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Australia World Leading Pioneers in Lifestyle Planning
- Australia leads US in lifestyle planning thinking says US analyst
- Trend towards lifestyle planning as key role for advisers
- Industry seeking a proven lifestyle planning process to integrate as the core
in the traditional financial planning process
At a recent industry conference for independent financial planning groups,
the hottest issue of debate and interest wasn't investment performance, education
standards, or even regulatory changes, but lifestyle planning.
In a competitive market for advice, financial planners are increasingly concerned
about how they provide better service and added value to clients. For many investment
professionals this means understanding a client's needs and issues more deeply
then traditional financial advice processes currently allow.
Lifestyle planning is fast emerging as the next generation of professional
development for financial advisers. Yet, less than 2% of planners have a systematic
and rigorous process in place to determine a client's future lifestyle expectations
and desires.
"We've been doing financial planning from our point of view, not from
the client's true perspective," according to Ian Hutchinson, Lifestyle Strategist
who founded Life by Design, a lifestyle strategy & planning group which works
with financial services firms to help advisers and their clients understand their
desired lifestyles.
"Clients don't want financial planning they want what it can give them,"
he says.
"Traditionally financial planning has focused on building the wealth of
clients yet most clients don't know what they want to do with that wealth. This
means they never focus on a clear and tangible goal. Lifestyle planning is designed
to help advisers help their clients to build a very clear picture of their aspirations
and why they should invest," says Hutchinson.
Clarity, motivation and discipline are key factors to successfully making the
financial journey necessary to build wealth leading into retirement. For many
clients, financial planning is a necessary evil. At best, they engage in their
financial journey at a once a year annual review with the financial adviser, who
simply reads numbers from a spreadsheet.
"There is a huge missing link in the emotional chain to help clients engage
in their investments," says Ian Hutchinson. "It can be done a lot better
and the responsibility lies with advisers to focus their clients on why they are
investing, not just how."
While lifestyle planning as a financial tool is in its infancy, Australia is
actually ahead of the United States according to respected American financial
journalist and industry analyst, Bob Veres, who spoke at the Independent Financial
Planning conference in Sydney recently
Veres believes that life planning, as its called in the US, will become the
dominant strategic driver of financial planning firms' growth in the future. He
says it is more than common sense or simple risk profiling, it is about personal
change for clients, focusing on what's really important. Veres believes that financial
planners need to go through a lifestyle planning process themselves before offering
the service to their clients.
"I don't think you can make personal progress in life planning by yourself.
You need to have some outside person to help you work through it. It is difficult
for us to put our own agenda first. Too many other agendas get in the way. With
life planning someone else takes on your agenda and makes you focus on it."
Lifestyle planning is about making the most of your wealth and ensuring that
your financial plan leaves you with no regrets in life. One financial planner
commented about a widow who said that if she knew she would have this much money
at 85 she would have taken more trips with her husband. "I have failed my
clients if they die with too much money".
The search for a new role for financial advisers
The advice industry is being systematised and much of the hands-on work of
advice is being eroded. With the trend towards model portfolios and technology
platforms like wrap accounts and individually-managed accounts, financial advisers
are being left searching for a new role. Much of the generalist adviser's expertise
is now a commodity and delivered to clients through a systematic process at a
lower cost.
For instance, financial advisers no longer decide on asset allocation or selection
of fund managers. They may develop tax strategies and structures for wealth creation
but these are increasingly seen as a specialist role, with expert solutions outsourced
to dealer groups or independent technical groups like Dr Tony Rumble's Savings
Factory.
What is left is the client relationship. Financial advisers are now asking
the fundamental question (and clients will soon too) - What is my true value to
clients? What is my role?
The answer lies somewhere between financial coach, mentor, lifestyle project
manager and cash flow controller. This is the new world of the adviser-as-lifestyle
strategist, according to psychology trained Hutchinson, who educates financial
advisers on the subject.
"People need help to focus on their true lifestyle goals and to develop
the positive behaviour to make very step towards those aspirations," says
Hutchinson.
"That's going to be the most important role a financial planner can play
with their clients in the future. They will need to give up their preoccupation
with technical wizardry and mistaken beliefs that they can pick markets and select
fund managers better than anyone else.
Industry figure, David Williams, who established Australia's first and most
successful financial planning chain, Retireinvest, says the industry is still
too obsessed with technical aspects of planning.
"Clients want understanding and the technical competencies are necessary
but not sufficient to justify the relationship."
Talk to a financial planner today and most are excited by the prospect of tapping
into the psyche and lifestyle aspirations of their clients. "Everyone loves
this stuff" says Hutchinson.
"But, when you ask them how to implement a lifestyle process, they become
ambiguous." The industry has not developed a solution to the need for integrating
a rigorous and simple process with the traditional risk-focused financial planning
process.
Ian Hutchinson hopes to change that in the very near future.
Hutchinson's lifestyle group, Life by Design has developed a proven
lifestyle planning process to help clients clarify their goals and expectations
before they enter a financial planner's office for the first meeting.
The Lifestyle-Driven
Financial Planner is a toolkit and change process which creates a new dialogue
between advisers and their clients. It covers a range of lifestyle issues, such
as lifestyle priorities, value-based living tools, cash flow management and how
to overcome obstacles to achieving your desired lifestyle. The learning program
is currently being piloted by a number of large financial planning groups in Australia.
Based on feedback from recent conferences, Ian Hutchinson has already had interest
from North America and intends to take the concept to the United States, where
lifestyle planning is embryonic.
Hutchinson believes that many financial planners will struggle with the challenge
to redefine their value and role based on a client lifestyle model and some will
simply not make the transition. But for those who do see the future, the ability
to influence a client's lifestyle outcomes is an exciting and rewarding prospect.
Ian Hutchinson (G.Dip.Psy, B.Bus, APS), Founder of Life by
Design®, has built a reputation as Australia's
leading lifestyle strategist. He has studied overseas with some of the world's
leaders in lifestyle planning, and his lifestyle strategy work has been profiled
throughout the media. His entertaining presentations are in demand throughout
the world including Europe and the Middle East. Life by Design®
can be contacted by phone on (02) 9979 4949, or visit www.lifebydesign.com.au.
For permission to reproduce this article article in whole or
in part,
contact Tanya Mottl on may be contacted by
phone (+ 612) 9979 4949, fax (+ 612) 9979 4969,
or email info@lifebydesign.com.au
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