How to get smart about financial planning

Though not an investor in the 'Learn from the Master' series, George Kinder is an expert and a master of his domain.
By Larissa Fernand |  30-12-16

It’s difficult to describe George Kinder.

He has the engaging demeanour of a professor, with the listening skills of a therapist. He does not drink coffee but enjoys black tea. He is a mathematician and economist from Harvard University but not a stereotype number-cruncher. He is an ardent reader of literature and philosophy but is a money manager. He draws immense inspiration from the poetry of William Blake and is a poet in his own right. And, if that was not enough, he is an author and photographer too.

But what is of significance in this post is the title bestowed upon him by his fans: Father of life planning. The reason he is universally known by that status is because his entire advisory model is based on soul searching. Before he even dishes out any advice, he gets the individuals to picture three scenarios and share their thoughts about it.

Scenario 1: You are financially secure. You have enough money to take care of your needs, now and in the future.

Questions to be answered:

  1. How would I live my life?
  2. How would I describe a life that is completely and richly mine?
  3. What would I do with the money?
  4. Would I change anything?

Scenario 2: You visit your doctor who tells you that you have 5 to 10 years left to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. 

Questions to be answered:

  1. What will I do in the time I have remaining to live?
  2. Will I change my life?
  3. If yes, how will I do it?

Scenario 3: Your doctor shocks you with the news that you have only one day left to live. Be aware of what feelings arise as you confront your very real mortality.

Questions to be answered:

  1. What dreams will be left unfulfilled?
  2. What do I wish I had finished?
  3. What do I wish I had been?
  4. What do I wish I had done?
  5. What did I miss?

In case you think this is all a bit too esoteric, think again. A while back, Dr Joe Coughlin, Director of MIT AgeLab, and his colleagues studied online reviews of financial advisers in the U.S. The study, sponsored by Hartford Funds, analysed online reviews of financial advisers that appeared on Yelp and Angie’s List. The study pointed out that lack of personalisation and empathy were deal breakers.

On the face of it, everyone assumes that technical proficiency and integrity is all that a client would want from an adviser. Wrong. Competency and knowledge and honesty are “musts”, but not the sole criteria that clients scout for.

Clients want advisers who understand their individual needs, wants, goals and timetables, and take them into account when coming up with a financial plan. They want advisers who listen to them, understand where they are coming from, are non-judgmental and don’t discount the factors that drive them.

By approaching financial planning in this manner, Kinder does just that. He puts the clients first – their needs and dreams; and by doing so they get to connect with what really matters to them.

A good financial planner will ask the clients to share their goals and proceed to recommend products that they need. A great one will ensure that the clients get to articulate what it is they exactly want and then help them formulate those desires into goals and eventually design a portfolio towards that end. The right starting point, which is the articulation of their deepest desires and needs, leads to a more accurate and realistic plan.

Kinder narrated an incident to demonstrate the potency of the above method. At a workshop in the U.S., a man stated that his goal was to buy a particular investment property. He discussed with Kinder the potential returns and what steps he would need to undertake over the next 10 years to make that project a reality.

Kinder then posed the 3 questions.

At the end of it, the individual stated that his biggest dream was to build an authentic and deeper relationship with his 6-year-old son.

Kinder countered. “How would it be if, from a financial viewpoint, I got you 5 extra hours a week to spend with your son?”. The man loved that suggestion.

Kinder’s point. A good financial planner would have helped him get that building. To do that, he would have had to spend even more time away from his son. While he would have met his “goal” as he perceived it, it would have taken him further away from where he really wants to be as a person and as a father.

Kinder has taught life planning courses on five continents, and believes that it is impossible to be a fiduciary without being a life planner. A fiduciary, in the purest sense of the term, needs to consider all aspects of their clients’ lives – life concerns and financial concerns.

Some advice from George Kinder on how to be a life planner and not just a financial planner.

  • At the first meeting, the task of the adviser or financial planner is to listen. The client should speak 80% of the time. The client wants someone who will listen and show empathy. And most importantly, someone they can trust.
  • The above three questions should not be asked at the first session. It is mostly brought up at the second session. Initially, clients will mostly tell you what they want you to hear. It takes trust, and maybe even time, for them to open up to themselves and to the planner.
  • If the individual is married, then it would be best if the couple visits the financial adviser or planner together. The opinion of the one who dominates in terms of money or goals should not be the only one speaking on behalf of both. The dreams and concerns of the other individual are also of prime importance.
  • Generally, advice centres around goals. Goals are categorised – retirement goal, child’s marriage, child’s education – and then a plan is drawn up on how to meet them. Life planners must develop a personal relationship with their client to really understand what they care about and what matters to them.
  • People evolve over time. What matters to them could change. What you wanted years ago may not be the same today. It would be wise to revisit the questions every couple of years.
You can view the list of 27 world renown investors covered in the 'Learn from the Masters' series here.

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