I have to admit that I am one of those annoying people who believe everything can relate to financial planning. I am not Sherlock Holmes, trying to see connections and clues in subtle places, listening for dogs that don’t bark. No, the connections between life and financial planning are simply what I see in real time in a variety of contexts. I have spent a lot of time better trying to understand those connections.

I recently read a book by a Harvard-trained M.D. who integrates Buddhism and psychotherapy. Little did I know the impact Advice Not Given by Mark Epstein would have on the work that I, and I am sure many of you, perform.

When he writes about psychotherapy, “Being right is not the point of this profession. ... Being useful is,” I think about those clients who were less enamored of my wisdom than I was, and who ended up instead of listening to me making decisions that harmed them (though some could have conceivably turned out better by ignoring my advice!) When our ego gets in the way of our planning, no one is helped. The ego is self-serving and insatiable, yet it consistently rears its head in our profession. When we want clients to love us, we might be making them dependent on us. That provides short-term benefits but ultimately erodes the clients’ confidence in their own decisions.

It’s more useful for us to guide clients through the uncertainty they will face and help them adjust to it, not assume we can always prevent it. We’re more useful when we make sure the right questions are being answered, not simply the questions we are most comfortable answering. This means we have to ask far more questions to get more information than clients would likely tell us on their own, at least if we are to work through the challenges in front of them.

One of the questions we ask clients when they bring something up is, “Do you want our advice or our support?” Some clients are going to deviate from our models and make choices that are, according to our models, suboptimal. But models are not maps; if the clients ignore the advice, it doesn’t mean things won’t work out for them. If clients are going to do something anyway, we should try to help them through it with the least amount of damage. If they really want our advice, then we can help them talk themselves out of something with the appropriate questions. That way they can reach a conclusion that may help them do something else.

For example, there is almost no good financial reason for most people to belong to a country club. But the decision to join one is not about finances—it’s about the life the clients imagine for themselves and their assessment of the long-term utility of it. They will likely be wrong about those assessments. Almost all of our clients who are club members eventually reach the point where they are staying solely because of sunk costs and the concern about what they could be giving up if they left. We may call it the endowment effect; they may call it “fear of missing out.” Regardless, it is suboptimal.

Are we better off showing the clients why they should quit the club or helping them feel OK about staying? It probably depends on how high the stakes are and how important it is for them to make an “optimal” decision in the first place. Do they want advice or support?

Another way we can help clients is by helping them understand what we know for sure and what we don’t know at all. Epstein writes, “The first day of school and the first day in an assisted-living facility are remarkably similar. Separation and loss touch everyone.”

We know for sure that life will change but we really don’t know at all when or how it will do so. One of our clients nursed his wife for 10 years through Alzheimer’s and often said that he would not allow that to happen to him. Then he started exhibiting the disease and couldn’t admit it to himself. We recently worked with his children to help find him a home in which he could live out his later years in a way similar to his wife’s, but without a spouse to care for him. The children are having to go through a similar loss twice.

We simply don’t know how things are going to turn out. Every client is a sample of one in a set of one. Our real expertise comes in helping clients deal with change and feel the most comfortable they can in their own situations, and also by letting them know that we are walking with them through their indiscernible future. This is difficult. Not only must we understand a variety of wealth management topics, but we must also be honest at those times our expertise is more limited.

One of our clients is extremely anxious about everything. She has more money than she needs, spends less than she could, and thinks extensively and intensively about every decision she makes. She is thinking about moving back to her birth state and entering a continuous care community, and feels as if she needs to make the move soon.

We could help her find a comfortable situation within her means. But the only family she has back home is a cousin. By contrast, she enjoys a large support system of friends and church members in her current state of residence. She’s moving back home because that’s what her mother did when she needed help. We asked her whether her mother’s siblings had been there to assist her when they were close by. She said no. We asked what made her think her cousin would be there for her.

It’s also important to understand the effects that separating from friends has. The client was going to leave a home she loved in a place she loved with people she loved because there was a tape playing in her head that she needed to go home. We instead spent time looking at comfortable places in her current state.

There is no way of knowing whether staying was really a better alternative than moving home. The only thing we knew is that she gave up less by staying put. This discussion is not about identifying a “correct” decision. That implies a precision that doesn’t exist. The issue is what will make her the least anxious about a decision that is highly complicated.

In order to get great at working with key issues, advisors need to become more self-aware. We make decisions based on our own influences. The 4% rule for retirement withdrawal came into play because people were asking how much they could spend to avoid running out of money in retirement. But was that the right question? Instead, what if we asked this: How can we walk clients through the inevitable physical and emotional changes they are going to experience as they age? I think most of us fall back to the 4% rule because it is a more comfortable discussion. What is my spending capacity and what is going to happen to me are both questions that need to be accounted for.

“We can shake free of our unconscious influences if we first admit they are there, if we can find and identify them, over and over again, as they appear in our day-to-day lives,” Epstein writes. As professionals, we must distinguish the aspects of planning that come from our own lives and experiences if we are to help find out what a client is experiencing. I see this in my own life, where a strong desire to be liked has often led me to make choices that were inconsistent with what I wanted for myself. I have given to charities in which I don’t believe, supported family members who may not have benefited from support, and given time to things that were not meaningful. I am better at seeing the influence from this trait and it has helped me engage in difficult conversations, helped me say “no” to people more often, and take better care of myself. But it’s been a long and difficult road to getting there.

What are the things that are getting in your way and how willing are you to look at them?

 

Ross Levin, CFP, is the founder and chief executive officer of Accredited Investors in Edina, Minn. Email Ross at [email protected].