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By: Vaughn Kellerman, CFP® | HCM Wealth Advisors
The world of financial advice has come a long way. In the past, financial advice was an industry that was focused on selling a product for a commission and often never talking to the client again. Over time, with the help of regulations and designations, a growing community of people who want to do things differently are turning financial advice into a profession that places comprehensive financial planning at the forefront and where the client’s interests are always placed ahead of the Advisor’s.
However, the term “financial planning” is admittedly a very general term and a question I commonly hear is “What does comprehensive financial planning even mean?” That question can be answered in dozens of different ways and while certain aspects are set in stone by organizations like the CFP Board, Advisors today have many ways to add value to a client’s life and provide “comprehensive financial planning”. Below are 5 ways that a great Financial Advisor can add value to a client’s life that a client may never consider discussing with their Advisor.
1. Helping to define a client’s values and achieve life goals based around those values.
Financial Advisors are beginning to incorporate the world of behavioral finance into their practices to help clients understand their relationship with money and how to use money as a tool to unlock a rich and rewarding life. The most well-known work out there in this area is likely George Kinder’s “Life Planning” which teaches an Advisor how to communicate with clients in a way that allows the client to truly understand what they value at a very personal level. Using these values as a foundation, the client and Advisor can work together to create goals and a financial plan that allows the client to achieve their dreams and not just achieve their financial goals.
2. Support overcoming financial biases.
Understanding and overcoming financial biases that a client has is another aspect of integrating behavioral finance into an Advisor’s practice. There are numerous biases that exist which impact a client’s decision-making ability. Mental accounting, loss aversion, overconfidence bias, and anchoring are just a few examples that can lead to bad decisions. While building a proper portfolio is still important, many Advisors are beginning to understand that the key to unlocking the feeling of financial independence for their clients is to understand the relationship they have with their money. Being knowledgeable about these different biases helps an Advisor build a financial plan that has a much higher chance of succeeding over the long term.
3. Planning for a sabbatical or mini retirements.
The idea of a “traditional retirement” is becoming less of a concrete path for many people, especially younger clients. Regardless of the term used, a sabbatical has become a path that is becoming more strongly considered. However, there are a lot of moving pieces when it comes to planning for extended time away from work. For example, a client needs to determine how much money they need to save, they must have a solid budget in place, plan for private health insurance, and they must plan what they are going to do with the time. Once their sabbatical time is over, the client also needs to consider what is next for them regarding earning an income. Do they go back to their old job or career? Or do they pivot to something new? A great Financial Advisor, along with the client, can help put together these pieces while also looking forward to understanding how a sabbatical will impact their financial future.
4. Help to create a positive environment within a family when dealing with money.
It is no secret that discussions involving money continues to be a taboo subject for many families around the dinner table. Instead of discussing the performance of a portfolio in each meeting with a client, a great Advisor will take time during meetings to help clients understand how to feel comfortable with money in their life and how to discuss all the moving pieces regarding their money with family members. An Advisor can be used by clients as part of the conversations, not just to give explanation around some of the more complex topics, but to take the lead in getting the conversation started when difficult issues need to take place such as how much of an inheritance a family member is going to receive. An Advisor can also provide knowledge or suggestions around how to teach children about difference aspects of money.
5. Help a client land a new job.
A great Advisor wants to be involved in all aspects of a client’s life that involves money and involves their goals/values in their life. When an Advisor takes the time to help the client unlock what they truly value in their life, this can often lead a client realizing that they want to pursue different work. When that happens, an Advisor can help model a pathway that gets them to their dream occupation while also helping the client to remain realistic in both what to pursue and the timeline for how it will happen.