I sometimes tell an old joke when I give presentations or speak at conferences. It goes something like,

“Clients can be divided into two groups, the liars… and the pathological liars.  The liars are easy to spot, but it’s the pathology that’s tough to handle” (I didn’t claim it was funny, just a joke)

Hang onto that thought for a second and let’s lean into the construct of “Fail”.  Or for that matter, “Success”.  What makes for a successful financial plan?

I think most practitioners would define successful financial planning as the process of:

  1. Identifying the goals and priorities of their clients
  2. Mapping the client’s assets with their goals and priorities
  3. Fulfilling those same goals and priorities

Certainly, there is nuance and an individual sensibility that each advisor brings to the planning process, but for the most part, the three steps above represent what financial planning looks like.  Succinctly stated: identify our client’s goals; show them how they can be achieved.

Well researched data supports the notion that indeed, this is what clients are asking of their financial advisors.  A recent research study conducted by Morningstar found that, “clients value an advisor who helps them reach their financial goals above anything else.”

Except…guess what?  They’re LYING!  Not to you… to themselves!  (point of joke as intro)

Now I am assuming that, as a well informed, modernistic, financial advisor, you’ve already recognized that working from a data gathering questionnaire and simply getting numbers and static data provides zero value to your clients.  I’m further assuming you have graduated to a more sophisticated approach of “getting to the core of what really matter to your clients”.  You’ve enrolled in “Touchy, Feely, 101.”

Which is great, however, when you ask someone, “What do you want?”, “What do you see your ideal retirement looking like?”, “What would bring you the most joy?”, you undoubtably will get thoughtful, well rationalized, answers.  Rarely though, will they be answers that someone will act on.

We simply are not hardwired that way!

The reason is “goal seeking,” is a long way down the path of human motivations.  Maslow’s “Heirarchy of Needs” lists Self Actualization – the grouping in which goals is recognized as belonging to – as number 5.  (out of 5)  (Though Maslow later added a 6th with Transcendence).

Point being, most people want to deal with a lot of “stuff” before they get to their “goals”.  Now I recognize that the “stuff” Maslow refers to, Physiological (food, warmth), Safety (security), Belonging and Love (relationships, intimacy), and Esteem (prestige, accomplishment), could certainly be considered a “financial planning goal”, but those typically are not the “goals” that most people use to determine success or failure on their financial plans.  For the most part, those are the ‘table stakes’ that most people take care of on their own.  The “goals” to which they are purporting to seek advice, are the later stage ones: time with my family, growth as a person, leaving behind a lasting legacy.

To which, they may or may not actually be motivated to do, despite their telling you it is their “goal.”  The reason for the contradictory nature of, “I say this, but I actually do this,” is two-fold: 1) People tend to give the answers they think other people want to hear. It’s just easier! 2) People have a ‘grand-canyon like’ chasm between their ideal self and their actual self.

In other words, 1) are the liars 2) are the pathological liars.

Which creates a borderline existential problem.  If clients are asking us to help them achieve their “goals” which, may or may not, be true and which they, may or may not, actually be motivated to accomplish, it’s hard not to wonder, “what the hell am I doing this for?”  Hence the existential crisis.

Do not despair.  There truly is a better way!  For our firm, we created 3 separate tools.

Identify When Someone’s Actions Contradict Their Goals

This provided our advisors a vocabulary to challenge a client with, “I know you say you want this, but your actions are doing this.”  Our tool leverages the work of Daniel Kahneman and Amos Tversky at identifying hard-wired biases which determines decision making and leads a person to rely on heuristics (rules of thumb).  It is a survey that asks questions, entirely non-financial, uncovering how a client will act in ‘real life’ and not just their ‘ideal self’.

There is a reason why someone battles their weight even though, intellectually, they know obesity leads to health risks.  There is a reason why someone continues to smoke in spite of the overwhelming data that links smoking to lung cancer.  There is a reason why someone perpetually shows up late for business meetings when they know it will likely cost them their job and their ability to support their family.

Those reasons are the hardwiring in someone’s brain circuit.  Our belief is, if we can identify that ‘coding’, we can point out the inconsistencies between the “Ideal” and “Actual”, and work towards getting them in alignment.  Equally important though, it allows the client to see for themselves whether a “goal” is real – meaning something they are truly motivated to pursue- or simply an idealized state of themselves.

Values Exercise

Rather than “goals” we focus on a person’s “values”.  We literally ask the question,

“In a world where you can choose to have your life be about something, what do you choose it to be.”

Clearly, the emphasis for us is on the word ‘choose’ or ‘choice’.  We start with wanting to know, “What do you value?”, “What values do you want represented in your life?”, “What values do you believe take you towards the path you want in your life?”.

This fundamentally differs from focusing on a “goal” because the goal is the end state. The result! The value is the reason for the journey.  The value is the emotional connection which pushes you to Stage 5 to reach your goals.  Without knowing the value, our belief is the “goal” will be an unrealized dream.

A Pathway or a System

Goal-oriented people exist in a state of continuous pre-success failure at best, and permanent failure at worst if things never work out. Systems people succeed every time they apply their systems, in the sense that they did what they intended to do.

If you do something every day, it’s a “system.” If you’re waiting to achieve it in the future, it’s a “goal.”

For our firm, we created a carefully curated itemization of “Your Personal Pathway”.  Much more checklist than statement of objectives, it is designed to show both the work being done by the advisor as well as the responsibilities of the client.  What is critical though is it places the emphasis and attention on what am I doing today- in the here and now- and not on some distant, ethereal future.

We passionately believe in the Financial Planning process.  As a firm, our money is where our mouth is, evidenced by investing of millions of dollars to that end.  But as passionately as I believe in the necessity of everyone having a financial plan, I believe focusing those plans on poorly informed goals is every bit as egregious as purporting one stock-broker provides superior stock selection to another and will deliver better returns over time.

Certainly we don’t claim to have all the answers, but we are searching to answer better questions!

Clive Cholerton
Executive Partner
QWealth Partners