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Each week, we look at the ABCs of cash flow management.

M is for Motive

When starting a cash flow planning discussion with a client, figure out his motive for wanting to change his financial behaviour.

This is key since there’s a difference between having a client that’s motivated to change, and understanding how you can help him maintain focus. Once you know why he wants to develop a cash flow plan, you can more easily help him follow that plan and achieve his goals.

When starting the cash flow management process, don’t be led astray by clients who simply say they want to become debt-free in the long term and save for retirement. These are eventual outcomes your client may truly want to achieve, but they generally aren’t people’s only underlying motives.

Read: Do your clients really understand retirement?

So, during initial cash flow discussion, use the following litmus test to uncover whether your client is sharing his true motive.

  • Is it personal? Many people want to retire comfortably and pay off their mortgages, so these aren’t overly personal or emotional motives. If your client lists these goals, encourage him to dig deeper and think about his more immediate, specific dreams. Read: Canada warms to goals-based investing
  • Will he be rewarded in the short term? Your client’s main goal can have an element of the future, but he’ll want to see some progress and benefits within the first 12 months. His motive needs to connect to his current life and circumstances. Read: Short-term goals increase planning success
  • Will he stay on track? By identifying a personal, achievable motive, your client is more likely to stick to his cash flow plan. If he wants to alter his cash flow so he can take his kids to Disney in six months without racking up debt, for example, he’ll be more inspired than if he’s aiming to be debt-free in 25 years. He needs to be able to consciously make better choices whenever he’s tempted to go off-plan. Read: Tips for controlling spending

If you have a cash flow plan, try putting your own goals through the litmus test. You can show clients how you determined your own motive, as well as how it helps you stick to your plan.

Continue on to letter N.

Read:

Strengthen client relationships

Help clients build emergency savings

Canadians are emotional investors

Stephanie Holmes-Winton is a Halifax based financial services educator/speaker who helps advisors find the money to help their clients fund their financial plans. She is the author of Defusing The Debt Bomb & $pent. Stephanie is also the founder and board chair of the Certified Cash Flow Specialist™ designation program. You can reach Stephanie at sholmes@themoneyfinder.ca or themoneyfinder.ca
Originally published on Advisor.ca

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