a client more than successfully navigating a critical life event together. It is why financial planning is deemed a profession within the financial services industry.
Catherine M. Seeber, CFP®, CeFT®, is a vice president and financial advisor with CAPTRUST, based in its Lewes, DE office.
Read more articles by Cathy Seeber
