Written by:
Tom Glanville
Senior Financial Planner at Amber River Shipman Wealth
Do Financial Planners have a Superpower?
I have always thought one of the biggest difficulties of being a financial planner is we do not sell a tangible product. The clients do not get to see a supercar, or a house to buy. Or even a can of baked beans, as one politician said during one of the introductions to the many pension changes over the years, saying that they wanted people to buy a pension like they would a can of baked beans at the supermarket.
So selling a service has always relied on a client taking on trust that the advice we give will be good for them. That has unfortunately led to issues in the past with silver tongued advisors abusing this trust. Hopefully, with the increased regulation we have seen over recent years has now put that firmly in the past.
But what was really needed was to quote Arthur Brisbane “Use a picture. It’s worth a thousand words”
The industry needed something visual so a client can see what they are getting. The answer is cashflow planning or as one extremely wealthy client described it “Lifetime Planning Tool”. Now I know cashflow planning is not unique to our industry but when it is used as interactive with clients, cashflow planning is incredibly powerful.
Traditionally cashflow planning has been used to promote dreams and avoid nightmares. By that I mean showing how much you need to save a month to buy that supercar in 5 years’ time, what age you can retire, or what happens to the family finances in the event of a premature death. But as the systems have become more interactive the uses of cashflow planning or modelling has become far more useful.
For example, the couple who were distraught that the sale of their business for many millions had fallen through and as a result they believed they could not have the planned for retirement lifestyle. The tears turned to those of joy when they were shown they could accept a far lower offer for their business and still do exactly what they wanted to do in that long-planned retirement.
Further tears again, fortunately of joy, when a client in a very high powered but extremely stressful job was shown that if they wished they could retire tomorrow quite comfortably. Interestingly this has occurred on a number of occasions and quite often the client does not retire the next day. Not that I am an expert in human nature but it does seem knowing you could finish tomorrow if you wanted to does help reduce the stress of the job in some way.
Nor is the benefit limited to those whose fear is running out of money. Being able to show the impact of substantial gifting or looking at philanthropy to clients who feel they ought to do something but fear the impact on them or their family is highly illuminating for some.
But to me being able to see the impact of “what ifs” is the most powerful and enjoyable use of the system. Showing the base line of how their finances work over their lifetime using the current circumstances and then throwing in the “what ifs” to see how it changes things or not as the case may be. What if I take 3 cruises a year? Can we afford to go somewhere hot for 2 months in the winter each year? What happens to the planned retirement date if we take a longed-for family holiday to Japan for a month? Or the reassurance that if one of a couple needs care in later life, the other one can still afford to live in the family home and pay the bills.
So no, financial planners do not have a superpower, unless it is the ability to drink copious cups of tea and eat biscuits, but being able to help clients visualise their financial future and see how the “what ifs” can be allowed for and help achieve dreams and try and avoid financial nightmares is pretty powerful.
However, as they say with great power comes great responsibility. Where you have a couple who are arguing whether one of them can afford to purchase that classic car or not, and the one arguing for not clearly does not want it bought anyway, giving a definitive answer will leave someone very unhappy. But you can’t win them all.
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