Financial Planning Needs to Get More Personal

This content first appeared as an article in Financial Advisor Magazine, here.

Since I started working in the transitions space nearly 20 years ago, I’ve become known for saying, “When life changes money changes, and when money changes life changes.” And after spending years building a training program for the stages of transition (we at the Sudden Money Institute and the Financial Transitionist Institute call them: Anticipation, Ending, Passage and New Normal) and of course talking about major life events and sudden money events such divorce, the sale of a business and inheritance, I continually return to human realities of adapting to change. I continually return to the fact that we humans are built for change, yet for some reason we in the financial services industry don’t give change the respect it deserves. Oddly, although it happens all the time, we don’t have an industry-specific protocol for dealing with it.

The Need for Transitions Planning Should be Obvious

Ask an elementary school teacher and of course any middle school teacher and they will be able to tell you all about that the physical, cognitive, social and emotional development of young humans. Part of their job is help children adapt to and even celebrate the many changes that naturally occur as they develop. Throughout the traditional education system, there are plenty of opportunities to acknowledge—to graduate—through the milestones of young life. Some milestones are internal and will likely happen no matter what we do, and others are culturally constructed, such as the transition to middle school and out of high school. Either way, what we now know about the human brain and body tells us that aspects of life and living such as decision-making and impulse control are affected by our biology and our circumstances, and also by our relationship to what’s happening with our biology and our circumstances. We know that we can develop the capacity to make wise decisions and regulate ourselves given the right training and support—if we are well-resourced.

What it Means to Be Well-Resourced

Being well-resourced includes adequate social support and a mindset that allows for growth and resilience. It involves healthy habits and relationships, and the ability to maintain equanimity in the face of whatever life throws our way. I doubt anyone would disagree that middle-schoolers need lots of support and orientation and interventions to help them in their journey from what was to what will be. Of course they do! This is a major transition, and regardless of the upheaval inside or around them, they must move forward academically and socially, and claim whatever identity that is arising inside them. There are things that must be learned and things that must be done regardless of how they feel or what they are going through.

Transitions are Part of Every Person’s Life

Fast forward a few decades to an inheritance, insurance settlement or the death of a partner. Toss in the prospect of a major career change or a windfall. If when life changes money changes, what exactly are we as an industry doing to support the human whose life and money are changing? Where are the interventions, orientations and support for that person? How are we helping them move from what was to what will be? As an industry, we probably do the most planning and maybe even some of the best planning for retirement. This is where we often shine. Mixed in with plenty of work on the technical side is often the acknowledgement of the real cognitive, emotional and social implications of retirement. There is even talk of the evolution of the individual’s identity. There is respect for this milestone and even some ritual and fanfare around it. This is a welcomed trend that warms my heart because it signifies a maturation of my beloved industry that I must admit I have been quite frustrated with at times. Still, the pivotal issue in Financial Transitions Planning, as we call it, isn’t really that there isn’t enough planning. It’s more like there isn’t enough planning on the personal side, and that’s where decisions are made. Transitions change your perceptions—sometimes fleetingly and sometimes permanently. Major life events trigger changes in your relationship to money, to people and to life itself. Your net worth and income might not change necessarily, but your ability to make skillful decisions might be diminished and your risk tolerance might change—and both of those will affect what happens with your money. An event doesn’t have to change your net worth to end up changing your net worth.

When Clients Struggle During Transition

When the continuity of our lives is disrupted, our capacity for problem solving, our memory, and our big-picture thinking can all be compromised, and just when we need them most. We saw this so frequently that we were able to identify nine common characteristics of clients who were struggling with their transitions. The Transition Struggles, as we call them, include Overwhelm, which is exactly what it sounds like. A classic case of Overwhelm is a woman whose husband has unexpectedly died. She is stunned, she may or may not have a lot to do (but her perception is that there is a lot, and that’s what’s important), and she has decisions to make (or she has the perception that she has decisions to make). She is unable to even begin to figure out how to proceed, and she has no idea how much income she needs or where it will come from. This isn’t really a financial planning problem—it’s a transition problem. Someone feeling overwhelmed doesn’t need an advisor who will take the overwhelm away, and, say, be her concierge and get everything done for her with minimal bother to her. That’s not going to help her perception of her mental state. What helps people who are overwhelmed is to normalize their experience and then to work with them to show them that there is not as much to do or decide on right now as their anxiety—the noise in their head—is telling them. And what helps people who don’t know how their bills are going to be paid isn’t to say, “don’t worry—I’ve got you,” it’s to show them (in a simple, clear way) how their bills are going to be paid.

What Clients in Transition Need from You

When I say that people need to be well-resourced, your support and your relationship with your clients is crucial. But as important is their confidence in their own competence. Our confidence in our capacity to move forward and overcome obstacles comes from demonstrating to ourselves that we can inch forward—not that we have a great financial advisor who takes care of everything. Now, this is true regardless of someone’s relationship to their event. Some people understand their place in their transition—what stage they’re in and how that affects their perceptions and relationships—and they’re engaged and ready to do what needs to be done. We call that Transition Flow, and the particular trait would be Clarity. Even when a client is in Flow, there is still plenty they can do to add to their own sense of confidence and resilience. We like to use these opportunities to delve deeply into values and the why of our decisions. We have discovered that transitions require a set of skills that have a different goal than traditional financial planning has. They are truly client-centered. The client’s pace, the client’s capacity to move forward, the client’s degree of certainty, and the client’s need to regroup are what drive the work. Essentially, it is the client’s relationship to their major life event and even their relationship to the idea of change, that dictate how their story unfolds. It’s so meta! I have no doubt that financial planners will continue to search for ways to better serve their clients. If there’s one thing I’ve learned over these nearly two decades, though, it’s that we need to look no further than the client in front of us for the guidance we seek. Transitions require a different type of financial planning, but probably more important is that they require a different idea of what financial planning is.

On Being Versus Doing

I’ll leave you with a distinction between doing and being. Much of the doing that is designed for the personal side is different, and at first that’s where most advisors spend their time. They are integrating the doing of the personal side with the doing of the technical side. But for some advisors, the myth of the primacy of doing appears, and the advisor realizes that the shift in doing was a catalyst toward a shift in being. That’s when truly transformational things happen for them and their clients. On those days, I couldn’t be more proud of my industry.

If you are–or can be–in the West Palm Beach area on November 6, we are opening our 18th Annual Conference to non-members so they can experience our unique community and our one-of-a kind, highly interactive conference experience. Click here for more on that.

If you are interested in an workshop that introduces our work and our program in Financial Transitions Planning, click here.

And if you are ready for our yearlong program in Financial Transitions Planning, or even becoming a Certified Financial Transitionist, you can learn what is involved here.