‘Needs Analyses’ are so last year…
One of my mother’s favourite phrases was “I want never gets…” a typical ‘protestant ethic’ I guess. I have news for her, wants are what makes the world go round. Once we have sorted out our ‘needs’ the only thing that takes our productivity to a new level is chasing ‘wants’. Marketing is the art of changing wants into needs – so we feel better about it. We never knew we ‘needed’ things like deodorant, toothpaste, conditioner until marketers got involved and changed your perceptions. Is it still socially acceptable to ‘need’ something, but not to ‘want’ something?
The truth of it is that your dreams – your bucket list – the stuff that puts a smile on your face – has everything to do with wants and nothing to do with needs. “Needs” drag you out of bed on a Monday morning to a grumpy boss and job you try not to hate. “Wants” propel you skipping out of the office to enjoy your annual vacation, or to that concert you’ve been thinking about all week or into the bookshop to buy that brand new book by your favourite author.
This distinction between wants and needs have become increasingly clear to me when helping clients to determine exactly what their ‘emergency fund’ should be – that bucket of funds as a safety net if you’re retrenched or a fat expense comes along and blindsides you. This “needs” conversation is often involved in discovering ‘temporary disability’ needs too. I think it is smart to cover risk, but no more or no less – I would far rather a client divert hard earned income into wealth and investment than over-insurance. This ‘temporary disability need’ is the amount of money you need to keep a roof over your head, food on the table and kids at school. The real needs. When push comes to shove, given a list of our monthly expenses, we can all prioritise expenses. The things that will get paid first. You will get advisors who will try and prioritise it for you, but it is very individual because it is based not just on needs but wants that are your needs.
Really, there is nothing wrong with wanting better. It is called ambition.
In Financial advisory we are obliged, in terms of the FAIS act, to determine a client’s needs and reduce them into a nice little table of numbers so that they can be shoe-horned into a goldilocks ‘too little’, ‘too much’ or ‘just right’ box. It is a static exercise – what have you got now, what do you need, and this is the gap you need to fill (and here is a policy to do it for you.) This probably works fine for life and risk cover – to make sure your family isn’t left destitute if you die or get disabled before they grow up, but it is a miserable approach to use for long term wealth that you’re actually going to be alive to enjoy. If the only questions you’re asked when it comes to retirement savings is ‘how much do you need at retirement’ and ‘when do you need it’ then the plan is going to be equally uninspired.
In order to turn a ho-hum financial plan into something that is actually useful and even motivational you have to break away from boring old numbers and projections based on current ‘needs’, and actually address those wants and dreams – and the financial behaviour that can support or sabotage those dreams. As the industry moves from commission and product focus to client focussed, fee based advice then adding this ‘financial coach’ aspect to financial planning starts to come into its own. Moving away from hard numbers and projections (or hard sell) into the more touchy-feely environment of actually helping a client understand behavioural finance isn’t going to be easy – but change never is. In every industry, not just Financial Advisory, when ‘hard’ changes are required to survive or thrive, people will leave the industry, one can only hope that it will also attract newcomers who see the opportunity (that has always been there) of really helping people. No matter what you think of the old fashioned insurance salesman, they were the only ones who went to the funeral with a cheque.
Action: Stop thinking small, have a wealth plan that addresses your dreams and not just depressing needs right now. It will need to address increasing inputs, moderating consumption and being clever with the difference – the real wealth.
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Author Dawn Ridler ©