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Chris Gilchrist: Are advisers ready to be counsellors?

Should financial advice be based on clients’ life goals and ambitions rather than their financial objectives?

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The American humourist H. L. Mencken famously observed, “When someone says ‘It’s not about the money’, it’s about the money”.

Under stress, we tend to project our emotions and there is nothing it is easier to project them on to than something that is entirely devoid of any emotional characteristics of its own. Divorce is the classic case, where issues to do with emotions prompted by betrayal, infidelity and so forth are projected on to disputes about money.

Often it seems that these disputes need to consume a certain amount of money in fees and costs before the antagonists are capable of dealing with the issues directly.

Most of us have gone with Mencken at some point in our lives. But as we become more mature financially and emotionally we can learn to avoid the deeper potholes in the road.

Does the job of a financial adviser include facilitating this learning process for clients? The financial planner George Kinder, life coach Maria Nemeth and others – including many members of the Institute of Financial Planning – would say that it should. By asking clients to dream their future without reference to money, they aim to liberate clients from the constraints, often artificial and unnecessary, that they think money imposes on them.

In this respect I agree with life planners: a proper financial plan cannot be based on financial objectives. It must be based on life goals and ambitions. Eliciting those goals in the first place requires the adviser to distance themselves from the money and encourage clients to treat money as a means and not an end.

The translation of goals in to financial terms is a key skill of the financial planner that requires exploring positive and negative implications of goals, timescales and circumstances both objectively and empathetically. If your head is full of the QCE4 syllabus, it is not so easy to do – although an awareness of behavioural finance can help put the technical stuff in perspective.

How much further should the adviser go? How far in to positioning the money journey as cognate with the learning journey of life? How far into relationships and their significance; in to risky career changes or frameworks like Kinder’s aloha that purport to give the journey meaning?

More people, especially aged under 40, are willing to engage in this way as clients and probably feel that the secretive uptightness about money typical of their parents’ generation is so last century. But are advisers ready to become counsellors? For that is what they may become if their guidance ceases to be merely financial but encompasses career, relationships and business, especially if they adopt a framework like those of Kinder and Nemeth.

I don’t question the right of advisers to take on these roles, provided they acquire the necessary skills. My reservations are about the money. Kinder, Nemeth and other authors of money journeybbooks cannot help concluding that more money is better. Like the makers of cult film The Secret, they end up ascribing a positive moral value to money, though they avoid the film’s distasteful you-deserve-to-be-rich message.

If you share my belief that a good financial adviser should not ascribe any value to money itself, either positive or negative, is this purely a moral judgment or is it also based on professional and practical considerations?

Chris Gilchrist is director of FiveWays Financial Planning, the author of the Taxbriefs adviser guide ‘The Process of Financial Planning’ and edits investment newsletter The IRS Report

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Over the nearly 30 years as an IFA until I was forced to retire early by the draconian rules of the RDR I always developed my solutions & recommendations based on a client’s lifestyle as well as financial aims & objectives. Exams don’t really measure this. It would be good if IFAs who have now lost their livlihood could be employed as mentors for new IFAs.

  2. Gosh Chris, if I have understood you correctly, I never expected this from you.

    I don’t bother with fancy titles I’m an IFA. (Even though I’m a member of the IFP and a CFP). People come to see me about money. There are only two types. Those that have it and need to look after it and those that consider that they don’t have enough and want more.

    The all want the same goals. A villa in the South of France with a Yacht. I’m no counsellor, nor do I aspire to be one. If people who come to see me don’t know what they want (or are able to afford) out of life then they are not the sort of people to whom I can easily relate.

    As Woody Allen so appositely put it “Money is better than poverty, if only for financial reasons”.
    All the planning ion the world can be messed up by events. Again if I may, a quote by Colin Powell “No battle plan survives contact with the enemy”.

    Rightly or wrongly I see my job as the husbanding of my clients financial assets and explaining to them what they are able – or unable- to afford in the current circumstances and if at all possible how to improve the situation. Yes I will look forward say 5 years max – basing projections on current known and presumably unchanging assumptions. But the best plan is regular review and a reassessment of the position in the light of the current facts. I have always thought that long term cash flow projections were about as good a work of fiction as Charles Dickens.

  3. Add another quote from Donald Rumsfeld Harry
    “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know”
    All the planning in the world will not cover every aspect of risk, even if the regulator believes we are able to gaze into a crystal ball.

  4. @Harry K – I can’t stand Dickens and think Cashflow modelling whilst helpful to some is long winded and fiction for many others.

    In respect of counselling – is this telling your client ‘you can afford a holiday, you need it and take one’. Is it telling them that their kids don’t have their parents best interests at heart – well then I am a Counsellor too!!

  5. Chris, not all IFP members subscribe to a life planning.
    Why it will hundred 3 day in the course, which incidentally was useful.
    I subscribe to the world of quantitative versus quality analysis.

    While it’s all right to say I would love a comfortable retirement. I always say to my clients. The only way that we could measure whether that is achievable not is by translating into terms that are measurable, i.e. money.

  6. Although I am CFP and chartered, I am rather cynical regarding this new trend towards life planning as a distinct discipline.

    Ideally, all financial planning should begin with a non-monetary discussion regarding values, goals and tolerances and the Kinder/Nemeth processes would appear to lift this to something of an artform. But, inevitably, money will always come into the equation very quickly, for the “measurables” aspects mentioned above.

    However, I am more concerned by the way in which the “life planning” label is being exploited as the new differentiator for IFAs (and, heaven help us, certain unregulated individuals who might view this as a means of extending their vocation without jumping through the necessary hoops).

    Are these new life planners truly adding a level of scrutiny and service that did not previously exist, or are they “disturbing” clients in order to preserve the remuneration margins that are no longer deemed palatable in the post-RDR world?

  7. Call it what you or clients like, either way they will be billed by the hour

  8. A really interesting and provocative article, Chris. As someone who qualified as an actuary at the same time my wife qualified as a relationship counsellor, I often reflect that her skills are more relevant in the financial planning world today than mine. Her task was often to encourage people to think through the consequences of tough decisions (stay or go simplistically) and that’s essentially what much financial planning is about (spend or save equally simplistically). A word of caution though- she asked for £12 an hour and often folks couldnt afford it!

  9. I work with three new advisers and paraplanners. They know the processes, but not why they are carrying them out. Thye cannot think outside the textbook and are fully focussed on ‘selling’ not helping people to build lives. So much for RO1. Cannon fodder for the bancassurance machine.

  10. chris g gilchrist 9th September 2013 at 10:30 am

    There are good reasons why a planner needs to start from ‘life goals’ as opposed to ‘financial goals’, which I’ll explore in another column.
    I agree with the comments about newly qualified advisers who don’t really understand the planning/advice process.

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