How to manage your Financial Planning Relationship

You’re nodding yes, when you’re thinking no. 

It can be a lousy feeling. Especially when you’re in a discussion about money with your financial planner. For some, it’s an intimidating world.  

In this episode of Sara Makes Sense, host Sara McCullough talks about a healthy financial planning relationship, and how to make sure you’re in one.

 Got a question for Sara? Send her an email at ask@saramakessense.ca and she might respond to it in an upcoming episode

Sara's website is https://www.wddevelopment.ca/ 

Transcript

Sara McCullough (00:01):

Yeah, <laugh>, I'm completely not ready. So let's do this thing. <laugh> 

Sara McCullough (00:09):

This is a relationship like any other relationship. Sometimes you are going to inadvertently hurt my feelings, sometimes I'm going to inadvertently hurt yours. I hope we can both get through those times. Yes, you're listening to Sara Makes Sense, a financial planning podcast. One of my goals is to redefine what financial planning is, what it could be and what it should be. And yes, I have said that relationship like any other line to clients, in specific situations. If financial planning was only about the numbers and it didn't involve emotions, I would have a completely different career. Very few people would be interested in hiring me. There would be a financial planning kiosk next to your bank machine. You would punch in your numbers, it would spit out a report, you would say great, implement it. And everything would be fine. No one’s talking about that. 

Sara McCullough (01:08):

Today, I'm talking about points in the financial planning process that the relationship part both becomes clear and gets rocky. That moment of, oh no, this isn't just about money. The point in the financial planning process where our human self hits the numbers, when our human self thinks we can predict what will happen and then we get surprised. When you as the client are suddenly aware that change is happening or about to happen. This is the point that financial planning matters. When the plan moves from just being a commodity, you can get anywhere to something that's specific to you. I'm Sara McCullough and this is Sara Makes Sense. 

Sara McCullough (01:55):

To talk about this relationship in a way that makes sense. Let's start with a few examples. One of my clients - let's call her Laken - was sure she was doing something wrong or not understanding what I was saying to her because she kept saying no to me in our meetings. To give you a little bit of background, in Laken situation, she's facing some really big decisions about her career. There's a disability that's limiting what she can do in her current career. And there are some areas of her life that just can't be pinned down with the certainty that Laken wants and like the future for her health, her children, her finances, a lot of those things are really fuzzy for her and she needs to make decisions in the next couple of months. And so in our meetings, I've been asking her questions about her past work patterns, the number of hours she's worked, I've proposed a few income levels that would mean she'd have to work a specific number of hours. And that would take out some of the financial uncertainty for her, but it would leave health questions lingering. And so she really was having trouble saying no to me. And finally, in one of our meetings, she said, I'm sorry. I'm, I'm just, I'm not very good at this. And I had to be really clear with her. My role as a financial planner is to give Laken options. And sometimes I'm gonna pick the options that are kind of right on the outer limits of what she's told me. 

Sara McCullough (03:36):

That's my role. Her role is to review what I've said, ask me questions about the options so that she's sure she understands them, and then weed out the ones that don't work. She's only going to pick one. And so when we think of it that way by definition, she's gonna say no to all the other ones. She is going to say no to me more than she says yes. And that means it's working. And so if we think about that expression, if there's more than one way to skin a cat, then surely there is more than one way to do your plan with the numbers that you have. So I'm gonna propose options because when we're the client, we don't know all the ways to get from point A to point B. I'm gonna show them to you and you're gonna screen them out and ultimately you're only gonna choose one. 

Sara McCullough (04:38):

So, in this situation, Laken should say no to me more often than she says yes and that's by design. I want to make sure that my clients understand what they are choosing as well as what they're not choosing. In my experience, many large financial mistakes are caused because we second guess what we should have done in the past and we try to remake the decision in the future. That's a mistake. That's costly. So when I work with clients, I don't want to be in that traditional expert role where those who are not experts should stay mostly silent and agree often. I want you to say no to the options that don't make sense because that's going to do two things at the same time. It's going to get you making decisions and move you towards the life that you want and it's going to screen out the chances of you making costly mistakes later, because you're trying to do it in hindsight and you weren't clear on what you were saying no to. 

