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Understanding Clients is the Real Job of Financial Planners

By Joel Redmond, CFP

One of the most fundamental human tendencies is to simplify. Someone asked Richard Feynman, the famous Caltech professor and theoretical physicist who shared the 1965 Nobel Prize with two other scientists, to define what he had done to win the prize – in one sentence. And Feynman’s reply was analogous to “if I could describe it in one sentence, it wouldn’t have won me the Nobel Prize.” 

Qualitative and Quantitative Analysis

Clients’ lives also seem to defy one-sentence definitions, especially as they become more and more affluent and active. At its simplest, however, financial planning is nothing more than two types of assistance – quantitative and qualitative. These can be abbreviated to “what” and “why.” Quantitative concerns include questions like these:

  • What does the client have – in terms of assets, liabilities, income, and expenses?
  • What does the client need, expressed in the same terms, and how different is it from reality? That is, what are the desired financial position & cash flows?
  • What financial alternatives and actions need to be considered and pursued to bridge the gap between the current and desired financial situations?
  • Which are the best alternatives for the client?

The reason the certification process is detailed and complex for financial planning is that the instruments, accounts, investments, and rules themselves are detailed and complex. You can’t master the distribution rules from IRAs in an afternoon. Digesting the pith of the tax code isn’t done in a week, or even a month. Discounted cash flow concepts aren’t necessarily intuitive, especially if they weren’t learned in college – and even if they were, the non-linearity of investment returns complicates them further in real-life situations.

What about those who would rely on software to do the heavy lifting? Many financial planning software packages have enough bugs in them that an independent, back-of-the-envelope series of calculations may be crucial on the part of a practicing planner advising a client, even if nothing more than an independent confirmation.

As complex as these calculations sound, the more challenging task is the qualitative side – truly understanding your client. The most sophisticated investment algorithms, the sexiest presentation technology, and the most eloquent analytical recommendation reports are no match compared to a genuine, empathetical client  understanding. Gabriel Garcia Marquez, the famous author (and another Nobel Prize winner) of One Hundred Years of Solitude, once commented on a newspaper reporter who tape recorded all his interviews. Marquez (himself a reporter for the Colombian newspaper El Universal) commended the reporter for his assiduity in getting the details, but also lamented the fundamental flaw of using a machine. The recorder, he said, left out the most important part of the interview – the beating heart of the one answering the questions.

Understanding Clients

This, really, is the job of a financial planner – to listen to the beating heart of the client. This beating heart is in a different place for every client. Some wear their hearts on their sleeves – you ask and they answer. Others are more subdued, and you have to learn to listen for what is said – and what is unsaid. This is subtext – the deafening roar of intuition under the diaphanous veneer of speech. Planners must listen to what clients mean – not merely what they say.

That said, becoming expert in the qualitative side of financial planning isn’t impossible, or even extensively complicated. There are three cardinal rules here

  1. Look for the client’s story, not just their information.
  2. Trace the source and origin of decisions – don’t rest until you find out why clients do the things they do.
  3. Care about them.

If you had to choose between being able to flawlessly value a client’s option portfolio using the Black-Scholes-Merton Formula or being able to do these three things, choose these three things. There’s an old saying that is tremendously true in financial planning: “people don’t care how much you know, but they always know how much you care.” This is as close to “one-sentence” financial planning as we’re likely to get.

2 comments to Understanding Clients is the Real Job of Financial Planners

  • Hi…Joel

    Thank you for the article, it is beauty, totally agree that we must care sincerely for our client at the same time i have experienced that sometimes clients dont care for us. They are only interested in them selve. I move away from clients who dont engage in two way relationship for long term.


  • K.V.Mohan

    Building relationship is a marathon.People do not care until we show them .The two way process
    starts as Joel said knowing the client’s story thereafter a differrent kind of understanding begins.Married for last 13 years yet finding difficulty in managing relationship so lets enjoy the financial planning experience.


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