Kitces & Carl Ep 75: Crafting A Statement of Financial Purpose To Find The Client’s Financial Why

Kitces & Carl Ep 75: Crafting A Statement of Financial Purpose To Find The Client’s Financial Why

When it comes to retaining clients, financial advisors benefit from focusing on gaining both the client’s confidence and trust. Because while a client may be confident that an advisor can develop a workable financial plan, they will not feel compelled to stay with the advisor unless they can also trust that their advisor has their best interests at heart throughout the process. And even though it is important to have a well laid-out financial plan, it is equally (if not more!) important for advisors to understand the client’s underlying motivation to ensure the plan is relevant and to help clients stay on track with their financial goals. To this end, a statement of financial purpose helps the advisor to create a meaningful plan for the client, and also helps the client stay focused on taking action on the plan and staying the course.

In our 75th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the difference between a “statement of financial purpose” and a “mission statement,” the psychology behind why a statement of financial purpose helps to instill clients with confidence and trust in their advisors, and the importance of crafting statements of financial purpose by first helping the client understand their own “financial why.”

As a starting point, it is important for advisors to begin the financial planning process by understanding the deeper reasons that explain why their clients are seeking advice in the first place. By encouraging clients to take time to carefully reflect on what it would mean for them to achieve their financial goals, financial advisors can discover insight into the client’s motivation to help them craft a relevant and meaningful statement of purpose (written in the client’s own words) that crystallizes why the financial plan is meaningful and important to the client.

Merely creating the statement of financial purpose isn’t enough, though, as clients need to review, reflect upon, and update it periodically, using it as a guide to steer the financial plan, keeping it on track. Advisors and clients can use the statement of purpose as a reminder that all the financial work being done is indeed serving a greater purpose. Additionally, a statement of financial purpose creates an opportunity for advisors to gain trust with clients, by reassuring them that what matters most to them is of paramount importance, and that following their plan (and sticking to it even through the most turbulent times) will help them attain their financial goals.

Ultimately, the key point is that a statement of financial purpose is a living document that helps clients stay focused on their most important goals and encourages them to stick to their plan. At the same time, it also helps to foster greater client trust and confidence in their advisors, facilitating stronger and more open communication channels, which presents advisors with the added bonus of better and deeper connections with their clients!

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