Values-based financial planning is a model that has evolved over the past decade that places the achievement of a client's life plans, dreams and personal values before the strategic pursuit of wealth creation (Knight, 2010).
There are three main approaches to the provision of financial advice. The first is product focused, the second looks at financial goals and the third, looks at the client’s financial and non-financial priorities, in other words their values, or what is important to them.
Financial planning has evolved from selling products, to a focus on goals, to understanding a client’s values, what’s important to a client first, before doing anything else.
Values reflect our life priorities and represent the things that are most important to us. Who and what we spend our time and money on reveals what we value.
“Values are important as they guide our beliefs, attitudes and behaviour.
“Our values reflect what is important to us in life. They inform our thoughts, words and actions. They are important because they help us grow and develop to create the future we want. The decisions we make reflect our values and beliefs. They direct us towards our purpose. Values guide our behaviour in all aspects of our life, including our home life, our work life and our social life.
“They are often referred to as our personal guiding principles or life goals. While we may have a variety of goals that are specific to a situation, like getting a job or a promotion, running a marathon, or travelling to Europe, our values are life-goals that not specific to any one situation” (Susan Blackburn Psychology).
We know that few people have set goals (3%) and even fewer have written them down (1%). Less than that have set values and even less have written them down. What an adviser needs, is a framework, a Values Questionnaire with prompts and a Values Tool to help their clients understand and articulate their values, and a Values Report to provide to the client.
We have provided advisers and their clients a Values Based Advice Framework so the adviser can help their clients decide which areas are most important to them in comparison to the others. We have provide 7 Values Areas – each starting with the letter “F” – Faith, Family, Finances etc. to get them started.
We have provided them with “one-word” prompts to help them identify their values so they can write down their definition of each of their values and to clarify what they mean to them.
Once the client has decided on their key values across all 7 areas, they can then order them in priority with their most important value at the top of the list down to their least important.
The Values Tool allows the adviser to review the client’s values in the face to face or virtual meeting. The adviser can help their client strengthen their values, confirm priorities and really understand what is most important to the client.
The Values Report is a one-page document that the adviser can give to the client and keep on record too. Any goals, new or existing, can then be measured against their values.
Let’s say, for example, the client completes their Values exercise and says that “Family” is their number one value. However, the adviser identifies that although the client is saying that “Family” is the most important value to them – they don’t have any life insurance, nor an estate plan in place.
There should be alignment of their values with their goals and their behaviour.
The conversation can then explore whether “Family” is actually their number one value, or does that need to be re-prioritised? Or, should the financial plan now include life insurance and estate planning?
Helping a client set and achieve their financial and lifestyle goals ensures longevity of the advice relationship.
But, helping a client understand their values and connect them to their goals increases the chances of them being clients for life.