Ep #105: Whiteboarding: Combining Emotions, Curiosity, & Math to Create Your Financial Plan
In the world of financial planning, it's not just about numbers; it's also about understanding emotions and priorities. Join the conversation with Benjamin Haas and Adam Werner as they reveal the detective work behind effective financial planning through what they call whiteboarding. Get ready to think differently about your finances!
1:26 What is Whiteboarding?
4:35 Why Values Play a Huge Role in Generating Advice
8:51 Examples of How Clients' Priorities Can Shift Advice Given
14:54 Proactive Planning is So Important!
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Benjamin Haas 00:03
Hi everyone and welcome to A/B Conversations where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now!
Adam Werner 00:27
Hey Ben, how are you doing?
Benjamin Haas 00:30
Adam Werner! How are you today?
Adam Werner 00:32
I'm doing great.
Benjamin Haas 00:34
Like your Friday?
Adam Werner 00:36
Yeah, for me, in the future, for those listening. Yeah, I'm going to be off a couple of days for our big regional race finals.
Benjamin Haas 00:45
I don't know what we're going to do without you.
Adam Werner 00:47
Let's hope for
Benjamin Haas 00:51
I mean that and for those that don't know, you and the racing side. I can't just say and for being fast, but being pinpoint timing because that's how it works, right?
Adam Werner 00:59
Yeah, yes. Consistency and predictability.
Benjamin Haas 01:04
Well, on behalf of me and the other six listeners, good luck this weekend.
Adam Werner 01:11
I know for a fact we have more than six because I've recently heard from a couple of people that I wasn't sure listen to it in the first place and apparently people do enjoy listening to this. So that's great and sorry all together.
Benjamin Haas 01:26
Yes and I'll let you introduce it but this is another behind the scenes. When we use a word “whiteboarding.” What the heck do we mean? So, peel back the curtain and let's do it.
Adam Werner 01:39
It is a little bit behind the scenes. So, we use the term whiteboarding and really all that means to us is the strategy before recommendations. All of the puzzle pieces in someone's financial life, throw it up on the whiteboard and we start to play with the variables and start to try to piece things together. Because as we've talked about before, any one decision when it comes to your financial life does not happen in a vacuum, there are those potentially unintended consequences. There's typically dominoes to any one decision, you know, you'd change your retirement contributions, what does that mean? Then for cash flow and withholding and all of that, just simple things have all these other little dominoes that go into it. We're going to talk about that process and kind of give some examples as to what we mean by that whiteboarding process.
Benjamin Haas 02:31
Because it's just so hard, I still feel it like how long have we been doing this together? We've been in business, you know, and we've been doing, quote, unquote, financial planning for, gosh, getting closer to 20 years, but it's just so hard to quantify what that is. I think a lot of people kind of recognize, well, there's a program, you plug stuff in and it does some math, and then you can tell people what to do. Whiteboarding to us, it's so much the human element on how to use that math or put things in order based on what people prioritize to actually be able to answer questions like, what I want to focus on today. When we say whiteboarding, here's what we mean from a relationship standpoint that allows us to I think, give the right advice. Sorry, compliance to try to give the right advice at the right time.
Adam Werner 03:25
Yeah, I think that one of the last things you said there is the key component. Any planning program can essentially spit out the best financial thing for you to do right, just numbers and cents, here's what you should do. But it's the human side, as you said, and based on someone else's priorities or what gives them peace of mind and comfort, can completely reorganize the strategy or potentially change what may work. Because ultimately, it could be the best financial advice but if it's not something that resonates and actually drives somebody to action, then it's worthless. It means absolutely nothing if they can't do anything with it. So oftentimes, if 80% is good advice but it actually leads to action, we’re at least headed in the right direction. That's the realistic side of planning that any action is better than no action, depending, I guess. But let's kind of go through, are we okay to kind of go through some examples or you want to go through some of what does it look like and what does it involve?
