A Life Planning Approach to Financial Planning

Contact: Steven Shagrin, CFP, has a law degree and started his career in finance as a tax accountant before spending twenty years as vice president for investments with Smith-Barney and Pain Webber.  As one of the pioneers of the life planning approach to financial planning, he started his own company, Planning for Life,  to reflect a more holistic financial planning style. He provides fee-only money coaching, retirement counseling and life planning.  He is also vice president of the Money Coaching Institute and is based in Walnut Creek, CA.

Situation: Meeting with private clients typically when they come in for the introductory meeting.

Who: Private clients (individuals and couples) coming to develop their financial life plan.  Although he mostly uses Money Habitudes with new clients, he will also use them with ongoing clients.

Why:

  • Tools help CFPs be more responsive to clients.  The profession is changing and clients now demand more from their advisors beyond recommending investment products.  More CFPs are spending time helping clients understand how their financial plans may be affected by psychological issues related to the role money plays in their lives (e.g. security, fear, status).
  • To build trust, start conversations, provide a safe way to talk about a difficult topic and make it more comfortable and interesting for the client.
  • As an easy and efficient way to more fully understand clients and their needs.
  • To understand where a client’s mindset is so planners can begin to explain their service offering from a perspective that’s acceptable and understandable to the client.

How:

  • When new clients come in, to get them started he gives each person a deck of cards to sort (so a couple is doing it individually at the same time).  While they do the standard solitaire activity (which usually takes 10-15 minutes to sort the cards) he will use the time to review their file.
  • Once they are finished, they talk about the card sort and it begins the conversation.
  • Although he starts with Money Habitudes, he also uses a variety of tools with his new clients including the Money Coaching Institute’s Money Type Quiz and the Money Quotient Self Assessment.

Outcomes:

  • It helps couples understand their differences related to money. Instead of fighting about each other’s money habits, Money Habitudes give couples a new perspective.  They can still disagree, but understand each other from a different point of compassion.
  • Whether it’s estate planning, planned giving or another facet of a client’s financial affairs, the cards help identify underlying, non-financial issues in the family dynamic such as divorce, health problems, trust and esteem issues, etc.
  • By using the cards its easy to see the red flags that can become part of the discussion to determine if a person or couple is a good fit for him and his practice.

Observations and Comments:

The usual process of getting to know one’s client is “woefully pitiful” says Shagrin. “On a new account form, they only require you ask: what’s your net worth, what’s your liquid net worth, how long have you invested in these different areas, and what’s your employment situation and tax rate. It doesn’t really ask how you think about money, how you make money decisions.” Even if people aren’t inherently comfortable talking about what they have and how they use it, they do want to feel like they’re understood when it comes to entrusting their life savings to someone else.

[The cards] are, on one hand, a trust-builder and conversation starter and, on the other hand, they are a way for me to more fully understand my clients and their needs….it makes for a better interaction and results in a relationship and advice that are more informed, more relevant and, ultimately, more appreciated.

If a couple is in a relationship where they don’t get along, just being in the same room with a planner talking about money, they may clam up.  I’ve been in circumstances where the husband did all the talking and the wife said nothing and then when I asked for some time alone, I’d ask her, ‘What’s going on?’ and she’d say, ‘He’s awfully controlling.’ I didn’t’ know how to deal with that then.  Now I can bring out the Money Habitudes cards and say, ‘This is interesting—there’s a disparity here.  What can you tell me about that?’  It makes it non-threatening because it’s an independent perspective from which they can view their present reality.

I’ve also used the Money Habitudes cards with clients I’ve worked with for a number of years.  The cards have helped couples to break a logjam in their planned giving and estate planning.

From a financial advisor’s prospective, where they [Money Habitudes] are very helpful is you know your client even before you decide to take them on.

Steven Shagrin: Three Client Stories

Jane was a client whose Money Habitudes card sort revealed an equal split with four cards each in Status, Targeted Goals, Security and Selfless. Not surprisingly, the story that came out was one of total frustration and total paralysis when it came to her managing her money. [Four cards is a dominant habitude and having more than one dominant habitude pulls a person in different directions.]

She related that she had been in real estate but quit and started working in a nursing home because the market was so bad. She’d been divorced for two years and the retirement funds from her settlement had dropped precipitously. Her son was now returning to school and she wanted to help with his tuition.

Every time she got a dollar in her hand she was torn about what to do. Because she had a comfortable framework to help her share her story, and because I could interpret her history within a financial context, I could approach her situation in a way far different from how I would have handled the same client if I were only working with a spreadsheet detailing her assets.

Robert and Elaine were in their late 70’s and had been working with me for more than five years.  They were currently dealing with a logjam in their planned giving and estate planning. Although they’d been married for more than 40 years, had plenty of money, and believed themselves to be very financially compatible, I asked them to try working with Money Habitudes.

They both had Targeted Goals as a strong, dominant.  In fact, they both identified with eight of the possible nine cards in that habitude, seven statements being common to both of them which is about as compatible as they could be with their dominant/primary habitude.  But their secondaries or next strongest habitudes were very different and that’s where I then focused my attention to resolve their impasse.

Her second-most-dominant Habitude was Selfless. She felt strongly that she wanted to help their grandchildren pay for college. By contrast, her husband’s secondary habitude came out as Security and it was very strong.  He was very hesitant to part with his money – even though the couple had more than they’d ever need.

It was only by doing Money Habitudes that I was able to help them understand their differences. When we started talking about the story behind that, that’s where it [his fear of not having enough money] came out. He had lived through the Great Depression and saw his family lose everything not once, but twice.  If I hadn’t used the cards, I don’t think that story ever would have come up.  With this context for their disagreement in their estate planning, the husband and wife were able to better understand each other’s motivations and I could frame a plan that appealed to both of them. Once I showed the husband how some giving options would affect the couple’s long-term cash-flow and cash-balance position – in order to satisfy the security need the client felt – the couple came to an agreement to give $10,000 a year to each of four grandchildren. It gave him much greater peace of mind.  They weren’t really arguing about money, since they both realized they had more than enough for their needs, but about ehst money represented to them emotionally.

Tracey and Will were separated and contemplating divorce. Will owned two sports bars.  After doing the cards he identified with Free Spirit and Spontaneous Habitudes. Will recounted a childhood where his father would come into money, lease a Cadillac and take the family to Florida.  Then leaner years followed. He learned: when you have money, use it and take advantage of it because you never know if you’ll get it again, so live for the moment.

Tracey was in nursing school and identified with Targeted Goals and Security. She  grew up with alcoholic parents and had to steal from their wallets to feed her siblings. For her, having money in reserve was one of the most important things and knowing where it’s going to come from and how it’s going to be spent was tied to her core survival.

They each found in the other person what they wanted for themselves until it began to drive them crazy about 15-18 years into the marriage.  When they played Money Habitudes it gave them a new perspective. Instead of fighting [about each other’s money habits], they could still disagree, but understand from a point of compassion.  It made for a very different and more effective conversation.

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