One of the primary objectives for many financial advisors is to help their clients align their goals and priorities with their spending habits, time, and energy. And even though advisors have the unique advantage of being well-positioned to have these important conversations with clients, encouraging clients to define their financial goals and developing a deeper understanding as to why those goals are meaningful to the client have proved to be a significant challenge for many advisors.
In our 86th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can broach the discussion when they notice that their clients’ use of capital and financial goals are not in alignment, and how they can help clients re-examine their goals and actions to get their financial plan back on track.
As a starting point, it is important to recognize when a client’s goals may be shifting, and to communicate with clients to understand whether their use of capital actually supports their goals or if they need to examine those goals more carefully. As while it is natural for a client’s goals to change over time, it is still up to the advisor to understand these changes so that the client’s financial plan can be adjusted accordingly. Asking thoughtful questions can help advisors understand if there are distractions or other external factors that are preventing the client from making progress toward their originally stated goals, if the client’s goals have changed (or if their original goals weren’t what the client genuinely wanted in the first place), or if the client’s circumstances have changed to the extent that they no longer even know what their actual goals are.
Even though it may be difficult for clients to examine and accept the reasons why a financial plan may have derailed, it is still crucial for advisors to ask clients to clarify and confirm what their goals are, especially when the client’s actions appear to oppose the originally stated goals of their plan. Because the consequences of not having the discussion can compromise an advisor’s values (and duties as a fiduciary!), at the same time possibly allowing for further client action that doesn’t support the goals outlined by the plan.
Ultimately, the key point is that when a client’s use of capital seems out of alignment with their stated goals, advisors have an opportunity to help clients revisit and clarify how their goals reflect their priorities and values. And maintaining an open line of communication over time, that accommodates an empathetic and judgement-free space, can help the client to identify any changes (whether to goals or actions) that should be incorporated into the plan to keep things (or bring things back) on track. Because in the end, the financial plan is a continually evolving guide that is meant to help clients reach their financial purpose over time. And by encouraging clients to revisit their goals frequently along the way, advisors not only help clients stay on track with their plans, but also connect with them on a deeper level, creating strong and lasting relationships!