Benjamin Haas 04:35
So, let's paint the picture, like when we say whiteboarding, like it's physically the whiteboard, either in my office, the conference room, and I want people to picture, you're laying out all the puzzle pieces before you start. You've heard me articulate this, picture the detective in your favorite crime scene show and they've got a board. It's all the pictures, all the pieces of evidence, like they're connecting things with the string, right? They're trying to be able to see everything in one spot so they can digest that from different angles. For us, it might be key pieces of data or key pieces about them, the timeline between now and their goals, but what's most important to them? What are the questions that we need to be able to answer when we're putting everything up on the board so that we strategically can start to look at it and say, what do we need to prioritize? If we do this, then what, oh, I shouldn't be taking all these answers. It gives you and me and Holly the opportunity to kind of start to look at it. Not from the math equation, but from a prioritization of what needs to happen and what we need to answer.
Adam Werner 05:52
I think, we often convey the message of planning, as you know, putting somebody's financial puzzle together. I think that analogy of thinking of okay, you now have a box, all the pieces are randomized? How do you start to build that puzzle? How do you start to build the plan? Usually, right, you start with the edges, get all your flat pieces, right? From our standpoint, you start with the fundamentals, cash, flow, cash reserve, all of those basics. I think there's a lot of parallels to that to the point where maybe the most complex, there's different ways to go about it. But you can kind of save that for the last puzzle piece that will kind of fall into place when you get everything else kind of oriented. So I like that. I like that analogy here a lot.
Benjamin Haas 06:42
I think it also, for as much as we are like, you know, and as much as Holly's learned, I mean, this is the first place that she's worked to do financial planning, as much as we all try to think like, we all have different perspectives on looking at it somebody's situation and going, well, we could approach it this or we could approach it that way. We should move into some examples but I can't emphasize to listeners enough that there are different ways to solve financial planning questions and not only within our profession, people are more apt to suggest this type of thing versus this type of thing. What we're trying to really get better at, is literally put everything up there and then look at the situation through that client shoes. If they say, this is what matters most to me, then we could recommend these three things. But this is the one we have to prioritize because to your point, we have to be able to get people moving in the right direction, even if it's not the perfect direction. The stats out there, 70% of our clients only enact 20% of our advice. That's a really small amount of action that's taken so this is our opportunity and again, let's just get into some examples. But this is our opportunity to try to make sure that we're pushing the right button for somebody and then holding their hand through that process. I don't think that happen if we just jump into a Financial Planning Tool and go, here's all the data, tell us what to do.
Adam Werner 08:13
Yeah, I think I know, we've talked about this another podcast before. But that's why it's so crucial to us, those initial couple of meetings to really ask questions and get to know somebody and try to figure out what those values and those priorities are. Because that will absolutely dictate some of the strategy or it may eliminate certain options that we would say, yes, this may fit. But if it doesn't fit the emotional side of things, if it's just not a priority for that particular client, then we need to set that aside. So maybe we'll start with a broad example and then work into some more specifics. Yeah, go for it.
Benjamin Haas 08:49
Do you have one that pops in your mind? That's kind of really,
Adam Werner 08:51
Yeah, I think the most obvious that we run across frequently is just holding cash and sometimes holding for clients holding I'll use air quotes too much cash, excess cash at the bank, where the right thing in the long-term may be, have just enough cash in the bank for your cash reserves to meet your needs. But then anything else that is quote unquote, excess, invest it, you know, you're not going to touch it for a year or two, or I shouldn't say a year or two for 18 plus months, so two-ish years. Then there is some safety and trying to play the long game with investments. We know that over long periods of time, the market always goes up. So, the right thing is to invest that and get some growth on it. But that tradeoff for certain people may be well, but if I know what I have in the bank and I have extra cash that allows me to sleep at night, that allows me to not worry about bills or unexpected expenses or something like that. It may allow me to not worry so much about my investments in volatile times because I know I have this safety net. It is my buffer in that when the market is going haywire. So, that's a perfect example where the right financial thing over time maybe to invest as much as you possibly can, but holding a little bit extra cash has a lot of additional value besides the actual dollars and cents.
