Journal of Financial Planning: December 2011
H. Jude Boudreaux, CFP®, is the founder of Upperline Financial Planning in New Orleans, Louisiana.
There’s a story told of Vince Lombardi, the legendary football coach. It’s said that he would open every season standing in front of his players saying, “Gentlemen, this is a football.”
Sometimes it’s helpful to be reminded of the basics, the fundamentals. I’m fortunate to be around the music schools at Loyola University in New Orleans regularly, and it’s wonderful to walk the halls and hear the incredible musicians practicing and performing. These are students who have spent their lives honing their craft and working to improve every day. The chair of the music business program often says music students who don’t pursue music as a career make the best lawyers, managers, etc., because they’ve been taught from a young age how to practice and learn every day.
The university also regularly hosts master classes in which professional touring musicians come in to share their experiences and share real-life lessons with the students. Each one of these I’ve ducked into starts the same way: playing scales. The world-class performers warm up with scales they’ve been playing since their earliest days holding an instrument. They tell me it helps to warm them up to perform, and grounds them in the fundamentals.
This all got me thinking about how we work as financial planners. It seems we’re all interested in the latest and most advanced techniques, and we don’t spend much time practicing and working on the basics of what we do as planners. To take a step even further back, what would those basics be? What are our “scales”?
As I thought about it, I came up with two things: budgeting and communication.
Budgeting
My good friend and planner J. J. Sessions often says that as planners, we’re talking to clients about goals. Goals are funded with dollars, and the dollars come from clients who understand their cash flow and budgeting. It’s been my experience within the industry that we often ask our clients about their spending and we don’t really dig deeper into those questions.
When people lay out where they spend their money, it’s eye-opening. If you can help them identify earlier what their values are, and then look at their spending, they’ll realize their spending isn’t in line with their values. This happened for me in a big way. I’m a spender, and my wife is a saver (opposites attract, right?). I always enjoyed going out to eat a few times a week with my wife. Although she enjoyed it also, she had tension about spending so much money at restaurants. It wasn’t until I realized that by spending money going out to eat I was getting some short-term reward but harming our family’s real goal, which was to travel more often, that I saw a need to change. Ultimately, I needed to say no to myself on a regular basis in order to say yes to our true goal.
I know I’ve avoided working with couples in the past on budgeting, because it’s difficult. It’s contentious. It’s challenging. It’s easy to get consensus about goals and the future, but it can be really challenging to get consensus about how clients should be spending their money now. Really understanding tools like Quicken that can help clients understand their money allows us to be good and patient teachers. Web-based tools like Mint.com automate the process for clients (and there are even smartphone apps for Mint that allow clients to make entries on the go), and programs like First Step Cash Management, a planning tool to help clients channel money to achieve their desired financial life, help us simplify the process for busy clients who haven’t had great experiences budgeting in the past.
Communication
There’s been talk within our industry lately about the lack of communications skills as a focus within the CFP Certification Examination® materials. It’s a real deficiency, and something I mention regularly when I speak to students of financial planning. The better we listen to (and actually hear) our clients, the more powerful and impactful our advice can be.
What can we do as planners to become better listeners? I think we all would benefit from some study of active listening techniques. This often starts with a check of ourselves. Are we listening to understand what is being said, or are we listening to respond? Are we focused on what the person is saying, and making appropriate eye contact? (There’s a difference between positive eye contact and staring somebody down!) Is your head clear of internal distractions? I often take a few moments before meetings to sit silently and make notes about whatever bubbles up in my mind. I write the thoughts down on my notepad, and then put it away knowing I’ll address those things later. That allows me to focus on my clients with fewer distractions.
Working in tandem with being a great listener is being somebody who asks great questions. Has your fact finding advanced beyond the form you’ve used since you entered the industry? I think of the work of Ed Jacobson in the field of appreciative inquiry, and how a simple shift in the way we ask questions can affect a client’s perspective about his or her circumstances. I’ve been fortunate to hear Ed speak on several occasions, and I now use one of his questions to start each meeting. Rather than asking, “How are things?” I ask, “What’s been a high point for you since our last meeting?” I find that clients take a moment and dig deep into their personal experiences, and they bring forth a wonderful positive experience they’ve had that I might not have otherwise heard about. We then begin the meeting celebrating the positive things in their life, and that tone carries throughout the meeting.
We then look at communication beyond words. If our communication is actually 53 percent body language, 38 percent voice, and 7 percent words (as the Albert Mehrabian 1972 study suggests), what are we doing to learn about and be more aware of our clients’ non-verbals? Joe Navarro has written a great introductory book called What Every Body Is Saying that provides a primer on non-verbal communication cues from all parts of the body. If you really want to dig into this area, the work of Dr. Paul Ekman on facial recognition is unmatched (I’d recommend Emotions Revealed as a starting point in his work).
I’m sure we could spend hours debating the basics in other areas. We all talk about Markowitz and the efficient frontier, but how many of us have actually read the paper? Or even a mutual fund prospectus, for that matter? We talk about insurance, but we don’t often read through entire policies.
One last thought: are we reading important texts outside of our field? It’s easy for us to pick up the latest copy of the Journal of Financial Planning and learn more from leaders within our industry. Let’s all spend some time investing in the basics of our practices as well.