Great financial planning is all about helping clients to make the best possible choices, and having formulated a plan, to stick to it. And it’s the job of PortfolioConstruction Forum’s inaugural chief finology officer, David Lazenby, to help financial planners deliver great advice.
Lazenby is in Sydney this week headlining the Finology Summit, a spin-off of Graham Rich’s PortfolioConstruction Forum Conference. The summit arose from a single-day workshop held in conjunction with the conference in 2014, and it has emerged now in its own right as a kind of conduit between some of the high-level economic, market and political issues that are integral to the conference, and the practical, day-to-day work of financial planners. It’s sometimes described as “where investing meets investors”.
The role of the chief finology officer is to “take what science knows about advice, and organise it in a way that it becomes useful for advisers to use”, Lazenby says.
Psychology and psychotherapy
It sounds simple. But Lazenby says some of the principles he is working on and introducing financial planners to draw on the fields of psychology and psychotherapy, and he will be outlining these during the summit.
“Some of the newer research they have in psychotherapy is that for so long we really focused on the method that a psychologist would use,” he says.
“Were they behavioural, were they cognitive – what method do they use? That, to me, is like, is someone passive, is someone active – different investment philosophies.
“What they found out is that [method] accounted for only about 10 per cent of the variance of whether the outcome in therapy was successful. And they started introducing what’s called ‘feedback loops’. At the end of a session I might ask you three questions, that might say, ‘Did you feel like we worked on the right things today?’ or, ‘On a scale from one to five, did you feel like you were listened to well?’ And there are three or four markers that give you a greater predictability of outcome if you use them and talk about that.
“We’re bringing the same things into the planning process.”
Lazenby says it’s an approach he uses in his own office.
“At the end of a meeting I say, ‘On a scale from one to five, do you feel like we talked about the right things today?’,” he says.
“And it’s not the answer that’s important, it’s the feedback loop that then starts to drive the relationship. I don’t question whether [the client] is right or wrong that we worked on the right things; I just use that when we’re planning for the next meeting.”
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Better decisions, stick to the plan
Lazenby says the approach is designed to help the client make better decisions, and then be committed to those decisions, with a greater likelihood to stick with them.
“That feedback loop really forces a conversation about whether you got out of today what you wanted to get out of today. So often it’s driven by what the adviser thinks the client needs to know or understand, which is [only] part of it.
“But if you came to me as a parent and you came to me with some challenges with your child, and I kept drilling down into stuff that you didn’t think was valuable, the things that happen in therapy is that people either leave really quick, or they stay too long and get nothing out of it. That can happen in the advice world also.
“I have to do things intentionally to tell you that this relationship is important. When you look at advice relationships you find that those advisers and clients that have stronger relationships have better returns in their portfolios. Why is that?
“It tends to be because people are more willing to stick to a strategy because they either believe in the adviser or have trust in the adviser, and confidence in them. If there’s a higher quality of relationship, independent of the market, their portfolios are better.”
