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Give Weight to Your Clients’ Top Priority

September 28, 2018

This time we hear from Forrest Baumhover, advisor and founder at Westchase Financial Planning in Tampa, Fla. He recounts an experience that taught him to listen for every client’s biggest concern.

When I first started out as an advisor, it seemed obvious that the best way for me to serve my clients was to help them come up with a comprehensive plan that optimized their savings and investments for years to come. My job, as I understood it, was to look at each client's total financial picture and create a long-term strategy based on what I saw.

Then I would present the strategy to the client, and they would proceed to implement it.

It didn't take long before I learned this wasn't always how things worked.

My first big client was a married couple earning $500,000 a year. With penalties, they owed $140,000 in tax debt, and the IRS was in the process of placing a lien on their house. Understandably, the couple's main focus was getting the IRS off their back.

The tax debt was concerning but I saw a way to handle it that would allow the couple to focus on long-term saving and investing. I helped them negotiate a payment plan, find a mortgage lender who would give them a home equity line of credit and advised them on some cash-flow issues. Within a year, the lien was gone, and, though they still owed taxes, the IRS had backed off.

At this point I advised the couple to tackle some other issues. I really wanted them to save for retirement, and I'd created a plan for them to do that by maxing out the husband’s side income. But the couple had other ideas.

In particular, the wife was fixated on eliminating their tax debt. Paying down debt is never a bad thing, of course, but I didn’t think doing that to the exclusion of other priorities was the most responsible decision. We had developed a five- to six-year payment plan for the tax debt. I wanted them to stick to the plan, start an IRA and save for retirement while paying back the IRS.

We went back and forth, but she made it clear she wanted the IRS out of the picture. In the end, I had to respect her choice. It wasn’t the best decision, in my mind, since the couple would end up better off in the long run by investing for retirement sooner rather than later, but for her, eliminating tax debt meant eliminating the biggest source of stress in her life.

This situation helped me realize that clients always come to a financial advisor for a particular reason. At the beginning of a relationship, it’s important to remember that many clients don't seek your advice because they want a comprehensive financial plan. They come to you because they're facing a big problem that’s keeping them up at night. Whether they’ve experienced a windfall or they’re facing a huge debt, it's usually something specific that brings clients in the door.

In many cases, until this priority problem has been thoroughly addressed, the client won’t focus on anything else. It’s my job to figure out what each client's top priority is, and to address that concern before all others. Often this means setting aside my own goals for a client and acknowledging that there's more than one right answer.

Forrest Baumhover

Of course, if a client wants to do something I consider irresponsible, I have a duty to tell them my view. I also have to consider if their decision is one I can work with, or if it represents a philosophical difference that suggests they should find a different advisor.

Usually, though, I can take a step back and address the immediate needs of the client. Once the priority problem has been addressed, then we can move on to devising a more comprehensive plan. And since I've helped alleviate a major source of stress, the client is more likely to take my advice when it comes to less-pressing issues.