What is the dividing line between advising a client and offering what amounts to therapy? In many situations, the boundaries aren't easy to identify.
Know your limits
Randy Kaufman, senior vice president at EMM Wealth, is quite familiar with the thin line between being an advisor and a therapist. She brings in a family wealth coach when the emotions surrounding a family’s financial situation become secondary to the finances themselves. She knows her limits.
“Understanding the fine line of when to bring in the therapist is life changing for my clients - and the difference between success or failure,” she says. Kaufman’s perspective changed after she read a 2016 Vanguard study titled Putting a Value on Your Value: Quantifying Vanguard Advisor’s Alpha®. Vanguard is the largest provider of mutual funds in the world. In that study, the company revealed that paying a fee for advice and guidance to a professional who uses effective tools and tactics based on industry knowledge can add meaningful value - potentially “about 3 per cent” in net returns - by using their framework.
The report helped Kaufman see that, as a financial advisor, just beating the markets doesn’t matter. “Three-quarters of the value added is my behavior as a coach,” she says.
Kaufman takes pride in being bold with her clients and telling them what she is observing. “I have clients who love me because I will give them the needed advice, not what they want to hear,” she explains. “When I see a spending addiction, for example, I’ll say, ‘I’m observing this behavior. I could be wrong, but let me refer you to someone who can help you move forward.’”
So how does Kaufman know she has crossed the line from advisor to therapist? “When I feel like I’m in quicksand, sinking fast, and need to extricate myself,” she says. Her viewpoint is, “This is over my pay grade and time. Let’s bring in an expert to do the family therapy, and we can focus on our value as estate professionals.”
One family she worked with experienced issues once the dad’s health began declining. When the mom took over, the adult children and spouses were bleeding her dry. Kaufman brought in a family wealth coach to address the family issues head-on. It helped the family avoid bankrupting their estate.