Life Planning: The Key to Great Financial Planning?

Life planning should be the cornerstone of any financial planning engagement.

I believe that, which is why I have spent a lot of time of the last year to become a Registered Life Planner®, and reinvent how we deliver financial planning services. Here’s why…if you asked me what I want for my clients, I would tell you that I genuinely want each of them to be happy…not just with my services (of course) but more importantly, with their lives. Money is simply a tool that should enable its owners to live lives they love, create memories they treasure, and establish legacies that express their deepest values. The problem is, most people do not have a clear picture of what they truly want.  They usually say something along the lines of: “I just want to maintain my current lifestyle and not run out of money.” Often there is the additional “I would like to buy a new car next year,” or “I would like to set up a college fund for my grandchildren.” In fact, those are frequently the reasons that people contact me in the first place.

These are all fine goals, but they may not be enough to enable you to look back at the end of your life and say: “I have lived a rich life that was truly my own, and I would not have changed a thing.”

The traditional financial planning process is not very good at helping people define their ideal lives. The training I went through to become a Certified Financial Planner® or CFP taught us to ask clients about their goals, but mostly, they focused on the technical aspects of different investment vehicles, insurance policies, estate planning tools, and tax rules. So, I learned to offer our clients a variety of good financial solutions, but the question is still “Are we using the tools to build their best possible lives?”

Life Planning Starts with the “Why”:

One of the most popular TED Talks of all time is Simon Sinek’s “Start with the Why.” In his talk, he explains that most companies (including financial advisors) market to consumers with messages explaining “what” they do, followed by “how” they do it. This is because “what” and “how” can be clearly communicated using the logical parts of our brains. The only problem is that humans are typically not motivated by logic, but by emotion. Mr. Sinek makes a compelling case that the most important place to start is with “why.”

Why we do what we do reveals what is in our hearts, and that is where true motivation and fulfillment lie.

Emotion vs. Logic

I love the analogy of the elephant and the rider for illustrating the tension between emotion and logic. Emotions are like an elephant, and logic is the rider trying to steer the elephant. This situation works out just fine until the elephant gets scared or excited. Then the elephant goes wherever the heck he wants and the rider holds on for dear life. The point here is emotions – positive and negative–are powerful, and you discount them at your own peril.

How Can Financial Advisors Help?

Most financial advisors have very little (if any) training in helping clients with emotional decisions. To put it bluntly, you show us emotion, we show you data. This is not the best way to help someone make major life decisions, deal with life transitions, or improve his or her most important relationships.

Wouldn’t it be great if financial advisors were skilled at helping their clients clarify what is on their bucket lists? At prioritizing competing demands and values? And at really thinking about the legacy they want to leave? This is what financial life planning is all about.

So, how can a financial advisor help clients get to the core of what’s in their hearts in a way that the clients might not even clearly understand themselves?

Time to Stop Avoiding Complex Personal Issues

The person who stepped in and pioneered financial life planning is George Kinder. George is a brilliant guy, and yet on paper, he seems to be a very unlikely candidate to teach financial advisors how to become life planners. He studied mathematics and gravitational physics at Harvard before becoming an accountant. He subsequently went on to start the life planning movement over 20 years ago and created the Registered Life Planner (RLP) designation. There are currently RLPs in 30 countries on six continents.

I remember thinking about how expensive the Kinder Institute’s five-day training was when I first enrolled. However, at the end of the five days, every advisor in my training group (all 12 of 12, including me) eagerly agreed to spend several thousand more dollars to enroll in Kinder’s six-month Registered Life Planner Mentorship program, which completed our path to becoming RLPs.

Why would successful financial advisors spend so much time and money for a designation that consumers have largely never heard of? I think it is because once we got a taste of life planning, we discovered our “why.” We came to realize that for us, life planning is simply “financial planning done right”. Every financial planning engagement should begin with a clear vision of the client’s most ideal life, establish a clear route map to achieve it, and then create the financial plan to support the vision and actions. That is what it means to be a financial life planner, and that is why I am one.

Call me or send an email if you want to get more clarity on the life you want to live.  Have a great week.