How to Start a Financial Planning Relationship

Financial planning has come a long way in the last 25 years and can even be described as a “mature industry”. Despite this, there is still plenty of confusion concerning when, why and how to get started working with a financial advisor. I was encouraged recently to describe how potential clients can get involved in the financial planning process. Is there are right time? How much money do I need to have to consider doing it? Is it expensive? What can an advisor do for me?

Engaging in a casual conversation, as I frequently do, with someone who has enquired as to what I do for a living, I receive all sorts of apologies for why he/she has not started on a financial plan. “My situation is really quite simple” or “I don’t really have any money to plan with”, are common responses. Some folks say their accountant takes care of “all that stuff”. It seems like people will fall all over themselves trying to convince me that they are not appropriate candidates for it. It tends to stir the imagination as to what they think might happen to them if they actually sit down and talk about money. For some, it would be more comfortable to talk to their teenagers about sex, or go to the dentist.

Truth and More Truth

The truth is that there are very few people out there who cannot benefit from a financial plan. Done well, the results are life altering. More truth: most people feel all sorts of emotions around money including shame, guilt, anger, fear and a host of other emotions they would just as soon bury in their sock drawer which is where most of them have left these things. One suggestion is to seek out those who engage in financial life planning to find a non-judgmental method of coming to grips with these issues. I can’t imagine any accountant I know wanting to handle this. As for the, “not enough money” argument, there is never enough money. Not having enough money is the best argument for getting started that there ever was. The question is, if there isn’t enough now, what needs to happen to change that? Or are you willing to live a life of “never enough”? Look around and you will see lots of folks living a life of complacency and “never enough”. For those who would rather chose abundance, financial life planning is a great place to start. As for the “my situation is really simple”, this is a confession that reveals how little people know about their finances. I translate this into, “I only understand a small portion of my finances and I dare not go any further”, another self-imposed limiting belief that will keep the believer from achieving. Think small and you will get small.

Dress Rehearsal?

One of the most consistently asked questions about doing any financial planning is “when is it a good time to get started”? Life events such as forced retirement, death, divorce, and marriage are common motivators to initiate planning. While these frequently bring people into the office, I cannot think of any life process or financial decision one could go through that wouldn’t be enhanced by the presence of a knowledgeable and trusted advisor. In 25 years of practice, I have heard the expression, “I wished I got started 10 years ago!” more times than I can remember. When to start? How about yesterday! Life is not a dress rehearsal. This is the big show! The real deal. There are no do overs, no gimme puts. Why would anyone want to go through it with anything less than full potential being realized? I will also suggest that it is not nearly as painful as say…going to the dentist. The results are certainly a lot more fun.

Trustworthy Inspiration

There are dozens of articles written in the popular press about how to pick a financial advisor. I won’t take up time and space regenerating those author’s ideas accept to say that most of them have it all wrong! They start with the idea of advisor compensation and services they can render and ask the reader to evaluate them and compare advisors based on what they think they need as if they were purchasing tomatoes. What a load of rubbish! Most of their readers have no idea what they need. They only know what the press tells them they should think. If people knew exactly what they needed and how to get it, they wouldn’t be sitting in an advisors office to begin with! Knowing how someone is paid is important, but is an afterthought compared to the idea of finding someone who is worthy of your trust and who can inspire you to do great things! Therefore, the question is not, “What can this advisor do for me?”, but rather “What can this person inspire me to do?” After all, the advisor is there to do the planning by facilitating a process with energy and passion. The implementation of that plan helps you to a life worthy of living but it is for the client to do, and the advisor to coach.

What should this cost to do?

The popular press would have you believe that you should never work with an advisor who works on commission as their biases are always towards selling products that earn the highest rewards. The truth is that many of the best and brightest advisors I know work on commissions. I worked almost exclusively, for the first 11 years of my professional life, on commissions. While I prefer working in a fee based practice, it does not define ones ethics as to how we earn a living. Many people who can’t afford a fee model and who want to get started in the financial planning process can best do so in a commission compensation environment. There is nothing inherently bad or wrong with this. The bottom line is, if you follow your instincts and hire an advisor you can trust and who inspires you, how they get paid does not, and should not matter. Understand the compensation system, and then forget it. If they are going to have the dramatic impact on your life, to inspire you to do things you could not accomplish on your own, it is probably worth many times what they will actually charge.

Rearrange the Sock Drawer

Some 24 years ago, I shared an office with a colleague who had an appointment with a gentleman he had not met before. It was common for us to suggest that people bring with them information to judge how we can help them to that first appointment. At the hour of the appointment, my colleague greeted the man in our office and ushered him into his office. The man was holding a good size box in his arms which he placed on the table, turned and started to leave the office. My colleague asked him where he was going. He said, “I’m going to my car. I have two more boxes to bring in (!)”. Over the next week, delving through his client’s life (in the form of boxed paperwork), my colleague found thousands of dollars of assets that his client never knew about. He was a single man who worked long hours and didn’t have much time for things like benefit plans and investments. His mother had died a few years back and had left him as her heir. He had not paid much attention to much of what she had left him. The box with her things just got pushed to the side while he went on with life. My colleague pulled out of those boxes things like a passbook savings account book with $70,000 in it and three life insurance policies on the mother on which no claims had been filed! This is an example of what we call “found money”. While this example may seem extreme, I can recall many similar instances where, through ignorance or just “to busy rearranging my sock drawer”, people are leaving money on the table. Even if you don’t understand all that you are presented with in this complicated and busy world, empowering someone knowledgable who can advocate on your behalf can pay big dividends. Bring in the shopping bag full of stuff and let your advisor dig around in it. You will be surprised at what they might find.

Change

Lastly, when you go into this process, expect to make changes. I know this is potentially the scariest part of the whole thing but it is also where all the value is found. Any good advisor is going to suggest, sooner or later, that you consider a fundamental change in either behavior or thinking, or both. Expect it to come. Remind yourself that it is coming and measure how you feel when you get nervous about these changes. Prepare yourself ahead of time and think about what changes you would be willing to make. I don’t know who said it but please remember the following:

“You always get what you’ve always got if you always do what you’ve always done.”