In my current position as Executive Partner of one of Canada’s larger Portfolio Management firms, I am introduced to 3 or 4 independent practices weekly.  Not surprisingly, the first step in due diligence is to go to the website of the firm.  While the overwhelming majority of their sites are invariably undistinguishable from one another, (we are so blessed by the work that our marketing department does for our partner firms), you do get a tangible clue of the sensibilities of a given firm simply by the prioritization of the tabs and the chosen language in each section.  

As an example, Q Wealth is a firm that believes entirely in the statement, “the financial plan acts as the lynchpin of the client/advisor relationship.” As such, if a potential firm organizes the “Services” tab of their site as Investments, Insurance, Group Benefits, and Financial Planning, then I’ve been given a quick short cut to eliminate this firm from consideration.  

More opaque however, is distinguishing the ideal of the stated values of a given firm from the reality of how they actually operate.   I can’t tell you the number of sites I visit, espousing a specific philosophical bent, only to discover the result of what is delivered to the end user client, couldn’t be further from that truth.

By way of example:

We provide (you can insert any of the following adjectives) “tailored”, “customized”, “personalized” portfolio solutions, only to find the same model portfolios across the entire client base.  Which isn’t to say there is anything wrong with model portfolios, it is simply to say, they are not “tailored”, “customized”, or “personalized”.

We are “fiercely independent” only to find their client’s portfolios littered with proprietary product, manufactured by their dealers, distributed with a healthy dose of incentives.  Aside from the blatant hypocrisy of the statement, I’ve never fully comprehended the idea that an advisor’s independence was something that demanded ‘ferocity’.  As an advisor, if you felt your independence warranted a warlike defence separating your clients from your dealer, then perhaps your current dealer is not the ideal landing spot for your practice.  

We provide “objective” advice, to later uncover, 99% of the client portfolios invested entirely in ABC mutual funds.  Again, not passing judgement on ABC funds, but when one fund company represents your entire practice, you are anything but objective.  

Bringing me to my personal favorite, we provide “holistic” financial planning services. Aside from the undeniable truth that the definition of “holistic planning” is anything but defined, when I inquire as to the firm’s process on discovery (who is this client in front of me?) I am told…,

“Oh, we use a data gathering questionnaire.”

Excuse me?

By any definition, using the term “holistic” to describe your planning process would indicate at least a modicum of effort to know that person.  To know what makes them tick.  Know what motivates them to wake up in the morning.  Know an element of what gives them joy.  In other words, discovery of anything other than what you would get from a data gathering questionnaire.  

Using a data gathering questionnaire to provide “holistic planning” is synonymous to prefacing a sentence with, “With all due respect…”, invariably followed entirely by disrespectful diatribes.  The two simply don’t co-exist.  To believe they do, is disrespectful to the planning process.  

A Data Gathering questionnaire fulfills one menial objective.  Getting numbers on a page.  That’s it!  In 25 years of experience, I have never once met a person that was not so much more than their numbers.  Without sophisticated discovery tools – ideally that engage both spouses – you are missing the single most important aspect of “holistic planning”.  Emotion!  

To quantify that statement, (though this was a long time ago, so take my numbers and %’s as directionally accurate if not precise) way back when I was still an advisor/planner running a branch office of United Capital, I produced Financial Plans for approximately 95% of my client base.  In those days, we actually charged a separate annual fee for this planning service and my renewal rates were consistently above 90%.  My process for discovery amounted to a disjointed, non structured conversation followed by a Data Gathering Questionnaire.  

At the end of one year, we sent out a survey to the client base asking, “is your financial plan an accurate reflection of the life you have set out for yourself?” To my dismay, less than 50% of my clients responded “Yes.”  I was dumbfounded.

Here they were, paying a separate fee for a service that was neither relevant to them nor prescriptive for where they wanted to be.  Yet they continued to pay me and renewed annually.  

At that time, United Capital rolled out what would become its signature tool, Honest Conversations.  Essentially, it was a client engagement exercise that allowed a client the opportunity to tell their life story in a safe, non- judgemental environment.  The exercise came naturally to me, and I made the commitment to introduce it to EVERY ONE of my clients.  I was not going to edit who I thought would easily take to it, I was going to dive in, headfirst, and see what came from it.  

A year later, the same survey went out, now 70% of the clients responded, “Yes”, the financial plan indeed now was an accurate reflection of their ideal life.  A year later, the numbers rose past the 80% mark, which is where they stayed.  

Yet another data point, we used multiple financial planning software at United.  My personal favorite was Money Guide Pro.  We were told by MGP, that their average plan had a total of 3 goals or objectives -A Retirement date, A Spending goal, and A Legacy goal – which was typically zero.  At United Capital, by using Honest Conversations, we averaged 9.  Simply by moving past a Data Gathering Questionnaire and utilizing a repeatable, scalable and rigorous exercise, we increased the goals and objectives of our plans by 3X.  

As time went on, and I transitioned from planning for my own clients and began training the other advisors of United Capital how facilitate the Honest Conversation exercise, I easily conducted in excess of 1,000 Honest Conversations.  I can’t begin to tell you how moving many of the experiences ultimately were.  The tears, the comfort, the clarity and ultimately the lives that were inexorably changed.  

But if I’m being Honest about Honest Conversations, I had a bit of love/hate relationship with the exercise.  I felt it was bit ‘leading’ in its design, meaning it lead clients to give responses that weren’t always as relevant to them as they stated.  There were many times I knew a client was giving me the answer they thought I wanted to hear, rather than what was ‘honest’ to their reality.

Subsequently, when I came to Q Wealth, we designed our own proprietary exercises.  We split apart the Honest Conversation type exercise into 2 separate exercises, 1) A Values Exercise that allows our clients to state their ideal future life and what values they want represented in it and 2) A Functions of Assets Exercise where our clients state what they want their money to do for them.   We then added a third component, leveraging the work of Daniel Kahneman and Amos Tversky in Behavioral Economics, and created what we call the QBias Survey where we gain an understanding of the unique biases that our clients bring to every decision they make.  

Collectively the three exercises allow a client to articulate the ideal life they want to live, the ideal deployment of the assets they have available to them and finally, uncover the intrinsic biases that prevent them from the living this ideal life they value.  

Now, this isn’t to say for one second we don’t still need all the numeric data.  However, we leverage technology to get that in a painless, self onboarding process.  Our belief system is such that, we want to use personal, face to face time for the critical, self discovery process and allow the client to do the boring, numeric data process for themselves in the privacy of their own home.  

The process works!  It is incredibly robust and the intimacy of relationship building that comes from the thoroughness is worth the time spent, many times over.  That said, I am not so filled with hubris that I believe this mousetrap is terribly unique or superior.  I firmly believe that any exercise that allows a client to state what is important to them and where they want to go, performed by an engaged and empathetic listener, is equally as transformative.  

But it is with more conviction that I know the days of using a Data Gathering Questionnaire to produce a financial plan has to stop.  It is every bit as egregious as putting a client in a portfolio contradictory to their stated Investment Policy Statement.  To selling an insurance product where no insurable risk was present.  To providing inaccurate tax advice.  Simply put, it is at the very least unprofessional and most probably, unethical.  

It’s time to move on!

Clive Cholerton
Executive Partner
Q Wealth Partners