“We’ve all heard that a picture is worth a thousand words,” began Erin Wood, senior vice president of financial planning and advance solutions at Carson Group in Omaha, Neb., in a presentation called Better Planning Through Pictures & Stories at the 11th annual Inside Retirement conference.
Pictures and storytelling can help advisors better represent their clients’ wishes and goals, she said.
Clients aren’t always able to express what they want in their retirement plans, she explained. They’re not sure of their priorities, and sometimes don’t feel free to speak openly about their desires. So getting them to open up about themselves and their hopes enables advisors to do a better job of structuring appropriate plans.
“Each one of us lives in our own world,” said Wood, who describes herself as a champion of humanizing financial planning. We have our own histories and perspectives, she said. Part of the financial advisor’s job is to try to see things through the client’s eyes, which is not always easy.
Her firm, Carson Group, partners with advisors nationwide to coach them to maximize their potential.
To that end, she presented a series of slides and asked for comments. The subjects ranged from favorite television programs to a description of what was going on in an old photograph of three young children.
The different perspectives and opinions that people gave in response to these seemingly neutral questions revealed the kind of personal information “that may not be indicated in a typical financial questionnaire,” she explained.
In addition, the data points that enter into each person’s frame of reference can change over time. So any financial plan is really “just a snapshot in time,” she said.
She went on to discuss how financial plans are built around historical data. But those facts are really just assumptions about the future. For instance, she said, expected inflation is a common factor in financial planning. “We use it to project into the future,” she said. “But that might not be how clients think about money.”
If a client is saving to buy a house in five or 10 years, the amount needed for a down payment could change dramatically if inflation estimates are off by even a few percentage points. “A small change in the inflation rate can make a drastic difference to the client in terms of actual money that’s necessary to fulfill the client’s goals,” she said.
One example of a big change that could not have been anticipated is technology. Many things that used to take up a lot of space in our lives and cost a lot of money are now done on our smart phones, she said. “The question is, what is the next 40 years going to bring?” she said.
Financial planning involves a fair measure of guessing, she said. But to take some of the guesswork out of it, she likes to use what she calls a “collaborative advice” approach.
Some 70% of people delay making financial decisions, she said, and half of all Americans have not made a major financial decision in years. “They don’t feel confident, or they say it’s not the right time and they have other things on their mind,” she said. The more advisors can help them along, the better.
Part of the idea behind her collaborative approach is not to lecture clients. There is a difference between listening and really hearing, she stressed. If the advisor talks too much, the client’s mind will wander.
Another problem is the mathematical jargon that’s used in many financial plans, she said. For most clients, it’s a turnoff. They are intimidated by it. And like a lot of students in a math class, they are afraid to speak up when they don’t understand something.
“They don’t want to tell us that they are confused or don’t know the answers,” she said. “They don’t know how to put the numbers to the goals we are asking them about.”
So Wood prefers to use what she calls “the postcard exercise.” She buys a random sample of postcards online and lays them out on the table in front of clients. Each client is asked to pick five cards that depict their goals for retirement. Afterward, she asks them to explain their choices.
Some want to build a dream house in the country, with a view of a lake, big windows, and a nice backyard for the grandkids to play in. This indicates one kind of savings goal, she said. Another client she had picked up a postcard of a high-heeled leopard-print shoe. It turned out that her dream for retirement was to be able to dress up and go out to nice dinners and the theater.
With this knowledge, Wood fashioned a retirement plan that included an income stream so the client could afford the cost of going out, not to mention the necessary apparel. None of these things had come up before in the client’s financial planning.
“There is a lot to be told about what’s outside the picture,” said Wood, and more going on with clients than you might see at first. Getting them to tell you their stories will inevitably prove “much more impactful,” she said, than harping on facts and figures. “Facts and figures will not necessarily connect with your clients,” she said.