The New Financial Planning Process That Empowers Clients, Saves Time

A trend toward collaborative financial planning, facilitated by sharing planning software onscreen via Zoom, is empowering clients and speeding up plan creation for advisors.

“Doctors who have the best relationships with patients and better outcomes have collaborative discussions with them. I think we’re moving toward a similar approach in financial planning,” argues Meghaan Lurtz, a finance professor at Kansas State University and senior research associate with Kitces.com, in an interview with ThinkAdvisor.

Traditionally, “there was a lot of ‘Wizard of Oz,’ with the advisors going behind the curtain, doing the plan and then coming back out,” she says.

But “with collaborative, interactive planning, it’s, ‘Let’s [together] find the [strategies] that are best for you.’ That helps clients in a deeper way,” maintains Lurtz, who lectures on financial psychology at Columbia University and is an adjunct professor in the University of Maryland’s program for Certified Financial Planner Board of Standards certification.

At Kitces.com, she’s part of the research team that creates and runs surveys probing how advisors conduct financial planning, how they market and the ways they use technology, among other areas.

A “Wellness Study,” for example, revealed the “shocking” finding, says Lurtz, that “pay was not a way in which advisors, particularly females, were being discriminated against.”

In the interview, Lurtz, a contributing writer to the new book, “The Psychology of Financial Planning,” developed by the CFP Board of Standards’ advisory board and ThinkAdvisor’s parent company, ALM (National Underwriter/ALM, April 2022), stresses that advisors need empathy “to be on the same side as the client” to understand their goals and values.

“If you can’t understand what’s really making your client tick, it will just make your job harder,” she says.

The interview also covers clients who might benefit from financial therapy (Lurtz is a past president of the Financial Therapy Association) and when money is used to manipulate, among other issues.

Her research has appeared in the Journal of Financial Planning, The Wall Street Journal and other prominent media.

ThinkAdvisor recently held a phone interview with Lurtz, who was speaking from Monterey, California.

She points out that multi-generational clients who establish a family money motto “get everybody swimming in the same direction and feeling empowered and connected.”

Here are highlights of our conversation:

THINKADVISOR: How has financial planning changed in the past few years?

MEGHAAN LURTZ: More advisors are doing collaborative planning rather than using the financial plan as a thing they sell in and of itself.

Instead of, “I’ll do the financial plan with my planning software, and then I’ll deliver it to you,” they’re putting the software up on a computer screen and going through the numbers with the client over Zoom.

From that, there’s a simple one-page financial plan that gets delivered.

What are the benefits of collaborative financial plans to the advisor and to the client?

It can make the final planning process faster because the clients are there to give feedback right away, talk things through and update them in real time.

It speaks a lot to the idea of collaborative leadership versus “I’m the leader, and this is what we’re doing.”

We know from health care that doctors who have the best relationships with patients and better outcomes have collaborative discussions with them.

I think we’re moving toward a similar approach in financial planning. It’s a huge deal for people to feel empowered about their money.

Describe, please, the traditional scenario for doing a financial plan.

There was a lot of “Wizard of Oz,” with the advisor going behind the curtain, doing the plan and then coming back out.

I think financial planners wanted the ideal client to be a delegator: “Just tell me what you need done. I’ll do it and then let you know what the answer is.”

The idea was for the client to delegate to the advisor and then listen to their advice. Now, with collaborative, interactive planning, it’s “Let’s [together] find the [strategies] that are best for you.” That helps clients in a deeper way.

There seems to be more financial therapy being conducted these days. Why is it needed?

People have a lot of “stuff” when it comes to their finances. At one end of the spectrum, psychologists or therapists diagnose [and treat] gambling disorders.

At the other end, we have financial planners who might discover that a client potentially has a gambling disorder.

It’s not the advisor’s job to cure a disorder, though they may be the first person to discover that’s going on.

There’s a space in the middle of the spectrum, where there’s a financial issue.

Let’s say a client grew up in a household where there was a gambling issue. When their parent won, there were lavish gifts; when they didn’t win, it was really scary.

As an adult, trying to make healthy financial choices, they have memories and beliefs that came from when they were a kid. The emotions attached to those are deep-seated.

What should the advisor do about that?

It’s the financial planner’s job to be open to this — not that they need to fully explore or work on it. But it’s helpful to know in the decision-making process.

What does a Certified Financial Therapist’s work involve?

There are clients who want to unpack how growing up in an unstable household has impacted their finances. They can do that emotional work with a financial therapist.

The Financial Therapy Association provides the Certified Financial Therapist designation [Certified Financial Therapist-ITM].

You’ve held client interventions not only to fix something that’s broken but so-called “good” interventions too. Tell me about the latter.

This is where we talk about what’s good and try to turn it into something that’s great. For instance, I’ve been a part of multi-generational meetings working together to develop a financial motto for the family.

People go through their different money stories about how they think and feel about money and then collectively find a theme and designate a motto for the family.