I know a fellow who had a terrible car accident and required around-the-clock care. His wife quit her professional career and devoted herself to his care for the two years he lived after the accident. He intended for the proceeds of his life insurance to go to his devoted wife. Did I mention she was his second wife? He had intended, but forgotten, to remove his first wife (no longer devoted) from the beneficiary's name on the policy. A month before he died, he changed advisors because of disappointing quarterly returns on his modest investment portfolio. Ask his second wife, now attempting to resuscitate her career, whether the subpar quarterly returns or the unrevised insurance policy was more important to her.

Another reason the planning process gets shortchanged is that clients don't perceive planning to be as valuable as investment management. Have a bad quarter-heck, have a bad month-and goodbye. In retrospect, you're better off without that kind of client, but how can you avoid this pattern if you don't know your clients? You don't get to truly know them by managing their money. You get to know them by talking to them about their lives and by going over their history. The things least discussed during the life of the advisory relationship are the issues of greatest importance when a client dies. Of all we do for our clients while they are alive, the least important thing at their funeral is what their portfolio returned last quarter.

Who's Steering the Ship?

If clients refuse to listen to what they need to hear, rebuff requests for paperwork or continually push you into premature investment return conversations, you have to find a way to change their thinking or live with repeating the past. You know the adage about the relationship between repetition and insanity, yes? The solution lies in taking charge of your practice.

For me, the solution became clear after a client referred a young widow. Her husband handled all the family finances before he died in an industrial accident. She was awaiting payment on an insurance policy while the accident investigation was being wrapped up, and she was concerned she would not have enough money. She never managed finances before and was understandably apprehensive. The policy, purchased a few years after the couple was married, named her as the primary beneficiary and their only child at the time as the secondary beneficiary. Or so they thought. The husband had filled in her name on the first line and the child's name on the second. What he didn't realize was that the second line on the application designated a co-beneficiary, not a secondary beneficiary. On top of that, the couple had had two more children in the intervening years. So now the wife, who already suspected she might not have enough money to support her family, discovered she had only half as much as she thought. The other half belonged to her oldest son, who was an alcoholic and roustabout. Meanwhile, the two younger children had been effectively disinherited.

This was a tragic example of someone thinking he had done the right thing for his family and being wrong. No one discovered the error until it was too late to correct.

I vowed I would not allow anything like this to befall one of my clients. I would insist on a planning discussion and document review, and I realized the only way I could get clients to give me what I needed to do a proper job of planning was to charge them for my time. I began charging fees for planning and refused to accept new clients unless they agreed to planning discussions and a documentation review.

Perceived Value

You and I know that people don't like paying fees for planning. There are plenty of advisors who will throw in free planning or bypass the planning process altogether in favor of managing client assets. But I make clients write me a check for my advice and I've found they not only expect more of me when they pay, but they are far more cooperative in getting me whatever information I need. They are more motivated to do what is necessary and right because they have paid me and they expect me to do what is right.

I no longer spend time with people who refuse to be coached or who want a relationship based exclusively on investment performance. That's not a relationship; it's an audition, and they'll leave at the first sign of a sour note. Yet that's when having a solid plan and a good advisor is most important.     It's what prevents investors from making poor decisions, especially during periods of excessive volatility.

As advisors, we have a choice. We can fret over what we can't control because our clients won't let us be in control, or we can assume control of our practice and our destiny. Do we want to spend our time focused on what Wall Street wants us to worry about so we can make them money, or do we want to take control, create a plan and help our clients make informed decisions? We want clients to be able to make choices based on whether those choices will get them closer to their goals; whether the choices align with their plans; whether their choices are made under emotional stress; and whether they are increasing their wealth and serenity. If we can get clients to take five minutes and consider these questions each time they face a financial decision, they can avoid most mistakes and make better, more focused decisions. That is a far better return on investment than an extra 100 or 200 basis points this year.

I want to know everything about my clients because whatever problems they may have, I can't help solve them after they are dead. There isn't enough money to get me to manage the portfolio of someone I don't know anything about. I won't be the advisor who goes to a funeral where the surviving spouse is in financial trouble because I didn't force her husband to bring in his paperwork. And I now know I don't ever have to be.