Why Helping Your Clients Know Their “Number” is an Old School Approach

Have you ever had a client tell you their number? You know, the net worth number that will make them happy. Or that number they ask you to calculate so they’ll know they’ll be okay?

Focusing on this number is outdated, a mistake and I contend will actually hurt someone’s chances of reaching their long term goals. Here’s why:

You are encouraging your client to focus on the wrong thing. When someone focuses on a future number they aren’t focusing on what they need to do to get there. Unless they are planning for a short term liquidity event, such as selling a business or winning the lottery, having a big number in their head doesn’t do anything to move them toward the goal.

Helping Clients Know Their Number is an Old School ApproachClients may very well use this number to gauge their progress. One of the positive impacts of goals is that they give us a target to move towards. One of the negatives is that when we don’t hit them we feel as if we’ve failed. When we put our attention on missing a goal, our energy is on the failing as opposed to the achieving of the goal.  For example, if your goal is to drive to Denver and you hit a detour and find yourself in Birmingham it doesn’t get you to Denver any more quickly by feeling badly you’re in Alabama. Instead, if you get a map or use your GPS to guide you to your preferred destination you’ll have a much easier time actually getting there.

In his Psychology Today blog Ray Williams surveys various research articles looking at how goal setting doesn’t work. He quotes L.A. King and C.M. Burton in an article entitled, The Hazards of Goal Pursuit, for the American Psychological Association. They argue that goals should be used only in the narrowest of circumstances: “The optimally striving individual ought to endeavor to achieve and approach goals that only slightly implicate the self; that are only moderately important, fairly easy, and moderately abstract; that do not conflict with each other, and that concern the accomplishment of something other than financial gain.”

Williams continues:  “There is an addiction in our culture to ‘getting more,’ the ‘going for the goals’ hype is disconnected from peoples’ authentic selves, and their values….there are psychological manifestations of not achieving goals that may be more damaging that not having any goals at all. The process sets up desires that are removed from everyday reality. Whenever we desire things that we don’t have, we set our brain’s nervous system to produce negative emotions. Second, highly aspirational goals require us to develop new competencies, some of which may be beyond current capabilities. As we develop these competencies, we are likely to experience failures, which then become de-motivational. Thirdly, goal setting sets up an either-or polarity of success. The only true measure can either be 100% attainment or perfection, or 99% and less, which is failure. We can then excessively focus on the missing or incomplete part of our efforts, ignoring the successful parts. Fourthly, goal setting doesn’t take into account random forces of chance. You can’t control all the environmental variables to guarantee 100% success.”

If you’re not buying the “danger of goal setting” argument, then consider that making the “number” the goal is the wrong goal. People think that having a money goal will motivate them to achieve it. Actually, they are focusing on the wrong incentive. People may think they are motivated by money or advisors may think clients are, but really people are motivated by what they money will do for them. The money might help them leave a job they hate, pursue a hobby they enjoy, give to causes they believe in, etc.

Build better relationships with clients and do a better job supporting them in getting to where they want to go.The “number” is a meaningless moving target. I had a client who told me at our first meeting that his number was $5,000,000. When he got to $5 million he said, “Oh, I guess that number doesn’t really make me feel like I’m there. I think it’s really $10 million that would have me feeling okay.” Guess what, $100 million might not make him feel “okay.” The feeling of security or knowing that we’ll be okay isn’t typically related to the number, but rather our beliefs about what “okay” is.

As advisors, many of us create financial plans for our clients, run projections, make assumptions etc. We help our clients create a road map for their financial futures. Anyone who has been in business over the past ten years knows that our projections are just that, projections. The world often changes in ways we can’t anticipate. What we are really doing for our clients by creating a financial plan is to provide them with a plan that satisfies their logical minds and really serves to ease their concerns about the future. When we can calm our clients’ worries we help them to make much better decisions with their money.

There are real benefits from the financial planning process. As advisors we need to expand our views about all the benefits a plan provides. When we move past the left brain logical benefits and expand our focus to the more right brain behavioral benefits we’ll build better relationships with our clients and do a better job supporting them in getting to where they want to go.

As a 21st century advisor make sure you understand your clients well enough to know:

  • What they want their retirement to look and feel like.
  • The most important people in your clients’ lives and how they want to be involved with them in the future.
  • The causes important to your clients and what impact, if any, they would like to have on these causes.
  • How strong their internal barometer is for making adjustments in their financial lives based upon what’s happening in the world.
  • What they really need from you to make solid financial decisions.

Helping clients to tap into their motivation behind their “number” will allow us to be much more effective in helping them get to where they want to go. People are motivated by avoiding pain and moving toward their passions. To succeed as an advisor in the coming years it will be crucial to expand the conversation from just the numbers to instead, focusing on intentions and passions. This is what it will take to truly move people closer to their desired outcomes.

Ellen Rogin, CPA, CFP®
is the co-author of Great with Money: 6 Steps to Lifetime Success and Prosperity. She speaks and consults to the financial services industry on business building strategies and working successfully in the women’s market. To learn more and to sign up for Prosperity Tips visit www.ellenrogin.com.

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