The Revolution in Client Services

One note on "revolutions" is that they are not all-sweeping: what changes is the "top of the menu" service that attracts clients. All the other services offered by financial advisors remain the same, and are always in demand, but they are not a primary factor the customer seeks in hiring an advisor, and may not be the primary factor the customer considers in retaining one.

Currently, customers are asking for assistance with "life planning" - it's being called various things, but there are a number of common factors:


In the past 30 years, people have created and accumulated more wealth than in the rest of history combined. Primarily, it's sunk in retirement planning (401Ks and similar accounts), but it's increasingly accumulating in other assets, and people are beginning to question its relevance - money for money's sake. They have a vague sense that they are not as "happy" as they should be - that they are not gaining a benefit from accumulated wealth, and they are seeking guidance.

One of the main tasks for an advisor addressing this need is helping individuals to set clear objectives, achieve them, and derive satisfaction from their success at doing so. The objectives of "life" planning are generally familiar to advisors - it embraces retirement planning, tax planning, estate planning, investment management, and all the other unglamorous tasks that are, and have always been, a part of the service package they offer.

Unlimited Demand

One key factor: most people have simply never explored their personal goals. The author suggests that our culture is predominated by a sense of powerlessness, and that individuals "have no idea they have control over the circumstances of their lives" and that the average person "feels like a prisoner to circumstances beyond his control."

When individuals recognize their ability to change their circumstances and achieve their goals, rather than just earning money and putting it in a pile, the need for advice to show them how they can do this will arise.

From a marketing standpoint, it generates unlimited demand: when is there a customer who doesn't feel they can be more satisfied, or a person who feels that they are happy enough with their current situation? Especially since the service is to help define the goal, the service then creates a need for itself.

Four Qualifications

To be prepared to meet this need, advisors need four basic qualifications:

  1. Familiarity with the financial landscape: we live in the most complicated tax, financial, investment, and regularity environment "ever created by the human mind" and the customer needs expert advice in dealing with it
  2. Basic goal-setting: For each client, the advisor must identify their individual circumstances, and help them to set goals accordingly
  3. Goal Achievement: In addition to setting goals, advisors must show clients that they are achievable by an incremental approach.
  4. Social Networking: Advisors generally deal with clients who are successful people, and have prestige in their communities. The connection to these people, and those with whom they can connect the advisor, is a key factor in staying in business.

It is reiterated that financial advisors already have these skills from their current practices, but will need to apply them to take advantage of the next market shift.

Structuring the Engagement

Financial planning has a standard four-step process:

  1. Set Goals - Have the client identify their ideal end-state
  2. Develop a Plan - Identify the specific objectives that the client must achieve to transition from their current situation to their desired end-state
  3. Implement the Plan - Define incremental steps to achieve the objectives
  4. Ongoing Review - Monitor the client's progress and adapt the plan as necessary

In this case, the "goal" is a the achievement of a lifestyle that the client desires (including financial, time-management, and environmental aspects) - which is at once more meaningful and less restrictive than traditional goals (achieve a specific net worth, safeguard wealth against inflation, etc.).


One difficult set of skills for analyst to develop is the ability to guide the customer to identifying the true nature of "happiness" - it's more psychology than mathematics.

The author refers to another source, but surfaces some odd questions to pose: If you were going to die in five years, what would you do differently today? If you had all the money in the world, how would your life be different? When we meet five years from today, what must have happened for you to feel that we've made good progress? What is your idea of a perfect day?

Another technique is the "hypothetical shopping trip," which helps to plan for windfall income (which is becoming more and more a reality, and a problem, as aging boomers die and their heirs don't know what to do with their inheritances). If you ask a person what they would do with ten million dollars, you may identify some valid goals among the frivolous ones, and some achievable goals among the more outlandish ones.

The same technique (hypothetical shopping) can help clients realize the importance of estate planning: provide they can buy everything on their list, there will be money left over. Do they want to leave it all to the children (with the negative impact that entails)?

There is also the question of whether clients really want what they say they want. The anecdote of a executive who retired early, then killed himself because he could not deal with the loss of power/prestige from leaving his workplace. In the end, simply having more money sooner, the traditional measure of success, may not be the best measure of success.

