Why Advisors Need to Monitor Financial Vital Signs

Several thought leaders in the financial industry have drawn a comparison between the need for a financial advisor and the need for a medical doctor. The trope goes something like, “you wouldn’t perform surgery on yourself because the consequences could be deadly, so why would you handle your own finances?” Sure, that’s accurate. But there’s a more important analogy between the two professions.

When someone attempts to find the right doctor, it can be a journey. They’ve probably seen several physicians, and perhaps have experienced poor bedside manner and the use of complex medical terminology that isn’t helpful. With the delivery of a quick diagnosis and a hastily filled out prescription, the patient feels uncared for and probably confused. It will be a completely different experience, however, if one day they meet a doctor who is different: empathetic, uses plain language that makes sense to the patient, and doesn’t rush into reaching a diagnosis. This doctor gets to know the patient, looks carefully at their medical history and completes a holistic assessment of the person’s health before offering advice. This might involve running labs for blood tests, conducting various scans and all the while relaying the rationale for each step to the patient. 

Financial advisors, too, should be equipped with the tools to assess and monitor their clients’ (financial) health. By breaking down complex concepts into simple language and giving comprehensive assessments that offer a systemic view of what needs to be done, advisors can become trusted and invaluable. Only by reviewing every part of the “financial body” of each client, and after collecting all the necessary data, can the advisor deliver a thoughtful, tailored one-page plan that clearly outlines what happens next.

The monitoring of those financial vitals is just as important as the intake process. 

Returning to our medical analogy, the best doctors don’t just view their patients’ visits in isolation. They schedule somewhat regular consultations that allow them to offer better preventative care and monitor patients’ health over the long term. Financial advisors should embrace the same approach. Without monitoring a client’s finances on a regular basis, market fluctuations or changing life circumstances could render a plan worthless.

By thinking about how a key set of indicators plays into a more complex, interconnected system,

financial advisors can begin monitoring their client’s financial vitals on a larger scale. Just as a physician should regularly check a patient’s blood pressure, weight, respiration rate and body temperature, advisors should take care to frequently assess a client’s financial health across various key indicators—including (but not limited to) liquidity, retirement accounts, real estate, savings, spending, taxes, debt, insurance, etc.

In doing so, advisors can become more effective, providing ongoing and preventative care that involves early interventions where necessary. When advisors employ systems and terminology that their clients can understand and connect with, based upon objectively informed scores (akin to those given in medical lab results), all parties benefit. If we alter the way we approach financial advising, more people will be encouraged to seek a trustworthy advisor who will monitor their financial vitals, improving their financial health earlier in their lives.

Reese Harper, CFP, is CEO of Elements