One of my partners, Richard Busillo, was telling me
about a new client relationship he had just established. The new client
told Rich that his money had no purpose. Rich's response: "I'm in the
money purpose business." After that conversation, it occurred to me
that that is exactly what financial life planners do. They help clients
find a purpose for their money. And that is significantly different
than asking clients what their goals are.
Goals are things we may want to do or have. Purpose is using our money to fulfill our core values. It is our job to help our clients align those values with their decisions about money. Achieving this balance will greatly enhance your clients' likelihood of experiencing happiness and peace of mind. As Olivia Mellon, Ph.D., author and psychologist says, "If your relationship with money is not in balance, no amount of money will help you. It is your job (as financial planners) to help your clients find balance around money."
How many of us, when asking clients what their goals are, get a response like, "I want to accumulate $3 million by the time I am 60 years old." Of course, this may be a goal, but it certainly isn't a purpose. What is the underlying value behind that statement? It could be several things. Perhaps $3 million represents security, or freedom, or power, or peace of mind. Most of us, when we get a response like that, probe much deeper to discover what it is the client really wants. Asking the right questions will increase our likelihood of discovering the core value behind this "goal." If we were to ask this hypothetical client who wants to accumulate $3 million how he would want to be remembered, it is doubtful that he would say "as a person who accumulated $3 million." Understanding the core value that is driving the goal will help us to provide our clients with better advice.
For example, when Judy, a 70-year-old widow, called, she asked about the feasibility of taking her children and grandchildren on a vacation throughout Europe. While she had enough money to last her lifetime, she did not have so much that she could afford to be frivolous or irresponsible. She recounted a dream that she and her husband had to take their two children and four grandchildren on this European vacation she was describing to me.
However, they always seemed to find some reason for putting it off. After her husband's death, her fear of running out of money resulted in her putting the goal on hold indefinitely. Still, she was becoming more sensitive to the uncertainty of the future, and developed a keen awareness of her need to be with her family. She wanted to know if she could afford to take this vacation, which was to cost more than $50,000. While the goal may have been the vacation, the core value underlying it was her love of family. Knowing this from conversations we have had over the years enabled me to encourage her to take that vacation. Determining the quantitative effects could come later. She agreed that spending less in the future, if she had to, would be a small trade-off for this family time that she so desperately wanted and needed. Unfortunately, five years later (in May of this year) Judy passed away. However, I can say that she lived her life true to her core values. Is there a better legacy for any of us? When was the last time you read an obituary that said, "Frank will be remembered most for his large home, his Mercedes and his bank account." Asking clients how they want to be remembered will facilitate a discussion about their core values, and you can help them live those values by showing them how to align their decisions about money with those values.
While we all know that money is a means to an end, it seems that we need reminding from time to time. An article written on the Web site MoneyInstructor.com tells the following story about a financial advisor who was working with an 85-year-old man to finalize his estate plan:
"The man had built what began as a small estate up to the sizable sum of $8 million. Unfortunately, the man had also recently lost his wife of 40 years. It was during the discussion of how the money was to be dispersed that the man had the sudden realization that the money he had spent his entire life stockpiling would never be used for his or his wife's enjoyment or benefit and therefore it was essentially worthless. The old model does not work because the old model gets the fundamentals wrong. Understanding the purpose of money is the starting point to offering good money management advice and to making good money management decisions."
In order to understand our clients' values and help them identify a purpose for their money, we need to ask the appropriate questions. For every goal or desire expressed by our clients, we ask whether it represents a core value for them. Or is it just something they would like to do, or something they feel obligated to do. One example is asking them how they feel about philanthropy. Perhaps they classify that as a core value, but they have made no provisions in their estate plans for charitable giving. Instead, they feel an obligation to leave all of their money to their children. Of course, giving money to charity may be a goal, but shouldn't we probe further to determine what the underlying value is? If that value is "making a difference" and they understand that, philanthropy would be one way to live in alignment with that value, and they may decide to use some of their assets to help fund causes that are important to them.
Such was the case with Angela. When we asked about her history, she recounted the time in her life when she felt pain about money. Her family struggled financially and found it difficult to pay her tuition at the parochial school she attended. Almost every year she was called to the office and reminded that her tuition had not been paid and that she would be unable to complete the term if her parents did not pay what they owed. Humiliated, she would beg her parents to find some way to spare her this annual embarrassment. While they always managed to avoid their daughter being asked to leave the school, the scene was replayed almost every year.
As Angela told her story, she hesitated, and I could see that she was pondering something. Finally, she told us that reliving that pain caused her to realize that she would like to do all she could to prevent other students from experiencing similar humiliation. She wanted to make a difference, and she asked if it would be financially feasible to start a giving program to help pay tuition for needy students at the high school from which she graduated. Since then she has expanded her core value of making a difference in the lives of others by establishing a family foundation so that these values may be instilled in her children. When she first came to us, accumulating money seemed to be her primary goal in life, but when she discovered a purpose for her money, her actions changed, and she is now living in alignment with her core values.
Peter Vadja, Ph.D., co-founder of SpiritHeart, wrote, "When one comes from one's core values, one's inner sense of what is important in life and living ... is at the heart of a life well lived, at work, at home and at play ... and is at the heart of creativity, self-management, self-responsibility, healthy behavior (mental, physical, emotional, spiritual, social, financial). Money, in this sense, has a different emotional and psychological energy around it, a softer energy, not unlike the energy reflected in one who says, 'I love my work and I can't believe I get paid for doing this.'"
Our firm's mission is a simple one: "To improve the quality of our clients' lives." Helping them to find a purpose for their money is a key to fulfilling that mission.
Roy Diliberto is chairman and founder of RTD Financial Advisors Inc. in Philadelphia.