Benjamin Haas 10:21
Right. So, in practice for us bringing it back to whiteboarding, it may be very simple for us to go, yes, puzzle pieces on the outside, fundamental advice, three to six months of your expenses need to be in cash. We're going to tell you three months and I'm going to tell you to invest everything different, we're going to put that in the plan and the rest of the plan hinges on that. When we know people come to us at moments of transition, maybe somebody passed away, have a client that's ready to sell a business, we have somebody else looking to buy a second property, they all have cash and more than we would probably recommend but they need that. They need that on the front end before taking any other steps in the financial plan that we're going to recommend because that's their safety net. So, what's our job in that data gathering process as we're starting the whiteboarding process? How about we just ask the question? What's your comfort zone? How much cash do you really need? How much does that play to allocate towards your other goals? Right? That's an example of the math may tell us one thing, the program may tell us one thing, we have to ask that question on the front end and early in the process so that we can adjust the rest of the plan because of it.
Adam Werner 11:26
I'll let you take this one but you kind of just hinted at it, right? The idea of a recent scenario, client looking to buy a second property and some of those dominoes we kind of had to address going through that thought process on, they're going to buy a second property? How do we best go about that?
Benjamin Haas 11:50
Yeah, and you can help me with it because I know you were the one that thought of some of these things so I have to give you credit for that. Our job when somebody's making an adjustment like that as adjustment to the plan is to think then, alright, if they're going down this alley, what's coming around the corner? What are the unintended consequences of that? So in this situation, if you're going to liquidate some money, what does it do to the tax return? Right, so yeah, I don't know. Help me out. What were some of those things?
Adam Werner 12:20
I guess we'll, I'll take one peel back. One other step, they theoretically this client could have sold all of their non retirement investment account and bought a house outright not to worry about a mortgage or any of that stuff. I know we talked about that in a recent podcast, similar situation. So it's the domino effect of we're going to liquidate some of this investment account. But then what does that mean from the tax standpoint? Are there capital gains? Are there losses that we can use to offset some of those gains? At what, depending on what we need to liquidate? Or how much cash we need to essentially come up with from the investments? What is that going to trigger in terms of taxes, and then you can start to play the if you give a mouse a cookie game right? Now, you sell some investments, you have some capital gains, along with their other income, is that now going to make them ineligible to contribute to the Roth IRAs as they have been doing the last couple of years, maybe, but let's be mindful of that. Just from a cash flow perspective, they're not going to acquire this other property, there's going to be not only the cost associated with that, but we need to come up with additional cash flow to help cover this other mortgage and the other bills that now come with a second property. That may now mean adjusting what they're saving into their retirement accounts through work. So again, what are the tax ramifications from that if they were saving from a pre-tax level? It's there's all these little variables that are all connected, as you said that the string on the detective's board, that you pull one pin out and now that string is, connected to something else?
Benjamin Haas 14:03
I'm glad you went through that because that's a great example of that's affecting 123 different parts of their financial plan. I think without us like looking at it through that lens, and again, I'm going to call it whiteboarding without being able to see it from all those different angles. These things probably just would have become problems later on.
Adam Werner 14:25
Benjamin Haas 14:27
So now we have to remove Roth IRA contributions or now we had too much money going towards retirement and not enough cash flow. That's what we're trying to do. We're trying to be proactive. We're trying to look at what works best for them. Let's have the conversations and getting that whiteboarding exercise I think just means we're being thorough and checking all the boxes of not only right now, but what could happen, unintended consequences, as you called it earlier.
Adam Werner 14:54
I think ultimately, obviously, we're biased as planners, but it's much better to be proactive other than reactive. This is just another one of those examples where yes, had we not considered all these different moving pieces, the problems don't change, you're just maybe changing how you can deal with them or the timespan in which you have to kind of digest and make a decision on how to deal with it on the back end. Or sometimes by being reactive you lose some of that flexibility or you lose some of those options, by not being proactive on the front end to just explore what is possible. Let's have the conversation and work through those priorities and try to figure out, here's what's going to work for you. This is what you're trying to accomplish, these are the tradeoffs, let's just talk through it.
