outcome of achieving the client’s goals. It remains important to keep away from manipulation and remain in a place of persuasion through understanding and empathy. Still, there will be times when client and financial planner disagree. Sometimes the planner will work through all the good communication steps, but not be able to come to a place of agreement. At times, the client’s objection or request may seem unreasonable. At times it actually may be unreasonable. Ultimately, you have a decision to make. If the request is reasonable, albeit not what you would prefer, express your rationale and plan to incorporate the change if at all possible. If, however, the request is unreasonable and even harmful, you cannot, in good conscience, agree to make the change. When this is so, explain yourself and the rationale, and politely and respectfully decline to agree to the change. You cannot knowingly agree to a plan of action that will harm the client, regardless of what they want. It’s possible you may lose the client, but that’s a better outcome than agreeing to do something you know is the wrong thing to do, and violates professional standards of practice. Assuming the client agrees to the recommendations (perhaps with modifications), it’s time to incorporate them into a plan of action. Construct a Plan of Action The format of the plan of action, or financial plan, is less important than what it accomplishes. The goal is to develop a working document client and planner can use as a road map to move forward. If you want, or are required, to develop a formalized in-depth financial plan, do this. However, a simplified plan of action often is a good option. In such a plan, you can identify each goal, along with the action steps required in the immediate future. You can also include a summary of longer-term steps to be taken over the coming years. Even at this stage, the final plan of action should emphasize steps to implement the plan rather than detailed calculations, etc. However, you should be able to provide relevant calculations, applicable research, and other details as background to support statements and demonstrate accuracy in case the client wants to know this information (and for your own files). What should be in the plan of action? The short answer is, each of the agreed-upon financial recommendations, how they will move the client forward to achieving the goals, and specific next steps to be taken by whom. Let’s consider a mini-plan with two goals and associated recommendations: • Retire at age 65, expecting to live in retirement for 30 years. • Purchase a retirement home with enough land for a large garden or small vegetable/chicken farm. CFP Final Level: Engaging Clients in the Financial Planning Process Module-2 Page 47
The goals work together, and both require additional information. • Retire at age 65, expecting to live in retirement for 30 years. • Begin organic/natural farming operations, with produce and eggs for self-use and to sell excess at local farmer’s markets • Study best practices • Purchase seeds and equipment • Install required infrastructure and obtain necessary permits • Hire help for initial land development • Travel to various international territories for two weeks each year (until restricted by age/health) • Visit with children/grandchildren (travel to them or have them come to the client’s home) one week each per year (total of two weeks) • Living expenses equal to the inflation-adjusted amount required today • Assume inflation will average 3.5% overall • Purchase a retirement home with enough land for a large garden or small vegetable/chicken farm. • Decide on location by doing online research combined with onsite visits • Contract with a real estate broker/agent • Allocate enough funds for the purchase and explore possibilities of partial mortgage as an option • Minimum land requirement of 10 acres, up to maximum of 25 acres • Must be zoned to accommodate farming • Must have access to water • Prefer property with existing house, but willing to consider new build • Prefer single level (ranch-style) house with at least three bedrooms and bathrooms; at least 2,000 square feet • Will also require sheds and other outbuildings • Maximum cost of ------- (determine a reasonable amount for your territory) To the preceding list we would add an overall timeline for implementation along with one to accumulate required financial resources. Also, the plan could include timing for specific activities, such as site visits to view possible locations, perhaps studying one or more courses on farming, infrastructure and zoning requirements, etc. Supporting the goals should be enough data and other information to identify required financial resources and amounts and time needed to accumulate the money. The client and financial planner could work through a basic schedule for accumulating funds and accomplishing the required steps so the client can realize their goal by the desired starting date. This would make for an easily understood, usable plan of action or road map. A good follow-up process CFP Final Level: Engaging Clients in the Financial Planning Process Module-2 Page 48
would be to itemize a list of actions to be done each quarter during the coming year. Then, for each following year the financial planner could meet with the client and determine the next four quarters of required activities. Continue this process until each goal is achieved. List the recommendations in order of importance, and plan to arrange for the client to accept each one. Upon acceptance, the planner and client can move on to agreeing on an implementation plan. Implement Financial Planning Recommendations The focus during the final presentation should be to present the plan in a way that the client can understand and commit to it. If the financial planner has done his or her job appropriately, the client should be willing to accept the recommendations and financial plan of action. If this is not the case it indicates either something has changed or the financial planner has not done his or her work effectively. The planner might feel that the client could have been less than forthcoming during the process. However, if the financial planner has followed the process to this point, he or she should already know about and have dealt with objections. By this time, if the client were not being up-front with the planner, it ought to have been revealed. There should be few, if any, surprises by the time of this final step (final, at least prior to regular monitoring and review). As a result, this stage of the process will be