Life and Money - Financial Planning With Your Heart

By Frank Sisco, CPA, PFS

Copyright 2006 Frank Sisco

(Word count = 1,340 including 67 words for About the Author)

Introduction

This is my first weekly column of "Life and Money" for the Martinelli papers, and I very much look forward to feedback from readers because your input will help guide me in creating essays that are pertinent and valuable to you the reader.  I start with a discussion of a very important aspect in personal financial planning - the heart.

Addressing the real goals by paying attention to your heart.

In financial planning for major issues of life and money, the heart should usually rule the head. Too often, we make financial decisions as if we were engineers, lawyers or accountants.  Researching and studying, analyzing and reanalyzing, graphs and spreadsheets, charts and calculators.  And usually the true goals are missed by a long shot. It happens even when financial advisors are involved in the process.

Often, the financial planning process goes like this.  Clients meet with their advisors and talk about what they see as the issues and problems.  The advisors come up with several suggestions and they discuss the options and settle on a set of action steps.  All very professional and polite.  However, the tough questions are often not asked, the questions that tug at the heart, the ones that can be unsettling.  Here are a few examples.  Why don't you close your marginally profitable business?  Do you really want to exclude one of your children from your estate?  Why haven't you gotten sufficient life insurance and long-term care insurance for your loved ones? Why do you spend so much money on clothes and consumer electronics? The tough issues are usually skipped or paid merely lip service by both the client and the advisor. Often the advisor does not want to cause angst that might lead to inaction.  Usually, the client has difficulty in properly expressing the feelings related to the facts. Sometimes, both are clumsy initially with a more meaningful discussion. As a result, many areas are not addressed for creating income or saving money or arranging affairs properly.  In fact, sometimes later significant potential financial loss and emotional upset can occur.

Holistic financial planning tries to understand and help the whole you.

A growing new trend, that also encompasses matters of the heart, is called holistic financial planning, which tries to evaluate the pieces of an individual in such a way in order to help make the whole person, and his or her finances and even life, much greater than the sum of the parts.  Like creating a beautiful puzzle out of a mix of components. This type of financial planning goes beyond the traditional considerations about personal finance and gets into matters of the heart such as understanding how you share your life with your family members and your friends, why certain songs are your favorites, how you juggle your time for hobbies, business and home, your passions, and your relationship with God and other people.   Your relationship with God and with people can have a greater impact on the success of your financial planning than the latest return on the S&P 500 index or the newest tax law.   The essential ingredients in the process are sharing openly and honestly with your financial advisor, family members, other individuals with whom you are closely involved, and with yourself.

Family profile

Two important tools in this type of financial planning are the family profile and storytelling.  Some advisors use the family profile to uncover a person's particular situation, especially for individuals who are middle aged or older, instead of traditional data gathering using forms and questionnaires.  The advisor builds a family tree with the clients' help (with both spouses present if possible), detailing the names, ages, occupations, disabilities, sub-family, etc.  As the information is recorded on the family profile, the advisor asks the client about each key relative. Out of the client pours heart-related information that reveals important financial considerations, such as the following.  The love of a disabled granddaughter who warrants annual gifts to help with special therapy and education.  Fairness for a helpful cherished son who deserves a larger share of the estate.  Admiration for a deceased father who built the family business and put several children through college, leading to the client's desire to generously help his grandchildren.  Adoration for the mother who handled admirably the family finances, leading to a client's greater sophistication about the financial markets and complex investments.  Emotional upset about a grandparent's long horrible illness contributing to the client's intense desire to protect assets by getting long-term care insurance and being more conservative with investments.  Financial failure of grandparents during the Great Depression and the loss of a residence, resulting in a low tolerance for risk and a preference for guaranteed investments and minimal debt.  Frustration over the conflicts among adult children and their unwillingness to be financially responsible, making difficult the process of planning for the succession of the family business.

Storytelling

A second tool used as part of the financial planning process is storytelling.  Because good financial planning involves making sound financial decisions based on the fit of the financial environment with key strategies and one's own circumstances, the better the fit, often the better the results.  Stories help get the right fit.

Let's first look at when you try to get this fit on your own without the direct help of a financial advisor.  Like most, you probably learn new information, especially complicated financial information, when it is in an accessible, easy-to-understand format, which is often a rarity.  Engaging stories told by real people of their life experiences (e.g. building a very successful business, losing a large portion of life savings through inappropriate investments, or rectifying decades-old family animosity over financial matters) are understood and retained better than are dry articles of technical information loaded with graphs and charts and esoteric concepts. In addition, for many people, the richer the medium the more enhanced their understanding.  A financial-related story conveyed by a celebrity in a very well done television show beats out a news article that may be void of personality.  Information that is engaging and personalized can lead an individual to make meaningful positive changes in their lives.

When you are getting the help of a financial advisor, storytelling plays an important two-way function. One way is from you to the advisor. In order to communicate information about yourself that the advisor needs to help you through key decisions (e.g. your feelings about family responsibilities, phobias about risk and loss, internal need to excel, compulsions to spend, etc.), you should tell the advisor compelling stories.  For example, it is not enough to tell your advisor you have a moderate level of risk tolerance. The term "moderate" is vague.  You need to tell stories about situations in your life involving risk-taking and discuss your feelings about them.  The advisor then gets a much better idea of what moderate means for you.  This way the advisor retains interest in your special circumstances and tailors personalized ideas and strategies for you and your family. The second way is from the advisor to you. The advisor does not need to be an accomplished filmmaker, television talk show host or radio star to make a lasting impression on you, but should have the ability to keep you interested and involved throughout the entire financial planning process by telling engaging pertinent stories, which contain important clear lessons about life and money.

In upcoming columns, I will expand on considerations of the other areas such as trust and integrity as well as the basics of financial planning

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About the author

Frank Sisco is a CPA and Personal Financial Specialist, and author of several articles about personal finance and issues of life and money.   His firm, Financial Management Corporation, is located in Harrison, NY.  Frank makes his home with his wife and daughter in New Rochelle, NY.  He can be reached at 914.381.3737 or by email at ideasmoney@aol.com, or visit his website at www.LifeAndMoney.com.