WEALTHTECH INSIDER: Plan One Doesn’t Exist Anymore. Time for a New Conversation?

Plan One Doesn’t Exist Anymore. Time for a New Conversation?


By Eric Clarke

Dear Reader,

Last week, I kicked off this new column to discuss what ideas actually work in the independent advisor space.

Today, we address the pillar perhaps most disrupted by the COVID-19 paradigm shift: Planning.

Right now, with uncertainty swirling and shares of “work from home” stocks surging, advisors might be tempted to hurry new clients into talking about investment portfolios and risk tolerances.

During the depths of the 33% downturn for the S&P in March, we heard many advisors ask the same question: “Well, how do you plan for a pandemic?”

But let’s take a quick step back. Clients are rapidly making personal lifestyle decisions that can have a significant impact on their long-term financial goals beyond market volatility.

The critical question today is “How would you help your clients adapt to the next unforeseen event?”

Investors have plenty of anxiety right now given the coming election, lofty equity valuations, potential changes to tax laws (again), low-interest rates for income generation, and a possible second wave of COVID-19. 

This is all happening during a massive shift in their personal and professional lives, one that could change the timeline for their retirement and expectations for the future. 

We and the planning technology we use have to account for these major, behavioral shifts. In my experience, advisors succeed when they combine their planning with a strong behavioral finance component to guide investors to better outcomes. Advisors need insight into the emotions, hopes, and anxieties at the roots of their planning goals. And then they need technology to drive home exactly what a client’s behavior means for their goals.    

If someone wants to retire early, buy an RV and tour the country with their family, a behavior-based approach to planning can help that person see whether their desires are frivolous, or connected to deeply-held values. If your client wants to sell their home and move to Barbados to work remotely, you should be able to visualize the full financial impact of their decision.

This is how behavioral finance transforms financial planning into a meaningful experience for investors. When you can show your clients that you understand the “why” behind their worst impulses and their loftiest goals, you add valuable context to their financial plans. Suddenly, your advice feels more personal and financial planning becomes a collaborative conversation that connects naturally to every other part of the advisor-client process.

If you’re looking for practical applications of behavioral finance, Dr. Daniel Crosby shares a wealth of ideas and insights on his podcast, Standard Deviations. He covers a variety of subjects, but every episode demonstrates how Daniel thinks about the ways in which people, their money goals, and their emotions intersect (or collide) with one another. 

Successfully providing financial advice comes down to understanding investor motivations.  People ultimately just want to be understood. If you can’t master this, it doesn’t matter what kind of planning software you use or what bells and whistles come along with it.  

Eric Clarke  

Eric Clarke is founder and was CEO of Orion. Connect with him on LinkedIn or follow him on twitter at@EricRClarke.