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Unpacking a Client's Financial Box

How thinking inside and outside of the 'box' can help advisors demonstrate value to prospective clients.

Helen Modly, CFP, CPWA and Barbara Ristow, MS, CFP, 03/09/2017

How do you demonstrate the value of the comprehensive financial planning process to a prospective client? 

How can you help newer planners gain comfort handling an initial planning interview?

What we call the "box approach" makes sense to prospective clients and is easy for newer advisors to master.

Controlling the Outcomes
Here is how we teach advisors to use the box approach with prospective clients. We begin by drawing a box on a notepad. The box should be large, but leave a wide margin around the outside. As we begin our conversation, we explain to Mr. and Mrs. Prospect that we can control the contents of the box, but anything outside the box is out of our control. So, let's fill the box.  

Cash Flow
We start with a discussion about cash flow, the foundation for any financial plan. Draw a box in the upper left quadrant of your first box and label the box with "CF" for cash flow.

The conversation with the client might go as follows:

"Mr. and Mrs. Prospect, you each work for companies and receive your paychecks every two weeks. This income is part of your cash flow. However, we need to deduct major expenses – taxes, mortgage, tuition payments, living expenses, charitable giving and so on—to determine your cash flow. If you have surplus income (positive savings) after deducting expenses, all is well. If you have a deficit each month, this must be addressed right away.

Helen Modly, CFP, CPWA, is executive vice president of Focus Wealth Management, a fee-only registered investment advisor in Middleburg, Va. Modly has more than 25 years of experience providing wealth-management services. She is a member of NAPFA and president-elect for the National Capital Area chapter of FPA. She can be reached at info@focus-wealth.com.

The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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