Jon Dunckley, About Consulting CEO, explores some of the themes of his recent presentation at the Adviser Summit.
In 1999 I was taught that financial planning, in all its guises, boils down to a simple equation: “W-G=N”, which means what the client Wants to happen, minus what they’ve currently Got toward that goal, equals the bit that we Need to help with. It’s beautifully simple and applies across the range of planning needs. Looking at retirement? What kind of retirement do you want to have? What have you got in place to help? OK, there’s the shortfall we need to address!
What’s the significance of this for later life lending? Well, the financial planning equation applies equally well here. What does the client want to happen? What do they have toward that? The problem in this sector, though, is that the depth of questioning isn’t always good enough to get to the true ‘wants’ and ‘gots’. As a result, the ‘need’ we’re trying to address is vague and inadequately defined. For me, that’s where the problems arise. In the last few months, I’ve seen release objectives like, “You want to release £100,000”, “You want to repay your debt” and “You want £75,000 for emergencies”. None of these cut it. I’ve even seen worse – my favourite ‘bad’ one being, “You want a roll-up lifetime mortgage” (actual face-palm at that one).
The point is that none of these have the detail and clarity that an external observer would need to see in order to answer the three important questions for a good later life lending recommendation:
- Does the case clearly demonstrate that it is right to release money from the client’s property?
- Is the amount to be released demonstrably the right amount?
- Has the right product been selected?
In the modern later life lending market, the answer is no longer automatically a lifetime mortgage. There’s a whole array of options out there and finding the right one is a matter of better questioning. Affordability and objectives being two of the key areas.
As a coach, I’m endlessly curious (read nosey). I want to understand people in more depth. “Why”, “What”, “When”, and “How” are my favourite questions. What are you looking to achieve? When? Why is that important to you? How could you do it? And all of these are equally important in good fact-finding.
I’m a big fan of the ‘question funnel’ in this context. It’s very simple and very effective when it comes to getting to the bottom of the client’s real release reasons. It starts with a wide open question, and ends up narrow:
- Open question: “Tell me about the reasons why you want to release money….”
- Probe: “That’s interesting, tell me more about….” – giving you an opportunity to close in on a specific area, travel for instance.
- Zoom: “Tell me more about… specifically” – this is the bit most advisers miss – the extra depth. Why is this important? When? What if they can’t do it?
This might break down into:
- Adviser: “Tell me about your plans…”
- Client: “I want to do some work on the house, repay my credit cards, and help out my daughter”
- Adviser: “Tell me a bit more about the work on the house….”
- Client: “I’d love to get a new kitchen, do some work on the garden, and redecorate throughout”
- Adviser: “Tell me about the plans for the kitchen…”
After the zoom, you can either go back to another probing question, or straight to another zoom question, both work equally well and help to get the richness of information that makes up a solid case.
Now, I know that most people reading this already know all this. But I also know that I do a lot of compliance monitoring in this sector and the files don’t show it, so it’s worth repeating along with one extra plea: When you get the information, write it down! The case is only as good as the notes that back it up. Without those, you are going to struggle to comply with MCOB, and that spells future problems.
At the summit, I talked about my favourite way of getting to some of this depth of information – a technique I call the lifeline. All you need to do is take a blank sheet of paper, turn it landscape, and draw a line across the bottom. On one end is today, on the other is ‘the inevitable’. Now you work with the client to draw out all the reasons they might release money throughout their life – with the why’s and when’s. Make it as detailed and vivid as possible. Let the client have the pen, get them drawing all over it. Once they’re done, ask them which of these they REALLY intend to do. Which are pipe dreams, and which are objectives? Against these objectives allocate any existing resources. What’s left are the ‘needs’ you can help address. I’ve used this technique with countless clients, and it works beautifully. If you think it might work for you, give it a go.
Whether you try the lifeline or do it another way, please do ask more questions, be more curious and, above all, record the answers!
For more information about About Consulting visit www.aboutconsulting.co.uk
- The views of contributors are not necessarily shared by the Council.
