Don’t Recommend Financial Planning
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“I’m opposed to financial planning,” said no one ever. Yet most of us avoid financial planning, despite the best efforts of the financial media to extol its virtues.
Studies of U.S.-based investors support this view. One survey found only 1% of Americans use a financial advisor. Their reasons weren’t surprising: Some felt they could do it themselves, using information easily found on the Internet. Others were put off by costs.
The real reason for lack of financial planning is much more complex.
Denial of aging
Would you plan for something unlikely to occur? Probably not.
Most people “are incapable of imagining themselves as old.”
Leon Trotsky, who developed a variant of Marxism known as Trotskyism, correctly observed: “Old age is the most unexpected of all the things that happen to a man.”
Another study by a Harvard psychologist, Daniel Gilbert, focused on why people make decisions their future selves will regret.
Gilbert and his colleagues found that we have “fundamental misconceptions” about our future selves. We believe we won’t change much in the future, even though we acknowledge making significant mistakes in the past. Gilbert calls this the “end of history” illusion.
Perhaps this is the reason many don’t engage in estate planning. As one researcher noted, “the brain does not accept that death is related to us.”
Given this resistance to financial planning, it’s unlikely your plan for overcoming it will be effective.
We can all recall rejecting suggestions to do what’s in our best interest, starting when we were children and were told to eat vegetables because “they’re good for us.” You’re unlikely to effect a fundamental change in behavior by adopting a similar strategy.
You need to change the conversation.
A different approach
Many years ago, I was traveling up the northern California coast. I stopped at a remote community called Sea Ranch and fell in love with it. It was incredibly beautiful and remarkably tranquil.
At the time, my expenses were about equal to my income. I didn’t have much savings.
I contacted a real estate agent and asked her to find land I could build on in the future, where the seller was willing to finance the purchase over an extended time.
She located a beautiful plot with a wonderful view, at a price that I felt I could cover over time. I overcame my anxiety and bought it. I paid it off over five years and subsequently sold it at a large profit.
I remember thinking at the time that this was probably a sound investment. That thought dominated my decision. If I had considered buying the land as part of my retirement planning, I probably wouldn’t have done it.
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In your discussions with clients, consider abandoning the use of “financial planning” and substitute “investing” instead.
Instead of discussing the need for “estate planning,” talk about “investing in your loved ones.”
Instead of discussing planning for educational expenses, talk about “investing in the future of your children and grandchildren.”
Use terms relating to investing in your financial planning discussions. We respond well to “annualized returns” and “how compound interest increases value over time.”
Almost every conversation about financial planning can be converted to one about investing.
This strategy will help you overcome resistance to planning.
Dan trains executives and employees in the lessons based on the research on his latest book, Ask: How to Relate to Anyone. His online course, Ask: Increase Your Sales. Deepen Your Relationships, is currently available.