The New Retirement

There is the concept of "new retirement," which involves continuing to work, at least part time, during retirement. This may be due to financial necessity or, as one retiree put it to his advisor, "I can only play so much golf!"

This is a growing problem due to longevity (people live longer than expected in retirement) and the capabilities of the elderly (people are not necessarily "decrepit" at age 70, or even 80).

This is changing the concept of what retirement 'means,' and it has significant impact on income and expenses in retirement, which is contrary to traditional perspectives.

This concept leads financial advisors into terra incognito: they can branch into career planning (income is derived from career, and career is part of what contributes to quality of life), and other aspects of an individual's whole-life experience planning. (ed: I think this is a bit ambitions, and well overstepping the bounds of what many people will tolerate.)

Off the Treadmill

An analogy is that traditional financial planning was about improving the treadmill people are on - the period of life in which they are devoted to making money to the exclusion of all else - and that traditional planning's goal was to make the treadmill more efficient and faster.

The shift now is to getting off of the treadmill altogether, transitioning to a more enjoyable lifestyle overall that includes generating income, but is not entirely devoted to that practice. A few examples of people who decided to "be happy with less" and cut back on their work schedules, or start their own businesses rather than working more traditional jobs.

Specifically, the author believes that traditional retirement planning (people work a job they hate to generate income for their goals) is being phased out for career planning (people seek a job they enjoy, even if the income is significantly less)

Expenditure Planning

Another significant difference in the approach to financial planning is to look at expenditures as a variable amount (rather than a fixed one), whereas the old school of thought looks only at investment to attain a specific goal, given current income and expenditures. By altering expenditures, the client increases their net cash flow (without exceeding their gross income).

EN: The author discusses expenditures from a zero-sum perspective - people don't' know where their money is going. It is also a factor in the current credit crisis, as failure to control expenditures leads to increasing debt that builds up over time. In fact, there is currently (2008) quite a cottage industry in debt management (credit counseling) as a result.

An example shows the value of journaling - having a client keep track of their expenditures. Most individuals do not, and as a result, they do not realize where their expenditures are and cannot determine a budget. Moreover, planners have shied away from the practice because it is labor-intensive and clients can find it intrusive.

Examples cited show that tracking expenditures helps clients realize where money is being wasted, and ultimately where waste can be eliminated, enabling the client to increase their savings (contribution toward long-range goals) on the same level of income.

Planner as Coach

Admittedly, this approach to financial planning gets the advisor into uncharted territory, especially into psychological areas where he lacks expertise. One solution is to adopt a "coaching" method, where the planner and the client examine the client's financial situation together, and the planner guides the client rather than instructing or nagging them.

There is a three-step process in coaching:

  1. The client identifies an area of dissatisfaction
  2. The advisor helps to identify the nature and cause of the problem
  3. The client and coach consider behavioral solutions

The business model for coaching (and financial planning in general) is a retainer rather than a commission on products purchased.

This is also a departure from the "quick solution" model that advisors are accustomed to: examining the factors, providing a quick answer, and stepping back. The "coaching" model involves an ongoing series of engagements to guide the client in achieving the solution.

An example: instead of advising the client to take out a home equity loan to pay off credit card debt, the planner must recognize that there is a deeper cause - the client needs to control their expenses - that must be addressed or the problem will recur.

Team Approach

The "life planning" process will also require ancillary and supporting services that are outside the scope of a traditional financial advisor: it may require a career coach, or a business advisor, an attorney, or a tax professional, to address some of the areas in which a client needs guidance.

This may require cooperation among separate professionals - and the implication is that a planner can participate in a coalition of support personnel, each of whom addresses their own "zone of genius."

EN: considerable text is devoted to techniques by which a lone financial advisor can develop a network of support professionals and leverage that network to get as much, or more, business from others as you refer their way.

Performance Reports

A note that customers are accustomed to feedback on investments in the form of quarterly statements. Advisors who engage in "life planning" must likewise develop methods for providing periodic feedback, both to help the client see their progress and to underscore the value of the service.

He details some of the software solutions currently available to assign "scores" to financial health (Junxure and ProTracker), but (en) these may already be obsolete.