Life planning a ‘best interests’ issue
Planners can go some way towards meeting their ‘best interests" duty obligations by adopting a ‘life planning' business model, according to AdviserQuest managing director Leyla Banaei.
Planners are very good at helping their clients formulate and achieve their financial goals, but they often neglect their clients' higher-order personal goals or ‘values', said Banaei.
Banaei was a financial planner for five years before she moved into a coaching role to help planners incorporate life planning techniques into their businesses.
According to Banaei, sometimes planners find it hard to make the link between the advice they've given and their clients' personal circumstances — an essential element of the ‘best interests' duty.
"That human element of the advice has been missing - it's not in the goals section of the Statement of Advice, for instance," she said.
A good way to start a conversation with a client about values would be to ask questions like ‘What's important to you?', said Banaei.
Sentinel Wealth managing director Justin Hooper also uses life planning methods techniques in his practice.
Hooper, like Banaei, has been influenced by the American life planning guru George Kinder, who has written several books on the subject.
But for Hooper, a lot of what he does should be "obvious" to Australian financial planners.
"Clients want someone to help them alleviate the emotional stress they experience around money. The purpose of financial planning is to help the client use money as an enabler to live the life they really want to live," Hooper said.
Hooper uses simple probing questions to identify his clients' ‘deep motivators', which form the basis of the eventual financial plan he creates for them.
"For someone with children, a deep motivator may well be to ‘be the best parent that I can be'," said Hooper.
Everything about the subsequent financial plan will have that ‘deep motivator' at its centre, he said.
Simply providing a client with great returns on their assets and a steady income at retirement is not enough, said Hooper.
"Let's say you've got a client with $100 million and they are absolutely perfectly planned from a technical perspective - but you find that they're still stressed or there's something still worrying them. Well, you haven't done your job," said Hooper.
The driving purpose of financial planning should be to provide people with enough money so they can live the life they want to live, he added.
Many Australian financial planners shy away from life planning techniques because they think it is the domain of psychologists or counsellors, said Hooper.
Banaei agrees it isn't necessary to be a psychologist to identify clients' deep personal goals, but planners still need "a level of understanding, self-awareness and skill".
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