Real financial planning

A good financial planner is a good human being.

For the moment, let’s lift our focus above the doubts being expressed by the regulators and sections of the media. Also leave aside differences of professional opinion about methods of remuneration, investment styles and so on.

Let’s consider what it is that the best financial planners actually do that brings satisfaction they are pursuing a worthwhile career and makes them so appreciated by their clients.

I was discussing planning with a friend from outside the industry, who recognised that the role was important but felt it was “very restricting to deal with money all the time”.

I was surprised at such a view, as I would have described it as “very satisfying to deal with people all the time”.

We are involved with people’s feelings as much as their money — and I don’t just mean greed or fear.

Like it or not, humans’ emotional states are very influenced by the force of money. We touch on fundamental issues when we assist people in their relationship with money.

At the risk of raising more philosophical subjects than usually fill these pages, let’s discuss the force in human life called money.

Consider the difference between good advice and bad advice to retirees.

Take two couples, one of whom lost most of their money while the other has invested wisely.

How much regret does one couple feel that they worked all their life and then blew it? How much fear is there about whether they can afford adequate health care or aged care accommodation? Do they berate themselves for their foolishness or feel inner rage towards those to blame for their loss?

The other couple is spared all of this. Not only are they better off financially, they are better off psychologically.

What are some of the day-to-day issues for planners who develop close relationships with clients?

Some clients cannot live within their means; their spending will exhaust their capital.

Only the planner who recognises this declining trend is in a position to focus the client on it.

This may involve explaining that the lifestyle the clients desire, are accustomed to or even feel they deserve, is out of their reach. It takes maturity and sensitivity to explore this subject.

Adults don’t expect anyone to discuss what they can and can’t spend. It is likely to be awkward and difficult to raise this subject — not to do so would be the easy course. But a caring professional would be willing to put themselves through it, as this is the real issue for their clients’ welfare.

Other clients are afraid to spend on themselves even though their finances are more than adequate. Some inner insecurity or guilt prevents them. I have known planners to give a client the reassurance that the client can indeed fulfil long-held dreams to travel.

This is dealing with psychology not money, in fact, money is definitely not the issue.

Many marriages break up under financial stress.

Further, even in strong marriages it is common for the two parties to have different attitudes to expenditure and saving.

Issues about money can bring pressure on the most important relationships and planners need to find a way to navigate this in developing a suitable plan.

I remember a planner recounting a call from a female client advising him that her husband had died the previous day.

If someone calls their planner at perhaps the worst moment in their life, there must be something very important in the relationship. It must touch on deep fears about whether they will be safe financially and a belief that the planner will help.

Over a long career, every planner will have clients that reveal they, or their spouse, are dying. The planner must be able to respond both as a fellow human being and as a professional. Only the most insensitive person could believe this is an interaction primarily about money.

Many estate planning questions deal directly with the desire to help children in some final way. This is about parental love more than money, which is merely the means.

Some clients express fears for a child who is a gambler or an alcoholic, for example. They are talking about money, but also more essentially, their desire to protect a child from themself. When planners are helpful with this they may be assisting with a client’s greatest fears.

As the saying goes, ‘Where there’s a will there’s a relative’. One of my colleagues spent many hours with a client in his latter years, ensuring financial structures co-ordinated with his will to produce desired outcomes for his first and second families.

Regrettably, challenges and a court case followed his death.

During this process, the planner committed many unpaid hours to making clear the client’s intention.

The deceased client, presumably, does not know of these efforts or the outcome. But the planner felt a moral obligation to serve the client’s wishes even after his death. Is this merely a relationship based on money?

Most planners have experienced one or both parties in a couple discussing the possible end to the marriage. If a planner related to this person at this time of distress as if the issue was only money, they would not be decent human beings — and, therefore, not decent planners.

Planners also advise on charitable giving (that is, the wish of people to do good for one’s community or the world). Again, the means may be money, but the real subject is the desire to be of service to one’s fellows.

That money touches upon strong emotions is reflected in broader society.

Few subjects are taboo in modern culture, but money is one of the most private of topics.

It is most impolite to ask people what they earn or what they are worth. For the majority, the only people they would ever talk frankly with about their attitudes to money are their financial planners.

Most people experience some feeling aroused when asked for money in the street, either by a beggar or a charity, much more than if they are asked for directions. Some may feel awkward or angry, some may feel superior, while others will experience the desire to give. In all cases there will be some reaction, because there is money involved, even though the amount may be tiny.

In many friendships or business relationships one might freely ask for a hand or to borrow something, but would never ask to borrow money.

Many expensive products are marketed on the basis of the prestige. Those who own them, apparently, will be admired and respected and can feel good about themselves.

Alternatively, there is the opposite view expressed in the joke, what is the difference between a porcupine and a Porsche? With a porcupine, the pricks are on the outside.

Consider the feelings toward money expressed in the phrases ‘rich bastards’ or ‘fat cats’. How different are the associations with the words ‘pauper’ and ‘billionaire’? The only difference between the two is money.

I am not being judgemental, simply indicating the complexity of human emotions about the subject on which we advise our clients.

The legal system illustrates the societal significance of money. We have two main forms of punishment: imprisonment and fines.

In the eyes of the law, one of the most effective means of controlling behaviour is to threaten to take people’s money. The legal system also seems to believe that anything (stress, injury, suffering, death, and so on) can be ‘compensated’ for with money.

Money is intrinsically involved with politics.

Historically, our two main political parties were simplistically considered to represent the more and less affluent sectors of the community. It has been said that an important factor determining election outcomes is the health of the economy.

Money is truly a currency of life. But we all know that. I am trying to highlight how deeply it is embedded in our society’s value systems to make the point that planners are dealing with a subject that touches people’s deep values and attitudes.

Over a long career, planners will find themselves relating to others who are going through a broad range of life experiences and human emotions.

Through this, planners can grow as individuals and in their empathy for others. This is the measure of a quality planner, at least as much as technical skill.

Technical skill can be supplemented by support staff, but relating to the client in the moment can’t be outsourced.

Today, all planners are subject to the innuendo that they are avaricious and conscienceless.

No doubt some in our industry fit this description.

However, if you aspire to be a good planner you have set yourself a worthwhile objective and you will do much good in your life.

Over the years, you will develop deep relationships with many clients. You will have contact with a broad range of people where you can explore attitudes to some fundamental questions.

Quite apart from any financial rewards, advisers have the opportunity to develop as human beings while being of service to others in matters of great importance to them. It would be hard to ask for more than this in one’s working life.

Robert Keavney CFP is chief investment strategist at Centric Wealth Advisory .