Martin Mulcare says you need to show you understand.The concept of “values-based advice” is not uncommon, but I wonder about the depth of commitment to it. When I have asked advisers about the benefits of a values conversation the focus of their response is often along the lines of either “differentiation” of their approach or “warming up” the prospect. I would like to question whether the values conversation is just a gimmick or whether it really adds to the quality of the financial advice. Now let me confess that I am not adopting an objective stance here. I am fully convinced that, applied confidently and competently, a values-based approach not only builds trust from the first meeting but provides an excellent foundation for advice. CASE STUDY 1 Greg and Jane (not their real names) are in their early 50s. They own a fishing boat and it is evident that they not only enjoy their pastime but they have a specific goal of upgrading their boat one day. A traditional financial planner would no doubt be able to identify this goal and include it in his/her financial plan.
However, a few years down the track the planner may well seek to “de-prioritise” this goal in favour of more “sensible” strategies. Our client, however, explored the couple’s interest in fishing to a greater depth. When Greg and Jane, with some prodding, began to share their passion for their hobby, our client was diligent in recording their key phrases. It became clear that it was more than just a hobby! This was their “sanity” after a tough week at work and their way of treating their friends to a great day out. They shared the “adrenalin rush” of wrestling with a marlin on the end of a line – and our client refrained from making any value judgments. So when the engagement letter not only noted the goal of upgrading the boat but also quoted some of their associated experiences, Greg and Jane were delighted that our client really understood them. And in a few years’ time, they will be confident that our client will continue to respect their goal, knowing what is really driving it.
CASE STUDY 2 Kerry (not her real name) is a widow with children from her marriage to Ken, as well as from an earlier marriage. She is keen to ensure that children from both marriages are well looked after in the event of her death. She is also keen to ensure that Ken’s legacy is enjoyed by his children and a family trust has already been established with this in mind. A traditional financial planner would no doubt identify the importance of estate planning and the difficulties of managing the expectations of Kerry’s two families. However, our client explored Kerry’s fundamental drivers in the context of her legacy and the relationship with her two sets of children. Our client conducted a serious and at times emotional interview with Kerry.
He came to understand the importance of honouring Ken’s financial discipline. More significantly, he discovered that Kerry’s relationship with Ken’s eldest son was very tense as a result of the management of the family trust. Mending this relationship was an important priority for Kerry. So when the engagement letter not only recommended a review of her estate planning but also included quotes about her true motivations, Kerry was in tears. She was impressed that, for the first time, someone really understood her wishes and she was confident that her wishes would be respected. The values conversation is not “special” in identifying goals or concerns. However, it is special in demonstrating your understanding of your clients in your engagement letter. It is also special in ensuring that the underlying drivers are recognised and respected.
