The following is adapted from The Entrepreneur’s Guide to Financial Well-Being.
Many financial advisers like to use the analogy of a pilot when describing what they do for clients. They fly the craft, and the client sits comfortably in the cabin.
I don’t care for that analogy myself because it’s primarily about departing from one place and arriving at another, with the client as a passive passenger.
There’s little discussion about both parties’ efforts and intentions, and about how the biggest part of reaching a goal is chunking it down into manageable steps.
As an adviser, I like to compare what I do with my clients to the sport of orienteering, which I participated in as a Cub Scout and Boy Scout leader.
In orienteering, you compete with other participants to find your way across an area, usually a countryside, using a map and a compass. As a competitor, you get a master map and a punch card at the beginning of the route. At every checkpoint, or control point, you receive a token and your card is punched to prove you showed up. The winner is the one who reaches every control point, in order, with the fastest time.
Embarking on a financial journey is similar to orienteering with a map. When you’re navigating an area, you encounter both easy obstacles and challenging ones, terrain that is smooth and difficult. Every participant has unique strengths and weaknesses, and must reach certain markers to ensure a successful journey.
Most financial journeys are long-distance endurance races, called “billygoat events” in orienteering. I think of all of my clients’ financial plans as billygoat events, and I use orienteering terms for the other types of client meetings we have in our practice.
Creating a Master Map
An adviser creates a good relationship with an entrepreneurial client by starting off with a process for discovering what is important to that individual.
I liken this process to creating a master map for an orienteering journey.
An adviser finds out the terrain of a client’s life, his or her goals and objectives, and the obstacles, all the while learning the checkpoints an entrepreneur wants (or needs) to reach or exceed to feel like the journey was successful.
One person’s control point might be to save $18,500 a year in her 401(k); another’s might be to own a home debt-free by age forty. Every person’s race is different.
As the journey unfolds, the map is a guide to assess whether you are on track or need to recalculate. Adviser and client work as a team, which is why it’s so critical to pick an adviser you believe will be an excellent teammate. You want an adviser who understands your checkpoints, because if you miss one—whether it’s minimizing your taxes or ensuring wealth protection—you could lose the race.
Discovery as a Compatibility Test
As a financial adviser, I believe the fact-finding or discovery process is key to fulfilling my client’s goals. My team and I spend 75% of our time upfront, trying to understand a client’s situation. We spend 15% of our time developing recommendations, and the remaining 10% goes toward implementing, monitoring, and adjusting a plan. I’ve found that identifying the right solutions in the first place leads to effective implementation.
Our “master map” meeting includes roughly 65 questions. Of course we ask financial questions about such issues as retirement needs. But many questions seem unrelated to finance at first glance, such as “What are you trying to accomplish?”
I find most people don’t want to be a burden on their kids. They want to lead a comfortable lifestyle and provide a legacy—such as contributing to a charity or their grandkids’ education, or leaving an inheritance for their children.
After the meeting, we analyze and review the information, and make recommendations.
One crucial aspect of the discovery process is that it allows you to observe the adviser “at work” before you make a final decision to sign on. You can see if you two are compatible. Questions to ask yourself about a potential adviser include:
- Is the relationship comfortable? At my firm, my team and I listen deeply. If your adviser is more interested in talking than listening, that’s a bad sign.
- Is the individual trustworthy? You can check the following sites to find out if clients have filed any ethical violations against a financial professional: FINRA’s BrokerCheck service (https://brokercheck.finra.org) and the US Security and Exchange Commission’s Investment Adviser Public Disclosure website (https://adviserinfo.sec.gov/iapd). If you are assessing a fee-only adviser, check to see if they are a member of the National Association of Personal Financial Advisors, located at napfa.org. The Paladin Registry is a no-cost vetting service that validates and documents adviser qualifications and business practices, matching individual investors to financial fiduciaries. Adviser ratings are available to the public. A lower rating might indicate conflict-of-interest issues.
- Does the adviser have the expertise to know and understand the best ways to take advantage of taxes?Some advisers, even if they are CPAs, are prohibited by their compliance departments from giving tax advice. A failure by a financial adviser to take into account tax burdens and brackets has the potential to severely impact your retirement and the estate you leave.
- Does the adviser care about my needs? Assess whether the adviser deeply understands your financial picture within the context of your life and its issues.
- Does the adviser look at my situation holistically and provide integrative solutions? Numerous advisers employ a traditional approach, focusing solely on a few aspects of a client’s financial picture. Integrative solutions look at a client’s finances as a whole, and integrate tax, financial, and investment management.
The Relief of Transparency
Most people feel incredible stress when discussing finances, because they don’t arrive in an adviser’s office already understanding everything and knowing how to solve their problems. They don’t know it’s normal to begin without having all the answers; the master-map process is designed to help clients crystallize their goals and objectives.
It can feel uncomfortable at first, but most clients end the first session feeling relieved because their situation is now transparent, perhaps for the first time ever.
Creating a master map helps people feel more confident, although some are concerned that they’re locked into a rigid plan. They’re relieved to discover the map isn’t static; over time, priorities change, detours happen, and routes need recalculating.
Working with a master map and a trustworthy adviser gives you structure and flexibility; it’s like having a GPS guiding your path. You need to know where you’re going, but if the route changes, you don’t have to pull over to find a road map or ask a stranger for directions. Your GPS recalculates and keeps you moving forward.
Hitting Control Points
No matter your route, it’s wise to build in checkpoints to assess your progress. This happens constantly in orienteering. You look around the terrain and try to identify whether you’re in the right place at the right time to get to the next control point.
These checkpoints tell you whether you’re on pace to finish in time or if you’ve gotten off track. With a financial plan, meetings serve the same purpose.
One of the questions we ask in our master-map process is how often the client would like to meet. With a new client, we meet frequently—as much as once every other month or once every quarter. Soon, we settle into a cadence.
The cadence usually changes when a major life event or stage occurs: a child nearing college age, a job opportunity in another state, retirement, and so on. In addition to the cadence of each person’s life, everyone has a pace particular to them.
Frequent meetings can be useful, but be wary if an adviser has a blanket rule of meeting quarterly. Often these prescribed meetings are nothing more than performance reports or recaps of market activity. Find out exactly what the meeting will entail.
An entrepreneur’s life is busy, and even with a strong relationship with a financial adviser, checkpoint meetings can become a low priority. But they are essential to keep you oriented to your master map. Your adviser must be made aware of any new obstacles or information so he or she can help guide you.