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Understanding One’s Values About Money is Critical to Good Financial Planning, Says Journal Article
December 7, 2006 - A person’s values about money strongly influence many of the financial decisions they make. Yet sometimes those values are less than clear. People and their financial planners need to uncover and understand their money values in order to design and implement an effective financial plan, according to an article in the December 2006 issue of the Journal of Financial Planning, published monthly by the Financial Planning Association.
“People’s goals are a reflection of their personal values, and values change very little over time,” writes Roy Diliberto, CFP®, chairman and founder of RTD Financial Advisors in Philadelphia and West Chester, PA, and Bonita Springs, FL. “They are manifestations of personal beliefs and affect the way they use their money.”
Diliberto’s article, “Uncovering and Understanding Your Clients’ History, Values, and Transitions,” is adapted from his newly released book, Financial Planning—The Next Step: Merging Your Clients’ Money with Their Lives, published by FPA Press.
Among the keys to uncovering and understanding a person’s underlying money values, says Diliberto, is to avoid making assumptions, look for disconnects between actions and stated values, and ask the right questions. For example, Diliberto raises the classic question most financial planners and questionnaires ask their clients: When do you plan to retire? But these days, that assumes a goal many people may not have, as the concept of “retirement” is changing. A better question to ask is, “How do you visualize your life in your sixties, seventies, eighties, and later?”
Look for disconnects. Diliberto gives an example where someone might identify philanthropy as a core money value. Yet their estate plan leaves all their money to their children out of obligation rather than according to what their heart says.
The power of asking the right questions can help in the “discovery” process of finding a person’s values. Diliberto writes about a client couple in which the husband said his goal was to buy a second home in Colorado in order to ski more. His wife, who didn’t ski, said she had no goals and whatever her husband wanted was fine. But when Diliberto later asked her about her money upbringing and probed more deeply into her interests, he found that she hated the skiing trips—a surprise to her husband! “We asked her why she had not shared this with her husband before and she replied, ‘No one ever asked before.’”
Diliberto also notes that “One never knows what questions we ask that will result in discovering behavior patterns that may be sabotaging a client’s financial success.” And such questions often help people make their own discoveries about what is important to them.
He also tells about a planner whose client wanted to retire by age 50, but was saving very little from his salary—not an uncommon problem for families. The planner asked questions about his client’s money history. One answer was that as a young man, this client was the only one in the family who managed to save money. When a sister needed money for an attorney to avoid going to jail, the man’s family badgered him into giving all of his savings to pay her legal fees. As the client told the story, it dawned on him that he’d never saved any money after that, so no one in his family could ask for money again. It was only after that self-realization that the man began a regular investment program.
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