Financial Life Planning: Personal Finance Is More Personal Than It Is Finance 

Financial Life Planning: Personal Finance Is More Personal Than It Is Finance 

Elena Zistakis, Senior Software Marketing Manager, Morningstar

Morningstar’s Christine Benz, Director of Personal Finance, and Jeff Ptak, Head of Manager Research, interviewed Tim Mauer, the Director of Advisor Development for Buckingham Wealth Partners, for Morningstar podcast, The Long View. Mauer co-authored The Ultimate Financial Plan: Balancing Your Money and Your Life with Jim Stovall, and he also wrote Simple Money: A No-Nonsense Guide to Personal Finance. He’s a member of the CNBC Financial Advisor Council and is also a regular contributor to CNBC, Forbes, and Time/Money.

Mauer believes in financial life planning, which he describes as an approach to financial planning that begins with a qualitative exploration to understand what’s important to and motivates a client. Access to deeper client insight makes it possible for a financial planner to align financial tools and resources to a client’s life objectives.

Tim finds that personal finance is much more personal than it is finance, especially when you can help uncover a clients’ life goals. Many clients know what they have to do, but don’t always follow through with it, especially when it’s not connected to a greater goal. Mauer believes that behavioral economics and behavioral science can play a leading role in overcoming this challenge.

Steve Wendel, Head of Behavioral Science for Morningstar, asked his team to conduct a study to understand what investors value most when selecting a financial advisor. Similarly, they asked advisors: What do you think investors value most when working with a financial advisor? One key finding from this research is that investors and advisors aren’t necessarily on the same page. Morningstar’s proposed solution to this problem mirror’s Mauer’s approach and states that to avoid misalignment, it’s best to not only discuss how to meet client goals but to understand what they find important.

Tim has found that the 2020 pandemic has helped many tune in to what matters most in life and that financial life planning is a powerful avenue for people to explore big life questions and decisions. While financial advisors are not therapists, he thinks that they are well equipped to navigate these deeper discussions with clients, particularly if they have the Certified Financial Planner (CFP) designation, years of practice, and a high degree of empathy. This combination along with a healthy dose of behavioral science, can make it possible for a financial advisor to successfully guide clients into doing what’s truly in their best interest. He states, “we lead clients down a road of self-discovery. And then, when they determine, when they find clarity, they are going to be more inclined to follow the recommendations that they give themselves than the recommendations that we render as advisors.”

To begin to orient to a financial life planning approach, Mauer recommends that financial advisors can start by asking big, broad questions about what’s most important to their clients across different areas of life, health, career, wellness, etc. At Morningstar, we understand that while financial goals are central to financial planning, identifying these goals can be a challenge. Our behavioral science team built an exercise you can use with clients to help them identify their top financial goals and uncover goals they may have overlooked.

Much of the research Morningstar’s behavioral science team conducts helps to inform the development of our advisor solutions, including our goals-based financial planning platforms, SuitabilityPro platform for Canadian advisors and Morningstar Goal Bridge, built for advisors to help clients prioritize goals and build investment plans to achieve them. There’s never been a better time to deliver great advice and advisors have never been better equipped to make a positive impact on their clients’ financial life goals.

To listen to this episode or read the full transcript, you can access and subscribe to The Long View on iTunes, Google Play, Spotify, or wherever you get your podcasts.

I have been using FinaMetrica for over 17 years for onboarding new clients. They like the extensive value of the reports; but what we appreciate is the innovations in technology, the value of the client-facing materials and the development of the life-long client relationships as I get to really know their behavioral tendencies. FinaMetrica has assisted me in building a very successful practice and we highly recommend it for any advisor who wants to enhance the overall value of their client relationships.

Ron Wilkinson - Portland, Oregon, USA
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