Maya Angelou, it turns out, was not just a poet and philosopher for the ages. The literary legend was also a savvy client who fired more than one financial advisor she deemed guilty of either talking down to her or ignoring her socially responsibly investment requests1. She may not, as she admitted, have understood the markets but she certainly understood her value.
Angelou, prudent and a successful real estate investor in her time, likely also understood the importance of a financial plan, not in the sense of budgeting or making 10% returns but in how it helps you live your best life. She did, after all, proclaim that her mission was “not merely to survive, but to thrive; and to do so with some passion, some compassion, some humour, and some style”.
If Angelou were around in 2022, she would recognize that financial planning has a reputation problem. In a world of 24-hour news and BNN daily stock reports, advisors are falling over themselves to talk returns, tech stocks and crypto bubbles. Real financial planning, however, is not picking the next “winner” or lowering a client’s blood pressure after a market crash. Instead, it’s helping people live the life they want by optimizing their assets.
The problem is that financial advice has become a product industry. And while some argue it’s a service industry, no one is calling it is an experience industry. As Angelou famously said: “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
No one will remember the mutual fund they bought or their asset allocation strategy, but they will remember their dream retirement vacation, being able to gift their children enough to pay for their wedding, or not having to stress about senior care costs. Yet still there is an obsession with returns and investments. It’s time to flip financial planning on its head; it’s time to start changing lives.
We think that instead of buying a fund or stock, people want to buy a feeling. This is particularly true when it comes to couples and finance. Money is a long-established romance killer. According to the RBC Love, Money & Marriage Poll2, 47% of married couples admitted finances are the biggest stressor in their relationship. For the vast majority (88%), having similar financial goals and money habits were deemed to be important for a healthy long-term relationship, but 32% were not comfortable talking about each other’s financial situation. No wonder there were 2.74 million divorcees in Canada in 2021 – up from 1.88 million in 20003.
But imagine if financial planning was more like couples therapy, with the aim of getting two people to buy in, literally, to a shared future. That feeling of taking on life together, going through the ups and downs, maybe raising kids, and then coming out the other side with enough hard-earned money to enjoy the type of retirement you both want is priceless.
Through honest conversations about what you want out of your lives, a CFP professional can forge that relationship and through tax efficiency, estate planning and a prudent investment strategy make that a reality, without mentioning a single mutual fund.
We’ve lived it
Life experience is a key differentiator when using a CFP professional. Unlike the big banks, for example, where it can feel like you are shopping for a product in the same way you’d shop for a car, financial planners offer the potential for a deeper, longer relationship. Instead of being influenced by commissions or targets, they are led by what you want to accomplish.
This requires exploring real issues: how can you pass down wealth to your kids in the most tax-efficient way? How much do you really need to live the retirement you want? What’s your ambition? Cottage of your dreams, a round-the-world trip, or paying for your daughter’s wedding?
How many banks ask those questions with the goal of fulfilling dreams not sales quotas? Financial planning is not about saving the most cash possible; it’s about helping to fulfil a client’s financial potential and maximizing their lifestyle. This requires partnering with a firm you trust to take care of you.
One of the most emotional times in life is when people come into a significant amount of money. Often, this means a loved one has passed, and the recipient has to grapple with grief alongside the financial maze this presents. A sudden windfall could also be a result of someone selling their business or, in rare cases, winning the lottery.
Different people have different impulses, but decisions made in the midst of loss or elation may not be the most rational. Some quickly splurge it on dream cars and houses, others may make bad investment choices in a rush to get into the market, while some hand it over to a long-lost relative who has suddenly reappeared. It’s also true that, once tax has been taken into account, what at first seems like a never-ending pot of cash, might not be as much as first thought.
In short, you need a financial plan based on what’s important to you. A good planner, who understands you and your situation, can help you prioritize because, even if the windfall is large, you can’t buy everything. In 2015, the National Bureau of Economic Research found that 15.7% of NFL players had filed for bankruptcy within 12 years of retirement, despite many of them making millions of dollars. In addition, a staggering 78% of retired players were in serious financial distress just two years after leaving the game, according to Sports Illustrated.
These are extreme examples, but few people are used to managing large sums of money. Professional advice should be your first phone call and if it isn’t, the industry has failed. Inheriting a large sum, or selling a business, can be an intense experience but it should be a pleasurable one. For most people, this is their chance to change their life, and those of loved ones, in a way that matters most to them. Advice should be less about the potential return on investments and more about the potential return on life.
Angelou said: “I’ve learned that making a ‘living’ is not the same thing as ‘making a life’.” Financial planning is not about accumulating as much as possible; it’s about enabling people to live their best life. By putting a person’s dreams first, and bringing couples and families together, CFP professionals can offer that experience.
4 Top ten priorities for HNWIs in wealth management – Citywire