19th February 2015 by John Lappin
George Kinder wants to spread the concept of ‘life planning’ around the globe and to the masses. Life planning is the branch of financial planning which aims to go deeper into someone’s life, circumstances and goals to help them identify and achieve what they really want.
Its advocates say that it is about much more than simply managing your money, though ultimately that may the tool used to achieve the goals identified.
To date, availing yourself of life planning has generally required a visit to life planner with a view to becoming their client. That requires providing a lot of information and discovering things about yourself in an in-depth process that many people do not feel comfortable with.
Kinder who is based in Massachusetts, but is known globally in financial planning circles, still advocates seeking advice and his website discusses how to select the right planner. Yet he also wants to reach out to consumers – those who refuse to visit any financial adviser – to spread the news about developing good financial habits.
He has set up the Lifeplanningforyou.com website with the aim of it becoming “the place where people go for thoughtful questioning about their lives”.
He contrasts this with what he calls the ‘robo-adviser’ website – where generally a customer provides information and then executes a decision based on the feedback. (N.B. This depends on the local regulations allowing. In the UK, this often is regarded as fully regulated advice by the City Watchdog, the FCA.)
Kinder’s website has received a significant boost from the Wall Street Journal which recently put it top of a list of online tools and apps for planning for retirement.
“They compared it with the ‘robo-advisers’ and other major retirement sites and they liked ours the best. None of the other sites are giving the consumer the ability to reflect about their life which is what life planning is about,” he says.
“The basic principle is to ask how can you know what to invest in, before you know anything else. The first things you need to know include where you are going, what you are about, what you really want, but until you use life planning, you can’t know most of this”.
Kinder’s advocacy of life planning is accompanied by a critique of the approach of other big financial firms and other financial advisers.
“All but the best financial planners ask rudimentary questions focusing on products and material things,” he says.
Kinder’s description of life planning is certainly a world away – if not further – from what you might experience with a visit to your bank to discuss your financial affairs.
“Life planning revolutionises the process,” he says. “Some of those things may not seem relevant to a financial planning process but they are – even the things that don’t seem to require money, writing a memoir, playing jazz in clubs, wanting to act in independent films. It is a matter of wanting to live a life that incorporates more of your values. But it requires time and that raises money questions too, perhaps in terms of your job, and the compromises that you need to make.”
Kinder says his website invites consumers to reflect on such questions. It has an adviser portal to direct people to a life planner, but it also caters to those who do not want to visit an adviser.
He says: “We try to model what a great adviser would do. We go from asking those meaningful questions about someone’s life and goals to a frame that might inspire a consumer to make the choices needed and to put the meaning in their life first. Then we look at the obstacles. They are often financial obstacles or time constraints.”
The site includes a rudimentary section on some of the principles of investing, but it doesn’t go much into products. Indeed a product led approach is anathema to Kinder.
But it not just advisers nor indeed financial institutions that take a mistaken product-centric approach. He says that many consumers, who don’t trust advisers, also make the mistake of starting with a product or a stock or asset specific approach. This is not helped by much of the media coverage. Indeed, he hopes that his website and associated book LifePlanningforYou – one of several he has authored but the first aimed specifically at consumers – can radically change that mindset.
Kinder says: “My experience with working with consumers in workshops shows that about half are interested in financial advisers. Half don’t trust advisers and couldn’t care less about visiting them. Yet a lot of people when they think about money think about the same questions that the product sellers think about.
“If you look at the consumer media, they say it’s time to buy gold or buy this type of stock or sell this stock. Consumers get lost in this type of information. Consumers end up investing at the wrong time in the wrong things and they do it partly because they distrust advisers”.
Hence, Kinder’s urging that people go back to a conversation about money that involves more profound thinking.
“When they get the knowledge piece from the site, they then see that we are not ‘robo-advisers’. There is good basic advice, but they can then go and do more themselves or they can seek out a trustworthy planner”.
Kinder is however also sceptical of UK policymakers’ support for generic advice, which some see as the solution to the relatively small number of advisers here in the UK.
“Generic advice is boring which is why the consumer goes and makes mistakes trying to sizzle it up in some way. The sizzle should be in what you are doing with the investment, not the investment itself”.
But he also believes this group can also make the mistake of not taking enough risk as well.
“If you don’t trust an adviser, you are prone either to taking an excess of risk or prone to getting something that is low risk, where you take too little risk to increase your assets. In both cases, I try to inspire people to consider equities and then take a passive approach. I suggest a ‘buy and hold and forget about it’ approach. For someone dead set against an adviser that is one of the safest ways to do it.”
