At 8:45 PST this morning, my husband was moving our belongings out of our four bedroom home on a four acre lot, in favor of an early life downsize to a townhouse with only the space we need in Halifax.
At that same moment I was on-stage in sunny Palm Springs, California speaking to an audience of my peers about how debt and cash flow management creates high net value clients.
The Proof
The debt issues in this country reside with many clients who we think of as great, quality clients can be made far more financial agile and wealthy if their debt and spending were part of the plan.
Case in point: during a recent conversation with a gentleman who owns an MGA, I was told “my advisors don’t deal with clients who have debt”. My response? “Wow that must be quite a screening process? Do you track their credit bureau file to ensure they remain debt free?”
Of course they didn’t, because the original statement was based on well…nothing. We make far too many assumptions about debt. Remember the saying about the word assume…
Most wealthy people became wealthy while using debt at some point, so why would we assume they aren’t still using debt? Many great clients are great because they’ve got huge incomes, but that doesn’t mean they are making the most of them.
I run into a lot of clients with household incomes in excess of $300,000 (in Nova Scotia) who are saving as much per month as a couple earning a fraction of that.
The Solution
Our current manner of dealing with debt at least in the public space is by using math and shame. Hint: the solution is not to show people the mathematics of their flaws or to shame them into changing their behaviour. The math has to back up your advice, but to use it as proof of financial goofs doesn’t usually yield much in the way of results.
Rather, with this particular topic, we must take an entirely different approach. We must do the opposite of shame the client and remove any shame from our questions.
I always put it to clients like this: Show me the proof that everyone, from birth to present, should know better than they do. Then I’ll wag my finger at you.
The fact of the matter is our financial world works exactly as it is set up to work. We can’t expect different results by expecting people to learn about money by osmosis. Just look at your financial courses. Do you see material on debt and spending (besides math)? Do you have any financial calculators on personal cash flow management (besides budgeting hint: that doesn’t work).
If financial advisors were really managing personal cash flow, I wouldn’t have to cobble together all sorts of different tools (I’m working on one of my own) to create a plan.
To the advisors I say the same thing as I say to clients: You are not bad, you are not stupid. Show me where, from the day you began in this industry to now, you should have learned to do anything differently then you are doing.
Once change is about goals and not about blame, the people you are trying to help can actually hear you.
The Opportunity
This is arguably the best part! Survey after survey shows consistently that 75% of Canadians name debt repayment as their top priority yet they perceive that less than 5% of advisors can help—and they are right. We’ve got high demand for a skill that is short supply; if that doesn’t spell opportunity, I don’t now what does.
The even greater opportunity is this: Advisors can reduce erosion of their books if they are dealing with a client’s top priority; advisors can stand out as it will take years for this skill to become the norm; further, advisors will maximize the value per client, as a client who are open about debt will not hide assets.
My message is as short and sweet: Take care of what our clients see as a priority, or prepare to lose clients to those who do.
There is great value in a client feeling better about their finances. The market is an awful thing to place your financial faith in, because you can’t control it. But cash-flow and debt management gives a client a great deal of control, and then the market just isn’t so scary!
I’ve put my effort where my mouth is and created a course for The Knowledge Bureau. You can now become Certified in Debt & Cash Flow Management. If you think a skill that 75% of people want and less than 5% of advisors can deliver is something that can grow your practice then check out the free chapter of this course.
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I’m am so grateful to Evelyn Jacks, president of The Knowledge Bureau and her team for giving me the to speak at the DAC, and would like to thanks Manulife Bank for sponsoring my presentation and moving the industry forward on the issues of debt and spending.
