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Look Beyond Impact Investing to Impact Advising

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Look Beyond Impact Investing to Impact Advising

According to Investopedia, impact investing is investing that aims to generate specific beneficial social or environmental effects in addition to financial gain.

The purpose of this column is to look beyond impact investing to impact advising. Since I just coined the term “impact advising” for this article, I suppose it would help you to know how I define it. Impact Advising is financial advice that aims to generate deep psychological and emotional fulfillment for clients, in addition to financial goal achievement.

The natural tendency of many FAs is to explain, or over-explain, their processes rather than focusing on client outcomes and the impact of the advice. Too many FAs talk about how they manage money, asset allocation, diversification, risk tolerance, the efficient frontier curve, etc. FAs like to demo their planning software, display their cool fin tech, and explain their investment process. In case you’re wondering how we know this, it’s because we train advisors to record their prospect and client interviews and meetings. Then we listen to those recordings to find what’s done well and identify areas for improvement. I have coached thousands of recordings of successful FAs in every stage of client acquisition and client service. Not surprisingly, there are clear patterns and lots of opportunities to improve. As you’ve heard, “the truth is on the tape.” Clients don’t really buy the processes and the tools, they buy outcomes and impact.

Sometimes an illustration from another industry is helpful. For example, people buy airline tickets to get to their desired destination, right? Few are interested in whether the plane is made by Boeing or Airbus or that Rolls Royce or GE engines are mounted under the wings. Jerry Seinfeld puts it this way, “The pilot’s gotta come on the PA system and tell you what he’s gonna do. ‘Well… I’m gonna take it up to 20,000 feet and then I’m gonna make a left by Pittsburgh and then I’m gonna make a right by Chicago. Then I’m gonna bring it down to 15,000 feet.’ He gives you the whole route and all his moves… we’re all sitting in the back going ‘ya… fine, do whatever you’ve gotta do. Just end up where it says on the ticket. Can you do that?’” Clients want the outcome: getting to where it says on the ticket. And then what?

Unlike airline pilots and flight attendants, you have more intimate relationships with your clients. You go beyond the destination. What are their personal reasons for going where they want to go? What’s the impact of achieving the outcomes? Continuing the flight analogy, people want to get where it says on the ticket for their personal reasons: to visit friends or family, business meetings, and vacations. Sometimes the reasons are big: The Super Bowl, the important wedding, the milestone anniversary, the graduation, the family reunion, the medical treatment that’s only available at the specialty clinic in this particular city, or flying to New York City to ring the opening bell on they day their company goes public.

The FA who can successfully deploy more effective outcome and impact communication strategies will be much more successful at acquiring clients, retaining clients, being referred, and inspiring clients to act on the advice. But this is easier said than done for an industry of people who tend to be analytical and trained as financial technicians.

What are the different outcome and impact elements? Some are easy for prospects and clients to articulate when advisors employ effective question-asking and interview skills. Others are innate benefits of working with a great FA. Benefits that many clients may not appreciate until they experience them.

The most common outcome and impact benefit of working with an advisor is the clarification of, and the planning for, common financial goals (eg: retirement, financial independence, college-funding, weddings, vacations, health care needs, etc.). But, these goals represent just the first layer: the outcome or destination. It’s helpful to keep in mind that there is the goal, which you might consider to be the “tangible what” they want, and something deeper, which is the “emotional why” they want to achieve the goal. Both are important. For example, a person may want to achieve financial independence, the tangible goal, for the emotional why payoffs of feeling secure, helping others, and having a sense of pride and satisfaction that they accomplished something that most people never achieve. There are more unique “emotional whys” than there are unique “tangible whats.” Two people can want to achieve the same goal for different reasons. When you help people discover what they want and why they want it, you build a stronger bond of trust. Now they are more likely to make the important decisions, like hiring you in the first place and then following your advice to take the actions necessary to achieve the goals. Of course, one of the worst things you can do is to try to guess a person’s outcomes and impact. It’s much better for them to overtly state what they want and why they want it as a result of you asking the right questions in the right way.

Related: 8 Ideas for Getting Things Done the Right Way

What are some of those innate benefits of having a really good advisor that are valued by clients when they experience them, but rarely articulated when clients are surveyed about what they want from a financial advisor? This is an example of the classic saying, “you don’t know what you don’t know.” There was no research to justify the creation of the smart phone, for example. Steve Jobs didn’t do a survey where the respondents overwhelming said, “we’d like to have a single device that fits in our pocket that will replace hundreds of other physical devices that we previously purchased separately. At the very least, we would like our phone to take pictures, store our photo library, store and play our entire music library, be a video player, and a game console. And it would also be very nice if we could do our banking, order food, and call for and pay for transportation with a few keystrokes instead of talking to other humans.” Just like the smart phone exceeded our expectations, the best advisors deliver outcomes that have impact the client may not have realized they would appreciate until after they experience them.

  • What’s the impact for clients to not have to think about or worry about their money on a day-by-day basis? How will their life be better with the physical and mental time freedom this affords them?
  • What’s the impact for clients to have a qualified professional who knows everything there is to know about their entire financial life and their wishes so, if /when something happens to them that pro will step up and lead their family through the transition? What will they do to make their life better with the physical and mental time freedom this affords them?
  • What’s the impact for clients to have a 10-level of confidence that no matter what happens in the markets, the economy, or the world they will achieve their goals? How will their life be better with the physical and mental time freedom this affords them?
  • What’s the impact for clients to be emotionally free from the constant barrage of bad news from the media? What will they do to make their life better with the physical and mental time freedom this affords them?
  • What’s the impact for clients to have all of their financial subject-matter-experts to be led in a coordinated manner so every element of their financial advice operates with harmony and synergy? How will their life be better with the physical and mental time freedom this affords them?

The mantra of financially successful people is “true wealth is discretionary time.” In order to inspire people to work with you in the first place and get the most value from the relationship, what is it they want to do with their time that is more important than dealing with their money? The answer to this question is why financially successful people have advisors. What’s the IMPACT of delegating their financial affairs to you?

There is a worksheet and exercise to help make this easier for you and your prospects and clients called the “Quality of Life Enhancer.” Many hundreds of advisors have used this process with many thousands of clients to discover their emotional drivers. What comes up are those things that matter most to the client that cannot be delegated. Family. Friends. Fun. Faith. Fitness & Health. Philanthropy. Finances… as in how they make money by running their business or their career, not financial planning and investing.

The premise of the Quality of Life Enhancer exercise is that there are only 168 hours in the week and how you choose to spend those hours determines your success and happiness in life. Because those things that you cannot delegate will easily consume your 168 hours, you MUST delegate everything that you can in order to have the best quality of life. Essentially, people pay you for financial services so they can recover the time to do something else that’s more important that they can’t pay someone else to do. In other words, the impact is the payoff of what they do with the time saved by being your client.

The most compelling value promise for the outcome and impact – oriented financial advisor is, “we take care of your money so you can go live your life.”

If you already have a copy of the Values-Based Financial Planning book you can find this worksheet and instructions on how to use it on page 82.

Impact investing is good. Impact advising is even better.

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