As a longtime financial planner and wealth manager, I can testify that ascertaining and truly understanding my client’s vision for their lives, their values and their heart felt goals is difficult and time consuming.
Oftentimes, clients themselves are not fully aware of their financial goals, much less what they want to accomplish with their lives.
The issue is how humans are hardwired. Humans are built for survival not delayed gratification. We are constantly bombarded with news and advertising that works to either scare or excite us into a course of action that we may later regret. Keeping clients on task towards achieving their goals as life ebbs and flows is the bane of every advisors’ existence.
And as if time wasn’t already in short supply, the CFP Board of Standards has recently updated its Code of Ethics and Standards of Conduct with increasing emphasis on personal, subjective circumstances and how they intersect with the objective, quantitative data we are already comfortable gathering. Qualitative data includes, financial and life goals, values, family issues, health, attitudes, priorities, expectations, and the like. The onus of verifying CFP’s are acting as fiduciaries while addressing both the client’s personal and financial circumstances falls strictly on the advisor.
But there is good news. It is relatively straight forward to effectively use behavioral psychology and behavioral finance techniques that simultaneously accomplishes 3 important goals:
- Give advisors a repeatable and scalable template to quickly and easily get to know their clients deeply and personally;
- Help clients identify their what (goals), why (motivations) and how (strategies), which will help them stay on course; and
- Be able to show the SEC and/or the CFP Board your holistic, fiduciary efforts as part and parcel of 1 and 2.
Effective client discovery entails helping the client to internally explore what it truly important to them when they are relatively calm. Let’s break this down. Our brain consists of an ultrafast “limbic” section that dominates our actions when excited. Think survival. We also have a much slower “neocortex” executive part of the brain where our goal setting function exists. However, we have to be at ease for this section to work properly. When excited or agitated, the human mind can kick the ‘thinking’ part of the brain offline and we go into survival mode of fight, flight, ease and appease. No time to think about long term goals and aspirations when that is happening.
As advisors, it is incumbent upon us to ask discovery questions in an inviting way, when your client is at ease.
Research shows that framing questions using “Prospective Hindsight”, that is working backwards from a certain future, improves goal attainment by up to 30%. Dan Sullivan’s R-Factor and Dangers, Opportunities and Strengths (DOS) questions speak to this, as does Kinder’s 3 questions and the “5-Whys” protocol, among others. Google any of these for more information on these specific questions and you’ll quickly understand why they are so powerful. Collectively, they establish that the prospect or client can see having a relationship with you. They will identify what they value and most important to them (priorities), and their motivations behind these aspirations. Adding a “tell me about…”, or “I’m curious…” in front of any question lowers a person’s resistance to thoughtfully answering the question.
Research shows that if a person can conceptualize the 3 integral elements of delayed gratification (what/goals, why/motivations and how/strategies) and review these on a regular basis, we are much more likely to stay on course towards achieving our heartfelt goals and aspirations. Simon Sinek’s “Start with Why” Ted Talk is a must watch. Knowing your why, your motivation to achieve a goal, taps into your fast, limbic system in a good way.
The how, or strategies contemplated to achieve these goals ought to be formulated in a way that transcends current circumstances. Yeske Buie’s Policy-based Financial Planning framework is an excellent model to use in co-developing a strategy for goal achievement along with the client. A well written strategy, or policy if you will, establishes “Decision Support Systems”, which gives the client and advisor a pathway to follow when life is in flux and we become excited or scared and are tempted to change course. Crafting decision defaults utilizes the mind’s “Status Quo” bias of doing nothing. Set it and forget it. Examples include auto deposits (pay yourself first), increasing your savings rate concurrently with a raise, limiting use of credit cards, having pre-determined philanthropy philosophies, limiting debt to equity ratios, never buying a new car, and maintaining a diversified portfolio and auto-rebalancing at least 2x/year, among many others.
The point is to have the conversation with your clients and get these defaults implemented and written down for review during client meetings.
Armed with this information, advisors and clients can easily craft summary statements that captures all three elements (what, why and how) that the client has expressed along with their default “pathways of achievement” into one cohesive reference guide for any particular topic. Readily having this information available for quick review before a meeting will save the advisor time and money and forms a basis of a repeatable and scalable practice. We recommend referencing what a client said they wanted to accomplish, why they care, and how they plan to achieve the goal in their own words. In doing this, they are much more likely to refrain from self-sabotage and stay the course as life ebbs and flows. In turn, these probing client discovery questions coupled with the client’s answers and well written strategies form a verifiable audit trail for compliance purposes. Quickly and easily show the SEC or CFP Board that you are indeed integrating the qualitative and quantitative from a fiduciary point of view. There are as many ways to achieve this as there are practices, but CRM platforms are built for such. As well, there are an increasing array of digital client discovery tools and platforms that ease the burden of capturing all this ‘soft’ data and storing it where it is easily retrievable. We have built Touchstone Pathway for just these reasons.