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.