There has been quite a significant movement over the last few years of financial brokers or advisers repositioning (or simply renaming) themselves as financial planners. This makes a huge amount of sense, because of the value that lifestyle financial planning brings to people’s lives. But it only makes sense when lifestyle financial planning is what is actually being delivered.
Why is Lifestyle Financial Planning so important for you, the planner?
There are two answers to this question. The first and most important reason is because of the impact it has on the lives of clients. It’s not about investing money, it’s about helping clients to achieve their lifetime goals and dreams, and to lead more fulfilled lives through making behavioural changes. Good financial planning simply improves the lives of clients.
The second is a defensive reason. I still haven’t heard a reasonable defence of how traditional financial advisers will be able to defend themselves if or when a proposition similar to Vanguard’s lands on our shores. As it will one day. For those of you who are unaware, Vanguard rolled out a new proposition in the UK this year, offering their passive funds directly to investors with an administration charge of 0.15% of assets. And the charge is capped at asset levels of £250,000. On top of this, they are hiring 3,000 CFPs who will give advice over the phone to clients for 0.30%. If all you do is help clients make investment choices, how will you compete with that?
What is lifestyle financial planning?
It consists of four main phases, and it’s not lifestyle financial planning if any of these phases are skipped over. The four phases are
This is the phase that gets skipped over the most, which is a shame as this is the most important of all of the stages. This is the phase where the planner finds out the lifetime goals and ambitions of their client, where the client can visualise the outcomes in their own terms – the life that they will lead, the possessions that they will own, the impact they will be able to have on the lives of others, what they will do and achieve in their lives.
Until you know the answer to these questions, what are you planning for? Just building a pot of money with no idea of what it will allow your client to do?
This phase is carried out by careful and well thought out questioning by the planner. And then listening intensely. It is not “airy fairy”, instead it is the most important conversation that you will have with your client.
This is where the planner then uses his/her expertise to develop the roadmap for the client to get from where they are today, to achieving the life they visualised in the discovery phase. This is an area of comfort for planners, where you can utilise all of your experience and technical skills to develop a plan for your clients. As a result though of the comfort at this stage, some planners rush to it without properly completing the discovery phase – when that happens, you are no longer carrying out lifestyle financial planning.
Central also to this phase is the use of future cashflow planning. Again without it, it’s not lifestyle financial planning. Using this process you can demonstrate to clients if they are on track to lead the life they visualised and if not, what they need to do to get on track. You can show them the impact of unforeseen events and how to plan for them, the impact of changing goals and of course the actions they need to carry out, or products they need to put in place to achieve the plan.
The most straightforward of all of the phases. This is where the planner assists the clients in carrying out the required activities (e.g. budgeting, bank accounts, wills, power of attorney) or putting the required financial products in place that will play a role in achieving the goals of the plan.
4. The ongoing journey
This is again a really important stage that sometimes doesn’t get enough attention. Regular contact and scheduled meetings sit at the heart of lifestyle financial planning. The ongoing interactions turn the plan into a real journey towards the client achieving their lifetime ambitions. They are the opportunity to review and restate / change goals, review the progress and performance of the actions and products that were implemented and keep the client on track in terms of their behaviours with their money and their investments.
Without these meetings happening as scheduled, it is akin to pushing a boat away from the harbour wall to sail the stormy seas alone… You need to be beside your client at every turn, helping them to navigate their way towards their dreams.
If you are carrying out these four phases of work consistently and expertly with your clients, you can change their lives and help them achieve their desired goals and dreams.