Sara McCullough (05:53):

My next example is one of my other families we'll call them Ned and Clara. They had one request after they saw their initial plan. Ned wanted to retire 10 years earlier than what we had initially talked about. Now, Ned and Clara's initial plan showed a significant financial surplus. So in their initial plan, they could keep their current house, they were gonna add a pool, they were gonna renovate the interior, they were gonna do some traveling and maybe buy, you know, a little piece of land up north somewhere in their retirement and they loved that. And then Ned said, well, well, hang on. I, I just wanna make one change, I'd like to retire 10 years earlier, can you show me what that looks like? So when we met again and we reviewed the new scenario, the outcome was significantly different. They needed to limit their spending or sell their current home or both. And those renovations, not so easy all of a sudden, and Ned was really upset in that meeting. He said, we just made one change and now you're telling us everything is different. You told us we were fine last time. Right. 

Sara McCullough (07:15):

Because actually that one change of wanting to retire 10 years earlier is really three changes when it comes to the money, right? And those three changes kind of snowballed into each other. So Ned retiring early is shortening the income into the family. It's shortening the income into their portfolio. It shortened the time that the portfolio had to grow and it increased the length of time that the portfolio needs to support their income. So that's big, but as the client, we thought it was just one change and when I came back and, and showed them a completely different graph and, and completely different options, that was hard. They weren't expecting that. They kind of heard me say, you're good, everything's great, good job saving. And then that one more thing felt like it completely changed it. And the default was, how could you do that, Sara? How could you, which time were you lying to us the first time or this time? Because they can't both be true. And it took a little bit, um, of conversation for them to understand why the one change was not just the one change and it was a big deal. And so more on Ned and Clara in a few minutes. 

Sara McCullough (09:00):

One of my other clients, we’ll call him Colin. Several months ago, he hired me because he was worried about running out of money. He also wanted to renovate his house and travel, but he really didn't think he had enough money to retire and be stable, except that he was retired because he got laid off. And so that was that. So his initial projection did show a significant surplus. And I, I guess thought Colin would be excited about that because he said that was his biggest worry was running out of money. And I had done the projections, a couple of different ways. I started with the numbers that he gave me and as I was working behind the scenes in my office, you know, I added in a few other dollars just to see what would happen just to, you know, push the limits a little bit and see if there was a chance he would run out of money. What would it look like? What would it take to run him out of money? Um, and so he really, from everything I can see is, is pretty stable and not really likely to run out of money. And I thought he'd be excited. And at the end of the meeting, he was not excited. He was kind of aggravated and he said, I don't believe you. 

Sara McCullough (10:31):

And so we've had several meetings since, and, and he really, you know, he's the type of person that likes very clear information. He likes spreadsheets, he likes being able to see the, the flow of, of one number from one year to the next. Um, and so he, but he really started picking the plan apart. And he was the one that told me he wanted to renovate the house. And then he really didn't like the cost of the renovations, which is the cost he gave me. And, and so we went on like this for a couple of meetings and I, I tried, I, I gave the information in different formats, we talked about it. Um, I, you know, I changed around as much as I could. Um, and in our third meeting at the end of two hours, he said, Sara, I think when I'm pulling apart this plan, it might not have to do with the money. I think I'm having trouble with the idea of renovating because it's too close to my wife passing away. I think it's grief. 

Sara McCullough (11:45):

And I said, I agree. I don't think this has anything to do with the money. And that's okay. It's still an important part of your plan. We need to know this. So the idea that planning should be efficient, clean, easy - it's garbage in my opinion. No one's life is going to change. If the planning discussion, doesn't get to the heart of what you want to do with your money. The heart of why you're trying to earn, save, grow, gift. It's not for the sake of the money itself. It's for the sake of what the money can do for you and your family. For those you care about, those you want to connect with, the changes you want to make in society that go beyond the dollars and cents beyond the numbers on a screen. 

Sara McCullough (12:44):

So an update on Ned and Clara, that second example that I talked about, where he wanted to retire early. And the part that I didn't say earlier was he wanted to retire early because she was wanting out of her business ASAP. Our first conversation, she said, I think I'd like to be out in three years. By the time we had our second meeting, she said, get me out now, I can't do this anymore. And so Clara called me earlier this week, asking some questions about selling her business in a hurry. So that part wasn't a surprise. What was a bit of a surprise for me? I could hear the excitement in her voice. And she said to me, since we've been working with you, we've had so many great conversations with each other, and it's become clear that it's important for us to move 400 kilometers to be closer to family. So we're going to do it. 

