How to Help Your Clients Start the New Year

“Never spend your money before you have it.” — Thomas Jefferson

Successful financial planning involves more than the balance in a client’s portfolio. A strong financial plan represents what is important to an individual—in other words, his or her fiscalosophy.

Consider these two scenarios:

• Mark spends lots of money on trips and entertainment. His father was a workaholic who never took time to really enjoy what he had earned.
• Nancy never feels she saves enough, despite the fact she is a millionaire. She grew up in a large family that constantly struggled to make ends meet––at one point, the family was homeless.

Both of these examples illustrate the impact a client’s individual backstory can have on how he or she thinks about money and investing. These stories are an essential part of someone’s fiscalosophy.

Before talking about strategies, tactics, allocations, and categories, it is essential that you and your clients understand how they think about investing and money matters. Knowing how and why people makes money decisions the way they do can help when planning for the future.

Every decision we make involves both money and values. Fiscalosophy is understanding the connection between the two, and using that connection to make the right decisions when it comes to investing.

Understanding your clients’ fiscalosophy begins with asking a series of questions designed to help them develop a plan that works for their unique set of values and circumstances. Here is a list of questions you can use to get the dialogue started:

1. Debt: How much debt do you have? Are you comfortable with that level of debt?
2. Savings: How much savings do you have? Are you comfortable with your level of savings?
3. Spending: What is your level of spending? Are you comfortable with your level of spending?
4. Giving: What is your level of charitable contributions? Are you comfortable with your level of charitable contributions?
5. Stock Market: Does investing in the stock market make you nervous? Are you comfortable with your level of investment in the stock market?
6. Insurance: How do you feel about insurance? Are you comfortable with your level of coverage?
7. Children: What is your attitude regarding supporting your children? Do you expect them to earn their own way, or do you want or give them every advantage––or somewhere in between? Are you comfortable with what you can provide them?
8. Retirement: When do you plan to retire? As soon as possible? Never? Somewhere in between? Are you comfortable with your current retirement plan?

Ensuring that clients answer these questions completely and honestly will help ensure that your recommendations support their values.

It is important that financial advisors understand and appreciate how each client thinks about money, including how they arrived at where they currently are. Just as a doctor can’t diagnose what’s wrong with a patient without knowing his or her complete medical history, it is difficult for an advisor to develop a comprehensive plan without knowing a client’s fiscalosophy.

If your client has a spouse or partner, it’s important that both of them answer the questions above. You––and they––may be surprised to learn that they don’t always share the same fiscalosophy. The areas they disagree on are the ones you need to especially focus on. After all, if your clients aren’t aligned, you’ll have difficulty helping them attain their goals.

How your clients think about money is just as important as how they manage it. Good investment results are the outcome of prudence, patience, and a sound investment policy––all components of a sound fiscalosophy. Any financial plan should be unique to their situation (what they have) and their values (philosophy).

If your clients answer the above questions thoroughly and honestly, both of you will understand what needs to happen for them to live the best life possible with the resources available to them. Your role is to act as their guide and to do your best to keep them on the right path.

The greatest reason to have this conversation is that both of you will know where things stand, and that every recommendation and decision you make going forward, is based on both philosophical and financial goals. Your clients’ decisions are no longer based on reacting to a market that is in constant flux or a generic formula, but rather on what works for them and their unique circumstances.

From everyone at MitchAnthony.com, have a wonderful and prosperous New Year!