Albert Einstein once said, “If I was given one hour to save the planet, I would spend the first 55 minutes defining the problem and 5 minutes solving it.”
Although there is some debate on whether Einstein is truly the source of this quote, it illustrates an important point: before jumping right into solving a problem, you should take a step back and invest your time and effort into understanding it first.
From what I have observed over the years, many financial advisors do the opposite when meeting with clients; they focus the majority of their effort analyzing the solution to a problem, rather than defining the problem they are looking to solve. We have all been guilty of this at some point, even myself.
This is particularly evident in the comparison of financial planning software and product recommendations. Financial planning software is typically used to model a client’s current situation and the effect of an advisor’s recommendations. The current situation and recommendations are often then combined into the same report and delivered at the same time.
In theory this approach is fine, but in practice it begins to complicate the situation. The definition of the problem and the proposed solution are blended together, leaving it up to the client to decipher where one ends and the other begins. This confusion can ultimately leave a client with an inability to choose or a lack of confidence in the choices they have made.
When the Client Understands the Problem, the Solution is Easy
When advisors take the time to fully define the client’s situation before incorporating recommendations, two things happen:
- The client has an opportunity to revisit their goals and make adjustments so they can commit to doing what is required.
- The advisor can make recommendations that are aligned with the client’s values, knowing that they have the desire and resources to follow-through and do what is needed to solve the problem.
The Razor was developed with this in mind. The Razor allows you to analyze your client’s situation and focus their attention on the 4 Primary Planning Options TM; lifestyle, retirement age, rate of return, and liquid assets. From here, the advisor is better able to analyze a client’s situation in relation to what is realistic, refine their goals, and focus on what is truly important. This provides the client with an understanding of the options available and the changes they may need to make to achieve their goals.
Advice vs. Selling
Financial planning involves creating strategies to help better manage the financial resources a person has so that they can achieve their goals. It’s in the advisor’s best interest to help clients set realistic and attainable goals to which they can commit, and to provide the confidence needed to achieve those goals.
Advice is acted upon when a client understands their situation and is committed to the goals they have set. Advice based on anything less will need to be sold.
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