2nd June 2014
George Kinder has been an advocate for a fundamental change in the relationship between financial firms and their customers and clients for many years. He says the financial crisis has exacerbated the flaws in the existing model even more and led to a fundamental break down in trust. Yet he also believes he has a solution.
Under the banner of life planning, he has focused on convincing financial advisers to change by really getting to know their clients, detaching themselves from any product sale and restrictive tie ups with fund firms and pension companies, while ensuring they are highly qualified technically but also schooled in life planning techniques.
Now Kinder is aiming to reach out to consumers with the life planning message, having written a new book and associated website, Life Planning for You, with the typically ambitious tag line ‘How to design and deliver the life of your dreams’. With the book, he hopes to convince more consumers, investors and savers to seek out advisers they can trust.
But he is also aiming to spread life planning across all income groups. Another project aims to create a life planning firm offering a free hour-long life planning meeting to just about everyone and indeed a meeting every year if required. He also has thoughts on how life planning can reform the troublesome banks. John Lappin interviews him below.
Mindful Money: What has been going wrong in the relationship between financial services and clients and customers to date?
George Kinder: “The core flaw in financial services could be framed in one word – trust – or maybe two – trust and relationships. Delivery in financial services should be different from what we normally think of as advice. It has to be strongly related to the client’s life.
“The central flaw is trust. When I go into offices in the City of London, the people there ultimately come back to a focus on a product, even if they speak of how important the client relationship, client satisfaction and client service is, but they don’t see the profits in it.
“The primary flaw is trust, where you manufacture a product and take the margin you need and give your investors a profit. I am a fan of Adam Smith, but this model has failed in financial services, especially since the banking crisis.
“Higher quality advisers are embracing the idea that client service comes first and really believe in ‘knowing your client before you give advice’. That is what life planning is about. We are at the forefront of that.”
Mindful Money: So why write a book aimed at consumers?
Kinder: “My intuition tells me that if consumers knew what was available, that they could get to talk about themselves, to identify what would make them feel free in life, to get them exhilarated, they would go to a life planner. It is hard to sell a book that is selling people on going to an adviser. So the book can show people a way to find great advisers, but also how to design and deliver this for yourself.
“The book will aim to inspire people to see that money should be about living a life as close to freedom as it can possibly be. If they can’t figure out how to deliver this for themselves, then they can call one of the great life planning firms in the UK.”
“We think the new operating system for financial services has to be trust, relationships, deliver meaning and delivering freedom. It is not a cookie cutter approach. You have to listen and learn what is important to people. For most people, the most important thing is family or relationships, a strong second is their sense of values. People want to live with integrity. Creativity is important, including creativity in running businesses and giving back to community. What life planning does is it opens up a conversation that is authentic.”
Mindful Money: Life planning is often seen as very expensive. How far down the income scale can this go?
Kinder: “Not only can it reach down the income scale, but it has to go down the income scale. The banks are abandoning the middle market. I think this is designed for the middle market. I think we have a system here.
“We are working with a number of registered life planning firms to launch a larger scale registered life planning firm. One of the principles will be to offer free hour long life plans to anyone who wants one.
“You can do it extremely simply certainly, if a mid-market consumer doesn’t have a complex situation. In life planning you inspire them. You look at the obstacles and solve them. If it is getting out of debt, you refer them on to the right agencies, but you have inspired them to go there.
“I see it as something that ought to be delivered to everybody. I would hope from that we will also get support from non-profit organisations which would fund things further. A free hour is simple. It pays dividends in terms of trust and once a year they can come back.”
Mindful Money: So what should consumers be looking for in an adviser?
Kinder: “The book has a whole chapter on this. Life planners are trained to listen and search out what most inspires people. You also want someone certified or chartered. You want someone who has the best designations. You want to look at their fees and if you don’t have a lot of money to see if they have modest fees you can afford. The next thing is to check there are no product ties.”
Mindful Money: Could this approach fix the banks?
Kinder: “I think so. There are series of issues. I am writing another book – Life Planning: A Banking Manifesto. When I am dealing with bankers, sometimes at the CEO level, they have a concern about trust and a concern about the consumer, but they fall back to a product mind set. They have clearly done a terrible job and the focus has been wrong and the look and feel of those products is completely wrong. They are selling financial products as if they were couches or cars.
“In regard to product shenanigans, if banks were to change their operating system to advice, quality advice, rather than the delivery of products then it is problem solved. The fundamental flaw in financial services has been in the area of trust and relationships. The new operating system, or the real financial DNA includes three things: Trust, relationship and the delivery of consumers into their dreams of freedom, their lives of meaning. Life Planning is a systematic process – a foolproof one – that delivers these things. If the banks were systematically selling that advice package, including unbiased, unconflicted product advice, how could they fail?”
Mindful Money: Returning to the book, what if some investors don’t want to be convinced?
Kinder: “I try to be inspirational. Some people may not want to be inspired. Some think it is about products, old line financial advisers think it is still about the product, and that is what some reporters and journalists say too. That is what consumers have heard. So in a meeting they don’t trust us and they want to keep it narrow and that is it because they don’t trust us. But hopefully we can convince many more.”
Mindful Money: How would you measure success?
Kinder: “I would like to see the old ways ended. I want consumers to have an authentic conversation with their advisers and I would like to see the advice spectrum covering people who can’t afford to pay anything to people who can afford to pay a lot. I would like to see the whole system thrown over. In a more modest goal in terms of the next year or two it would be to get terrific sales of the book and website use.
“A model of great advice, that is personal, delivers much greater economic rewards for clients and advisers. The old banks would get one dollar or pound in six or eight from their customers. A life planner is going to get eight in eight, all the assets to advise on. Frankly how can you give advice if you don’t have the whole picture in front of you? That all has to shift. But it will shift.
“In relation to other acts of malfeasance, one of the principles of life planning is that a life planner has to live their life plan, they’ve got to walk the talk, or the client sees right through them, their lack of authenticity, their “sales” approach. A genuine life planning firm, like the one we are interested in putting together, would embed trust, relationship and the delivery of people into their dreams of freedom and their lives of meaning into the company itself. It’s extremely unlikely that in such a culture, where the leaders themselves were required to live in such a way, that these kind of ongoing scandals would continue.”