Writer Paul Hechinger interviewed me and my One Year to an Organized Financial Life co-writeer and friend Russell Wild for a piece on the importance of organized finances. I wanted to share the results.
Helping Your Chaotic Clients Get Organized
By Paul Hechinger August 20, 2013
Of all the hurdles advisors must clear with new clients, disorganization is among the most common. Their financial statements and records are usually in such a state of chaos that they can’t answer the simplest questions.
“Most people are disorganized,” says Nicole Middendorf, CEO of Prosperwell Financial, an RIA in Plymouth, Minn., with upwards of $100 million in assets under management. “It’s very rare that you find someone who knows what their net worth is, or even what the interest rate is on their mortgage, without having to dig for the information.
In fact, sorting through boxes of randomly stacked documents is often one of an advisor’s first chores. The good news, says Regina Leeds, a professional organizer in Los Angeles and co-author of One Year to an Organized Financial Life, is that most clients are already motivated to get their act together. Just by virtue of taking the step of meeting with a financial advisor, “they’re light-years ahead of other people,” she says.
Since the advice relationship often starts with the client filling out a general questionnaire, there’s momentum toward organization from the first meeting. Then advisors can help reinforce better habits by demonstrating that organization gives clients more control over their lives — the reason most people hire an advisor in the first place.
Still, Leeds’s co-author, financial advisor Russell Wild, cautions that it’s not enough for clients in chaos to be motivated — they have to be self-aware as well. “There are two kinds of disorganized people: those who know they’re disorganized and those who don’t,” says Wild, whose fee-only firm, Allentown, Pa.-based Global Portfolios, has about $11 million in assets under management. “Those who know it, you can help. And those who don’t, you should drop as clients, because they’re going to drive you absolutely crazy.”
Incentive, Not Intimidation
For the ones who aren’t beyond help, advisors can gracefully offer incentives to get organized. Wild, for instance, mentions that because he is paid by the hour, it’s in clients’ best interests to be as efficient as possible. “I’ll just let them know up front that if I need to pull it together, I’m going to have to charge them for doing that,” he says.
Theresa Chen Wan, principal of TCW Financial Planning in Dumont, N.J., who also charges for her services by the hour, says she has occasionally told clients who gave her incomplete information that it limited what she could do for them. However, she will go the extra mile to get what she needs: In one case, she went to the home of an elderly widow to gather years’ worth of disorganized records.
Like clients who have lost a spouse, clients in the midst of a marital breakup can find it particularly unnerving to tackle stacks of financial statements that may remind them of happier times. So Middendorf, who’s a Certified Divorce Financial Analyst, tries to make the process of gathering information less intimidating for her overwhelmed clients. “I get it, I’m divorced myself,” she says. “The way I look at it, it’s our job to help you get you organized and to help make this not so difficult.”
Wild thinks some of the blame for the chaos in his clients’ lives rests with financial institutions. In his opinion, many of them deliberately publish “obscure” statements, some in the form of lengthy booklets, “largely because they want to hide their fees and hide their performance figures.” One client with accounts at a wirehouse, he says, had no idea what portion of his assets were in risky allocations — despite the voluminous information he received from the institution.
Leeds suggests reminding clients that having their documents in good order can help them reach their financial goals. She also tells a personal story: When her father died, he left a completely organized estate. “There was no mystery, no hunting for papers,” Leeds says. “That’s a wonderful gift to give your children.”