Benjamin Haas 15:42
I kind of liked this detective analogy that we're kind of running with here. Be curious. So the other recent scenario that was popping into my mind, it's somebody that was helping settle an estate, I happen to be a beneficiary of that estate too. Now, as we've shared in different content, or maybe in different podcasts, like the rules of estate liquidation and inherited IRAs, things have been changing. It forced a conversation with me to just go, okay, the right advice here might be to stretch things out but what I know of this situation, this person having to deal with the family and support the family for many years, I just had to kind of explore and kind of that whiteboarding way, what does she prioritize here? Do we want to continue to stretch out a lot of these distributions, which, by the way, is probably the right advice from the accountant and from us. But there's a very emotional perspective here on how long do I want to continue to be tied to this situation that has really drained me in a lot of different ways just to try to save a couple bucks. Am I going to try to maybe exhaust this in a shorter timeframe? That ended up or is going to end up being the right advice here, even though financially the programs would tell us maybe to handle that a little bit differently? Emotions play a role in this whole whiteboarding experience.
Adam Werner 17:07
Yeah, and that's not to say that every time somebody feels a certain way, as it means that we just kind of go with it. Oh, sure. We're still going to give the feedback if there's a situation where someone is just accelerating a whole bunch of income and it's going to push them into a higher tax bracket, it's going to be truly detrimental, mess up Medicare expenses is something I had to look into here. I just wanted to make that clear that there’s certainly the human side of it, but oftentimes, I'll bring it back to the should I pay off my mortgage? I think that's a huge one that we hear from a lot of people and if that peace of mind of just getting rid of debt and not having the payment, that is worth a lot to a lot of people. But if that comes at the expense of a lot higher taxes, pushing you into higher tax brackets, then we'll talk through that and then at least, maybe try to spread that out. As you said, we're not just going to rip the band aid and, yes, it's going to feel psychologically good. But until then, the taxes are due that may take away some of that pleasure that was had of just getting rid of it. So, there are the nuances where, we kind of have to work through so that, sometimes the ultimate answer is to compromise where the client gets their peace of mind, gets accomplished what they want to accomplish, but it may take two tax years instead of one tax year. Just so that it's kind of the best of all worlds where everybody's happy and it's a decent result from a financial side of things too.
Benjamin Haas 18:45
Maybe that's a good way to wrap it up. I think what we're trying to share here is that the process is going to include a lot of conversations and I do not want to ever have people feel like financial planning is just oz behind the curtain. Right? It is our job to them. That's a great way of putting it. What did you like, expand on that? What did you mean?
Adam Werner 19:11
Well, I've often heard, like people being planned upon. Here's my question and then you know, an advisor or somebody just says, well, here's all the things you have to do and not have any scope of how that person will actually be able to work with that information or not.
Benjamin Haas 19:29
Right. I'm the thought leader so, I'm going to tell you what to do. Go do it. We want and what we're trying to express here in whiteboarding is we want to be the thought partner. Here are the questions that we heard you want answered. Here's what we understand you prioritize, your Statement of Financial purpose, what you value is this. Now it's our job to work within that framework. Going back to your puzzle analogy and us sharing this today. Whiteboarding is just to help kind of quantify our work, the thought process, the teamwork, the perspective and we want everyone to be a part of that when we're planning with them, we're a thought partner. Not to plan upon them, not to just be a thought leader.
Adam Werner 20:08
Yep, yep. Well said
Benjamin Haas 20:11
There you go, a little behind the scenes. How is our detective work done? Yeah, I'm going to lean into this man, detective work, I like
Adam Werner 20:19
Yeah, I often feel , you know, I'm not a forensic accountant. But you know when people give us data, I'm just looking for nuggets of information. Oh, look at the statement and there's a piece of activity. Oh, that stood out to me, make a note on it. It is a little bit of a detective work you know going through the planning process.
Benjamin Haas 20:41
So, we would need the copyrights to have our exit music for the podcast here be like that. See a lot of songs with law and order.
Adam Werner 20:52
Yeah, that's what I was thinking. Sorry, we don't want to get sued by NBC.
Benjamin Haas 21:03
Thank you for your insight on whiteboarding! Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investing. Thanks for listening!
Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.
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