Journal of Financial Planning: July 2016
It’s been said that if you don’t know where you want to go, then it doesn’t much matter which direction you’re headed, because you are certainly bound to end up somewhere. This parable, while likely outdated, could not be any truer in today’s world of infinite choices.
Clients could be doing literally thousands of different things with their lives every day. The number of trips, shows, apps, movies, jobs, people, and organizations that people have the opportunity to work for, watch, visit, talk to, or engage with is dizzying. Fifty years ago there were five TV channels; today there are 500. The same proliferation of choice can be applied across virtually every aspect of life—iPhone apps anybody?
It is this proliferation of choice that makes focus and clarity so critically important in our lives today, and therein lies the opportunity for financial planners.
The Idea of a Chief Editing Officer
Jack Dorsey, chief executive officer of Twitter and Square—yes, he works 60 hours a week at both companies—has been quoted saying that as CEO he is the “chief editing officer” of his organization. What he means by this is that each day, every employee has brilliant new ideas and visions of how to enhance each respective company. Engineers have ideas on how to redesign Twitter to engage more users. Square marketers have ideas on how to build a stronger brand to help drive sales.
And as chief editing officer, Dorsey sees his most critical function as being able to provide clarity of direction for his organization by sifting through all of the noise—amazing ideas from really smart people—and pulling out and focusing on the one or two things that are critically important to the long-term success of the company. Everything else is cut in favor of pinpoint clarity around one main purpose.
What if, as financial planners, we operated as the chief editing officer of our clients’ lives? Sure, ultimately the client must choose what their main purpose is, but what if we could help facilitate that process in a more structured way? And no, “How much do you want to spend in retirement on a monthly basis?” is not clarity of purpose.
Clarity around Values
Financial planning is about creating an orderly framework for evaluating trade-offs in a world of limited resources—time being first, money being second. That is why skipping over this critical first step of clarifying what is most important to clients can be a huge mistake. Most financial plans require some give and take, whether that is “we’ll spend a little less now, so we can save a little more to be able to retire a little earlier,” virtually all planning requires trade-offs.
And without clarity around values and purpose, there may be no great way to decide what that trade-off is. Therefore, it is essential for us to create a consistent process for uncovering what is really important to clients before jumping into the trade-off discussion.
Take, for example, an exercise that behavioral coaching firm, think2perform, offers. The think2perform card deck has roughly 50 cards listing out certain values. From money to health, work to religion, friends to family, the cards list out all kinds of different values a person could hold. During the exercise, which works great in an initial discovery meeting, or what I like to call the “clarity and organization meeting,” clients are asked to narrow down their selection from half the deck, then to their top 15 choices, then to the top 10, then the top five.
Once a client has narrowed in on their top five values, it becomes considerably easier to make the hard trade-off decisions later. For example, if a client lists family, health, integrity, security, and community as their primary values, then we have a framework for helping to evaluate trade-offs once we get into the planning.
Clarity around Critical Behaviors
Enter the technical side of financial planning. Yes, the technical side of planning is important, but it isn’t the only piece of the puzzle. After clarity is established with a client, it becomes our job to determine what behaviors are critical to success.
Clients have countless options for how they might arrive at their ideal destination safely. And this is where the chief editing officer comes back into the picture. We must help clients understand—and then hold them accountable for—the critical tasks and behaviors that must occur consistently over long periods of time to achieve their vision of a perfect life.
For example, should a client be saving into a Roth or a traditional IRA? What about saving into an HSA, or buying term or whole life? The decisions are endless, and our job as planners is to help build clarity around where exactly a client wants to go and then edit out all of the less desirable actions that are necessary to get there.
Matt Cosgriff, CFP®, is a financial adviser at Lifewise, powered by BerganKDV, which invites young consumers to manage their financial future the way they want. Follow him on Twitter @matthewcosgriff.
Editor’s note: This article originally appeared on the FPA Practice Management blog powered by the Journal of Financial Planning. Visit PracticeManagementBlog.OneFPA.org and click on “subscribe” to receive an email each time a new blog is posted.