Sara McCullough (13:44):

And she paused and she said, oh, and we're not putting windows in the house and we're not putting the pool in the backyard. <laugh>, that's what I want for my clients. I want them to use their money to support how they want to spend their time, how they want to use their skills, talents, all of those things that make you important to other people. If they did $200,000 in renovations on their current home, like we were talking about at the beginning, they're still 400 kilometers away from their family. Sure, the house would be nice, but would they value it? No. 

Sara McCullough (14:30):

I had another phone call this morning with the parents and the adult daughter of one of my other families. And so the three of them are making decisions both together and separately that have high stakes for everyone. And once they start reorganizing the family business and they get through a divorce and a marriage, one of each in each generation, there's no way to start all over. So, the family hired me when plan A wasn't clear to them with the advisors that they had. And so all of us talked about plan B, in a meeting with all of the other advisors and everybody agreed, but that was three weeks ago. And so last week, the first two advisors sent paperwork to the parents for signatures that was based on plan A. What? So then we did another meeting and the family still wasn't clear. I'm not sure I was very clear. 

Sara McCullough (15:41):

And so I did a phone call with just the parents and the daughter this morning. And it turns out that there's some features about plan A that two out of the three of them like better. And the third one is willing to accommodate plan A and to be clear, there's risks to plan A and plan B. But if plan A is the one that everyone can get behind, then that's where I'm going to start focusing my questions and my planning and my information gathering, because I don't live with the outcome of this decision. They do. So when they've got the information to make the decisions, see the risks, and arrange things to avoid or buffer those risks, hurray for that. Because otherwise, if they can't see, avoid, buffer, risks, in my experience, you appreciate knowing even when the outcome may not be what you wanted. So I've had clients who've had hard experiences, things that happened that nobody wanted, maybe we didn't plan for them, maybe they happened before I met them. 

Sara McCullough (16:52):

But for the clients that I've been there through the hard things, and we've had to adjust the plan, those clients have said to me, you know, it was a little bit easier because we talked about this possibility. I didn't want it to happen, but I did have an idea of what the fallout would be, and that helped. I want you to take two ideas away from listening today. The first one is, you can change your life by doing a financial plan. Not the financial plan in air quotes that get slapped out when you're in the process of purchasing an investment product or any other product. Not the financial plan that gets presented when the advisor isn't willing to talk about anything beyond the numbers and beyond what the advisor sees as possible. I've seen clients do seemingly impossible things because there's the numbers. And there's what you're willing to do to get the life you want. A well done financial plan that includes all aspects of your life that are important to you. That gives you clear choices, can and will change your life. The second idea I want you to take away from listening today. There's no way to change without friction. Changing lanes when you're driving causes increased friction between your tires and the road. If you can't change lanes while driving without friction, there is no way you can change your life without friction. But it's temporary. 

Sara McCullough (18:28):

So changing your relationship to money, understanding what's happening now and what you want to happen in the future with your money and making changes in how, where, why you're living and working will cause friction. As the planner, I'm sometimes the one who sparks that friction. We're pulling ideas and goals out of your head and into possibility and into reality differently than you had previously. 

Sara McCullough (18:59):

And that's where change happens. In the friction. And as the advisor, some days, I'm the one who missed what you said or heard you incorrectly. And I want you to correct me. I want to know when something isn't sitting right with you or the graphs aren't making sense, or when the option that I gave you just isn't right, even though it looks like it should be to me. Because this is about you. I'm not the expert in you. I'm the expert in a few things that will help you make decisions and get the outcome that you want. 

Sara McCullough (19:36):

You are at the center of that financial plan that's not a theoretical mathematical exercise with no practical application to your life. At least it shouldn't be. In life, we all have pieces scattered here and there. And when you start bringing these together and start really looking at making changes, it will get rocky. And that's also when it gets real and effective and fun. From time to time, we need someone who can cut through the noise. Someone who not only gets to know you as a person, but can also really show and make sense of your financial plan, not just the numbers, but truly what the numbers mean for you. This relationship, this plan, it belongs to you, not your planner. I'm Sara McCullough. Thank you for listening to Sara Makes Sense. 

Disclaimer (20:27):

The information in this podcast is intended for general information and illustrative purposes. For advice relevant to your specific situation, meet with a qualified financial planner, lawyer, or accountant before making any changes to your situation. Sara's designations and licensing include Certified Financial Planner, Registered Financial Planner, Certified Divorce Financial Analyst, and holding an insurance license.