Get a Life

Likewise, Kay writes that, rather than act as therapists, advisors should be "financial diagnosticians prescribing actions that we hope will bring clients close to living their dreams."

Kay has on occasion asked profound psychological questions but warns (in this interview) that "for some people, it's too invasive right off the bat. They'll go into a shutdown because you're asking them to lay themselves bare. If the client isn't ready to go that deep that quickly, it will scare them away."

At Wells Fargo Advisors, Michael Wincek, senior vice president-investment officer, based in Omaha, Neb., uses the firm's Envision process to obtain an in-depth understanding of clients. "It's a very stringent interview process. It may not seem like that to the client because it's relaxed and folksy; but at the end of the day, there's a lot of very important information gathered," he says. "It helps us understand the client's needs and hopes, and lets me offer an advice model to help optimize their lives. The assets are simply the tools."

One client-friendly exercise Wincek uses is a set of cards — variously titled "Retirement Income, "Retirement Age," "Education Goals," "Dreams, " etc., which he places on the table. Clients are asked to arrange them in priority order.

"That tells me, for instance, that if retirement income is a real hot-button issue but retirement age isn't, I can keep the client working longer for a higher income goal," he says. "It allows us to discuss these issues and show how the client can make trade-offs."

Envision has a Monte Carlo computer simulation component that, based on client inputs, produces hundreds of goal-centric scenarios. But, Wincek stresses, the critical part is gathering and editing the information. "If you don't know the client as intimately as possible, you won't get anything worthwhile. The rest is just turning out a computer program that crunches data."

Life Transitions Outweigh Goals

Anthony insists that, though client goals are obviously important, a discussion of transitions should come first.

"Goals are what you want to happen; transitions are what are going to happen anyway. What's the point of talking about building a home in Bermuda if the client has a mess [of financial trouble] in front of them?"

One of Anthony's newest exercises is the "Fiscalosophy Assessment," intended to help clients articulate their philosophy about money issues.

Another is the "Financial Diagnostic Self-Assessment and Workbook" with 40 statements to be ranked according to clients' education about money matters and how they manage their money emotions. The Institute uses this input, Anthony explains, to produce advisor reports to show clients: "Here are the areas we need to work on in order for you to build wealth in your life."

Like Anthony, Kay considers money history highly significant. "If you don't understand a client's money biography — behaviors they have around money stemming from the past — how can you give truly good advice? If someone grew up believing that [love of] money was the root of all evil," he says, "what are the chances they'll be a good saver?"

Kay recently began using a "Family Flow Chart," showing family members' ages against their physical and financial health. "If, say, we find a situation where there's contention among siblings, we need to make sure the estate planning is set up in a way that won't be problematic," he says.
Not surprisingly, one aspect of financial life planning that's proven sticky is assessing risk tolerance based on client responses.

"It's a big can of worms," Anthony says, "and we're working on it right now. The idea that you're going to be pegged according to three words — aggressive, moderate or conservative — is idiotic. Anyhow, people have no idea what their risk tolerance is."

He continues. "The real context for risk tolerance is: What do you need the money for? If you need it to take care of an aging parent, for instance, how much risk can you take with it?"

One of Wincek's Envision cards is titled "Risk Tolerance." Clients might take a while to shuffle that one. "It's an exceptionally thorny issue," he says.

"So if they tell me they can't take risk at all, then we're going to be very, very cautious in how we construct a portfolio. If they come in with a somewhat cavalier attitude, we'll take it back a notch to 'moderate.'"

When too-lofty retirement dreams fail to mesh with projected investment returns, life planning advisors must be forthright.

"Then it's time to quit being a salesman and start giving people reality checks," says Anthony. "You have to say, 'The numbers don't match up. Are you willing to compromise your lifestyle spending right now? Or are you willing to compromise on your goals?'"

For Wincek's part, not only has life planning changed his clients' lives but it has improved his own. "I'm not working at the frenetic pace of having to sell, sell, sell to meet my numbers. We're selling advice on life and portfolio issues. If you think you're going to be a trader and stay in this business, you're not. You'd better develop relationships with your clients."

That makes sense because clients today are surely in need of expert advice. In his discovery laboratory, Anthony is busy developing tools to help advisors "flesh out the issues that are keeping clients from building wealth the way they could.

"People," he notes, "still do stupid things with their money."

(Photo by Joe Treleven/Treleven Photography)