In my first article about financial planning, I covered the most common perceptions of financial planning, the beliefs that many people have as soon as the words financial planning or financial advisor are mentioned.
A lot of the problems with these perceptions is that they aren’t always founded on fact. So this week, I am going to break down what financial planning actually is and what a financial planner is.
For me, financial planning is about finding out about the client – what they would like to achieve and how we can put a plan in place to make those dreams a reality.
When meeting a client for the first time, I think it’s important to not have any perceptions or preconceived ideas of what the client is looking for and likewise, it is important not to assume the best solution for them before knowing their circumstances.
This is because in the initial stages, an advisor will not be able to advise without knowing more about the client. The products that we have at our disposal, are merely tools that enable us to do our jobs; they are completely irrelevant until we understand the needs of the client and their goals for the future.
Financial Advisor or Financial Planner?
In the last article, I mentioned financial advisors and financial planners. So what is the difference? In my humble opinion, there is a slight difference between the two.
Meeting with a financial advisor or receiving product-focused financial advice is transactional. Product-focused financial advice, while effective when done correctly, may not always deliver the best outcome for the client. Whether this is the best way of providing advice is pretty much down to what the client and adviser have agreed between themselves.
A financial planner and thus financial planning, in my view, is about creating a plan with the client and then, if required, implementing the appropriate solutions; enabling clients to achieve what they would like to achieve in their financial plan. So how do we do that?
It’s really quite simple. You need to listen.
When a client seeks financial advice, they want to be heard, they want to work with someone who they can get on with, but ultimately, they want someone who is honest and who looks after them.
Know. Like. Trust. The three key points in building any relationship.
So how can an advisor, or rather a planner, help clients to achieve this? I’ve said it before and I’ll say it again – listen! By really listening to what the client is saying and by asking simple but effective questions, you will be able to build a great rapport with the client.
You could compare it to a doctor: patient relationship. A patient goes to see a doctor with an ailment. The doctor is not able to diagnose a condition just by looking at the patient (unless it is a visible injury), so he asks a series of questions regarding the symptoms that the patient is feeling (like a financial problem or goal to be achieved) and with those questions and an examination, he will make a prognosis.
Similarly, a financial planner asks questions to ascertain whether he can help his client or not; and by listening to and understanding what their needs and circumstances are, what is important to them, and what they would like to achieve – he/she can develop a plan.
They Key Role of Financial Planning?
When we create a plan for a client, our goal is to help them achieve it.
The most important things that we offer is to help our client feel confident and reassured. They want to know that their money is working hard for them and that their finances are being looked after. They want to know that their debts, and possibly even their mortgage, will be paid off in time. But ultimately, they need to feel reassured and have the peace of mind that they, and their finances, are being looked after.