“You lose money by investing into low risk bonds because you won’t keep up with inflation and taxes or through the aggressive cockiness of trying to beat everyone in the market”.
In broad terms, Kinder agrees with the four per cent solution in terms of retirement, which is certainly relevant given the coming retirement income reforms in the UK.
“If you have roughly 60 per cent in equities, though it might slightly lower, and the rest in low risk, high quality bonds, money market funds or cash, you should be able to afford to take around 4 per cent income year”, he says though he adds that some of the exact details and amounts are still hotly debated.
He also thinks in general terms that an annuity could make sense with part of the portfolio.
“Annuities can give you a higher rate of return than a classic bond portfolio though I would ask what do you know about the costs within an annuity? Are they low cost? They can raise the rate of return very nicely”.
However, the big emphasis from Kinder is getting the thinking correct.
Yet isn’t life planning a luxury for many people given the fact the income and living costs have not kept pace?
“In America, it may worse than the UK. There are many studies that show that all the income gains of the last 30 years have gone to the top 20% of income earners. It is a question of macro economics. And it impacts what we do as financial advisers.”
Yet Kinder sees a more far-reaching and indeed economic application for his life planning message.
“It is not about monetary or fiscal policy or what is the appropriate purpose of economic policy in a government. The way the Government have tended to go since Milton Friedman’s influence has been to work through monetary policy. Up till then it was hugely about fiscal policy.”
Kinder says that these are blunt instruments. In America, President Calvin Coolidge said the chief business of the American people is business, Friedman says the social responsibility of business is to increase profits. Both miss the point. The business of great democratic countries is to model integrity and deliver freedom. Business appropriately done has the passion of an entrepreneur, delivering something that is exciting whether it is the cell phone, or web based services or something else. It has an entrepreneurial spirit. It can then be mass produced and deliver profits”.
That then comes Kinder’s critique of bigger companies and their often mistaken approach.
“Big companies merely become a product shop. That is what has happened in financial services. So that is what my next book is about – what is the main and proper approach of government? It is to deliver an entrepreneurial spirit. The speed of the economy in the 20th century was half that in the 19th. You could go back to Schumpeter on creative destruction or Edwin Phelps who argues it is about a lack of innovation. Innovations come from wrestling with these questions. That is what life planning does. It delivers entrepreneurial spirit,” he says.
So Kinder believes that life planning can stimulate economic activity at the grass roots. “If you take this issue with the middle market of people, part of the reason is they are not living their life plan. They do not know the financial world. Instead, it is about whether the market is going to go up or down. Yet fundamentally what economics is about is how do you want your life to be your legacy?”
He suggests that as people begin to think about those legacy issues, their passion increases and they become more entrepreneurial. “Rather than saying I have been screwed by Government so I can’t make those adjustments, whether it is kicking your job and becoming a creative artist or setting up a business, it drives the economy and society in a healthier way”.
But Kinder does believe life planning can come down the income scale?
“Where I grew up was Appalachia, my father tell stories of the poverty in the depression – 30 to 50 per cent were unemployed, and it was hit by the rust belt problems in the 1970s. That is where my roots are. When I started thinking about life planning, it was in the 1970s, I was working for very little and thinking how could I do what I cared about. I was entrepreneurial and trying to make something happen. That is why I wrote the book and did the website.”
Is the workplace is a good place to reach people?
“The thought that comes to mind is Richard Branson letting people take as much holiday as they want. Branson had the confidence. If you trust your employees, they will make the right decisions. That is really what this is about. It would be wonderful way to create more economic health. People who set goals are much more financially healthy, and companies don’t want employees to get into debt and have economic problems or issues of stress. That means a happier workforce.”
But what of individual examples? He comes up with three. A doctor who wanted to be rabbi, though who had one child who objected to downsizing the house and a financial situation complicated by the fact that he had invested in financial products which worked long term but were difficult to get out of mid term. He ended up working part-time while pursuing his rabbinical studies.
The second is of the US trader who moved to open a bed and breakfast in Vermont, which arguably applies to a lot of City workers in the UK and the third clients that have sold their cars and cycled everywhere to freeing up cash.
“The thing we do is look to move on something immediately. If writing fiction is important to a client, we try to find ten hours in the week, and we look for it, even if it is just by not watching television, or minimising the commute. We cut costs and save time. It is about inspiring people but bite the bullet on the cost stuff and the inspiration begins to take over.”