Not all financial planning—or financial planners—are equal.
The Certified Financial Planner Board has done much to standardize a substantive base level of knowledge for aspiring advisors. But the value of knowledge is vastly diminished without the ability to inspire understanding.
This is where organizations like the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA) have helped advisors bring their knowledge to life in the form of understanding, encouraging the employment of second-order thinking on behalf of our clients.
But this is where most financial planning stops and, in so doing, falls short of its fullest potential, the advancement of wisdom that can be nothing short of life-changing.
So, are you a transmitter of knowledge, a purveyor of understanding or a guide on the path to wisdom?
Or in the words of the famed Brain Pickings blogger Maria Popova, “Are you an Explainer, an Elucidator or an Enchanter?”
Explainers, Popova defines, “make information clear and comprehensible. Good textbooks are the work of good explainers.”
As a financial planner, this is the minimum standard, the one-way transmission of knowledge from advisor to client—a cogent and comprehensible definition of the risk-adjusted-return concept in the context of portfolio optimization, for example. It is the what, in Simon Sinek’s parlance. But if you consider your job to be done after this explanation, you should expect to regurgitate this knowledge many times over because your clients have likely fallen short of a stickier understanding.
Understanding is the domain of Elucidators, who “go beyond explanation and into illumination—they transmute information into understanding,” Popova expounds, by “integrating bits of knowledge into a larger framework of comprehension.”
Elucidators help clients understand the how—how the concept of risk-adjusted return, sticking with our example, can be applied in the form of crafting a client portfolio. Make no mistake: Becoming an Elucidator is no small task and may very well lead to perceived successful outcomes throughout the comprehensive spectrum of financial planning. For example:
- A client understands how much risk they’re willing to take in order to maximize their expected return.
- A risk management analysis arrives at an appropriate level of life insurance death benefit and sensible bodily injury liability limits for automobile insurance.
- 529 education savings plans are opened and funded.
- An estate plan evolves to include testamentary trusts for heirs, and logical determinations are made for filling the offices of personal representative, guardian and trustee.
Elucidation is sufficient to adequately apply well-grounded textbook knowledge. But it falls short of releasing this understanding for the purpose of revelation, the engine of motivation that empowers clients to fully enlist their quantitative resources in pursuit of qualitative values and aspirations.
Enchanters, however, “do all of the above, but go beyond the realm of knowledge and into the realm of wisdom.”
Enchanters don’t lecture and often don’t even recommend. They guide.
They don’t take control. They empower.
They don’t limit options. They expand their number.
In the previous examples, here’s how they might look different:
- A client finds unexpected contentment in discerning how little expected return they need to pursue in order to meet their goals, freeing them to ignore the financial headlines that have always caused anxiety (regardless of their intellectual understanding of the relationship between risk and return).
- An acknowledgement of the impermanence of life, illuminated through the open-ended discussion of life insurance in preparation for a birth in the family, inspires a client to take advantage of paternity leave.
- Clients develop a “family education policy,” articulating both their philosophy and intentions for future financial assistance to their middle-school children.
- An estate plan expands into a legacy plan as an aging client works with you to design a retreat punctuated by a family meeting to discuss both the letter and the spirit of mom and dad’s plans.
But this is just the beginning of enchantment. In its most evolved form, financial planning can be less about calibration or even renovation and more about custom building from scratch. And you get to be the artisan escort.
For those who struggle to find the pragmatism in enchantment, please know that there is no surer path to your clients “sticking with the plan” than to encourage them to be its architect. As many of the services and niches that previously differentiated us become commoditized, the institutionalization of enchantment in your firm offers a wellspring of differentiation and, therefore, a competitive advantage. And the exploration of why is simply more rewarding—and enjoyable—than the rote repetition of what or the instruction of how.
Once you’re convinced, however, the challenge becomes finding adequate training to reach Enchanter status. While you’ll find little in the mainstream, there are rich resources nonetheless, the foremost of which is led by the Enchanter in Chief, George Kinder. The Kinder Institute of Life Planning is now an international community of advisors who’ve chosen this path. Read The Seven Stages of Money Maturity for a philosophical backdrop and Lighting the Torch for a practical template, but you can’t beat the in-person trainings, especially the five-day experiential approach to enchantment.
Similarly, Money Quotient, founded by Carol Anderson, is a nonprofit in the Pacific Northwest that has created an evidence-based approach to enchantment and a host of tools to help systematize your qualitative client experience. And Rick Kahler, Ted Klontz and Brad Klontz have given us two gems in the client-friendly, curiously-named volume The Financial Wisdom of Ebenezer Scrooge and the graduate-level, recently-revised tome Facilitating Financial Health.
There aren’t any short-cuts to mastering this craft, but there is a great deal of opportunity as the industry has largely ignored this ancient art.
This commentary originally appeared March 3 on Forbes.com
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