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Will your financial planning clients really reach their goals?

Taylor Liao, CFPBy Taylor Liao, CFP, Chinese Taipei

Every client’s situation is different making it impossible to use the same model for every client. I start over with every case I handle because each client has a unique problem that requires me to be patient and accompany them through the financial planning process. In this blog, I will share with you things I’ve learned through many years of financial planning practice experience.

Case study: the client with two houses

During my last case, I found working with other CFP certificants was the best model. In this case, the client had been retired for one month, he had two houses. One of the houses he had been living in for 20 years and the other one he had just bought a year ago and was paying a mortgage of about US$2,600 per month. He had assets in stocks and mutual funds of about US$330,000. His financial goals included providing study abroad expenses for his two children and the retirement expenses for himself. He was considering selling one of his houses so he could put more money into his investments.

This case has two issues to address: selling the house and managing the investments. The client had investments for a long time but the performance wasn’t great, so he was seeking better management of the portfolio to guarantee his assets could cover the expense of his retirement.

In this case, I asked two other CFP certificants to help me out. One is an expert in dealing with realtors and could assist the client with selling his house. He specializes in negotiating with realtors to lessen the price of houses for buyers and to raise the selling price for sellers. The other CFP certificant had a background in stock securities. He is an expert in asset management. I asked him to setup the portfolio and manage it for the long term. I charged my client for the financial planning and for the two extra advisory services.

Have a team of experts

In financial planning, in order to accomplish clients’ goals, you will find yourself dealing with all kinds of matters outside of financial analysis such as real estate, house decorating, tax planning, etc. You may not know about some of the outside matters, which is why it is helpful to have a team of experts that you can share your fees with.

The goal of financial planning is not to just provide a comprehensive financial plan. A good financial plan is not a one-time presentation but a continuous and evolving document. It may take several years of communicating with a client to come up with a plan that works. Your role is to act as an adviser and hope that the client will follow your instructions to accomplish his/her goals.

The importance of follow throughFinancial Planning Process

If you just follow the process taught in textbooks: introduce yourself to the client, sign an agreement to work with each other, gather data and present a plan, then there is no follow up. I have learned that not following up with the client makes it difficult for the client to reach his/her goal(s).

My approach is to have the client keep a log of their spending in their mobile phone or computer. At the end of the month, they send the log to me and we review their spending together at the end of each quarter. During the review, we check the spending log and look at the progress of his/her goal. This process forces a continuous stream of communication between myself and my clients, therefore it is much more successful than a one time delivery of a financial plan. This process also helps me to identify the issues that clients face when trying to reach their goals. I tell my clients, “A financial plan is a plan that can improve your life but only with adjustments such as budget control, proper investment management, keeping a record of expenses, etc.” The point is that they have to do their part in order for me to help them.

Will your clients really reach their goals?

When you complete the financial planning process and give your clients a financial plan, do you believe that they will be able to reach their goals? Do you really want to see them make improvements to their lives or are you just drawing an impossible dream for them? If you don’t feel confident when you hand over the plan, make sure you keep in touch with them and monitor their finances and make adjustments.

It is our responsibility to follow through on the implementation with our clients. In my opinion, the success of clients is based on the implementation of the plan including budget control, regularly saving money each month, and managing the investment portfolio. When you hand over the financial plan, this is not the end; it is actually the beginning. The suggestions you provided in the plan may need to be adjusted based on the client’s situation. He/she needs our help to adjust the plan accordingly throughout the implementation stage.

Put yourself in their shoes

The most important competency in developing a comprehensive plan is a positive attitude. How can you offer a comprehensive financial plan based on an objective view while putting the client’s interest first? The technical ability to operate the financial planning process is very important, but the most important factor is being able to think from the client’s perspective. If you are able to do this, your suggestions to the client will be much more accurate. The client should know that you are on their side.

At the implementation stage, it is helpful to provide alternative choices to clients. In the example I talked about earlier with the client who needed to sell one of his two houses, I compared the pros and cons of selling each of the houses. One of the houses was bigger and had a more convenient location for traffic while the other one was near a nice park full of trees. This house would be better for a retirement lifestyle. Decisions do not always come down to financials. Much of the time, decisions are based on feelings; which house would be better and make the client happier?

Patience and understanding

At the implementation stage, I always try to put myself in the client’s shoes and understand the difficulties in their decisions. I practice patience and never push them to make quick decisions. It is the client’s life and it is our job to help them. They trust us to help them make the best decisions based on their best interest and we are able to do that because we know them and their situation thoroughly. Financial planners should know their clients well, not because of the data, but because of the conversations they have had with their clients about their views on life, their ideas about money, etc. The financial statements are just reinforcements to these other conversations.

Even if the financial planner executes the data gathering stage perfectly, he/she must understand the difficulty the client faces when making change during the implementation stage. Selling property, for example, can be emotional and might take the client a long time to decide to do. I can’t emphasize enough how important patience and understanding are at this stage of the process. We offer professional advice, but we also must offer empathy.

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