You should be able to understand your financial plan and how it necessarily attaches to and affects your life plan. Since few people have the technical skill to understand nuance, options, and the effects of changing environment. Financial plans must be simple.
And that is the problem. What exactly is simple?
Daniel Ling has something to say about that.
“Complexity is a sign of technical immaturity. Simplicity of use is the real sign of a well designed product whether it is a child’s toy, an ATM or a Patriot missile.”
It is not that the product itself is simple, it is that it is simple to use. Think of an iPhone. Easy to use, but immensely complex if you look past the shell.
In financial planning, ease of use is seldom discussed. It should be a high priority. The client need not know or understand or even be aware of the complexity of products and techniques used to achieve the result. The client must know how “to use” the products. The client must know enough to recognize when changes in the plan’s environment are such that there must be alterations.
There are approaches to this level of simplicity.
A helper, (advisor) can make a conscious effort to make the operation of the plan simple. Many do implicitly. Pay these premiums every month, save this much every month, make your debt payments as they come due, call if anything in your life changes, and we will meet again a year from now to followup.
The only downfall to this is if the annual review does not happen. Without that reliance on the client’s ability to know what changes matter and what changes are easily predicted to occur. There are many of these. I changed banks may seem innocuous, but if your life insurance is tied to your loans because you have become uninsurable since they issued it, there could be a problem. The change in premium from year 10 to year 11 for term insurance is usually exciting. The manager of your retirement investment plan changed and the new one has a different approach. A child has decided to go to law school in Paris. Someone is sick, maybe parents.
People adapt to changed circumstances, but proactive adaptation provides an edge.
The edge is that planning has a bias toward success, not because the tools are necessarily brilliant, but because many of the easily managed or obscure obstacles are eliminated from play. The client will relate to these successfully if they have a better idea about what is happening. They don’t need to know enough to do everything themselves, but they do need to know far more than they normally do know.
Part of client service is the development of client awareness. Newsletters, email, copies of articles or even just something that looks interesting address the need. No advisor has ever been accused of, “I hear from you too much.”
Encourage clients to send you material that is interesting too. It will apply to more than just one.
Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.