devoted to obtaining agreement as to who will do what, on what timetable. This will include a follow-up schedule so there are definite times by which action steps will be accomplished. For example, with the preceding two goals, the first action step for the client might be to make a list of potential locations on which to build the retirement home and determine the approximate cost of doing so. You can plan to discuss the findings at your first quarterly review meeting. At that meeting the financial planner might agree to present a preliminary budget and cash flow recommendation. Whatever the choices, the road map items can serve as follow-up meeting agendas clearly identifying what is to be done and who will do it. On-going client engagement will help the financial planner guide the client through the steps required to work toward goal achievement. It has been previously identified, but as a reminder, financial planning is not a one-time, “set it and forget it” activity. Financial planning is, in many cases, a lifelong engagement in which the financial planner continues working with the client, making adjustments, encouraging on-going action, and continuing to partner with the client on the road to reaching life goals. A well-developed financial plan provides a strong foundation Applicable Practice Standards The applicable Practice Standards relating to presenting recommendations to clients are Standards 5 and 6. For the detailed statements, and explanations of the Standards, please refer to the FPSB document Financial Planning Practice Standards. CFP Final Level: Engaging Clients in the Financial Planning Process Module-2 Page 49
5. Implement the Financial Planning Recommendations 5.1: Agree on implementation responsibilities. 5.2: Identify and present product(s) and service(s) for implementation. 6. Review the client’s situation. 6.1: Agree on responsibilities and terms for review of the client’s situation. 6.2: Review and re-evaluate the client’s situation. Summary Raising the Bar In this course we have provided an overview of how to engage financial planning clients and how to do so in a manner that allows and encourages them to articulate dreams and identify goals. We have explained how to implement an effective discovery process using appreciative inquiry to help the clients focus on how they might develop the best possible future. The course has reviewed how to quantify goals and the steps required to reach them, and we have suggested how a financial planner can develop and present recommendations designed to guide the client on the path to achieving life goals. The course has provided sufficient guidance so that, if you follow the advice, you will become a more productive and effective financial planning professional. Throughout the financial planning curriculum, you have been given the knowledge to develop the skills and gain the experience required to become successful as a financial planner. Great financial planning is not about the financial planner. Great financial coaching is not about the financial coach. Great financial advice is not about the advisor. It is all about the client. The first Principle of FPSB’s Financial Planner Code of Ethics and Professional Responsibility summarizes the thought for us: Place the client’s interests first. Placing the client’s interest first is a hallmark of professionalism, requiring the financial planning professional to act honestly and not place personal gain or advantage before the client’s interests. Think about what that really means. From one perspective, it’s easily understandable as a call to honesty, integrity, objectivity, professionalism, and competence. It means that the financial planning professional will function in a manner that does no intentional harm to any client. The financial planner CFP Final Level: Engaging Clients in the Financial Planning Process Module-2 Page 50
will do everything he or she can to concentrate on meeting the client’s needs, looking out for their interests. Look deeper, and there is a greater meaning, one that is applicable to our current area of consideration. On one level, a financial planning client comes to a financial planner simply for help reaching goals. The financial planning professional has the knowledge, skills, and abilities to provide the desired help, and the ethical standards to do so in a way that will not harm the client. When a client comes to you, the financial planning professional, he or she brings with them their hopes and dreams. They want to know whether you can help them, and also whether they can trust you. They want to know whether you will partner with them and come alongside them on their life journey. If they agree to work with you, it’s because they have decided to place their trust in you. They are, in a very real sense, asking you to be the steward of their hopes and dreams. They are placing their life goals in your hands. This is not something you can take on by yourself. It primarily remains the client’s responsibility, but they are entrusting you with a leadership role in their future. Interestingly, when you embrace this mind-set, you are also increasing your own opportunity to succeed. Bob Burg, in his book The Go-Giver summarizes the factors involved in this truth as follows (Burg & Mann, 2007): • The law of value: Your true worth is determined by how much more you give in value than you take in payment. • The law of compensation: Your income is determined by how many people you serve and how well you serve them. • The law of influence: Your influence is determined by how abundantly you place other people’s interests first. • The law of authenticity: The most valuable gift you have to offer is yourself. • The law of receptivity: The key to effective giving is to stay open to receiving. When you embrace the financial planning professional practice, process, and mind-set, you are exponentially increasing your potential value to clients. The more clients you serve in this way, the greater level of success you will realize. This, perhaps, is the hidden genius of what this course has covered and the financial planning profession as a whole. Keep this in mind as you engage clients, as you develop and present recommendations designed to help them achieve their life goals, and as you work together to implement the recommendations. You are doing much more than others may suppose. You truly are embracing the spirit of financial planning professionalism. CFP Final Level: Engaging Clients in the Financial Planning Process Module-2 Page 51
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