How to show clients what they’re missing when they focus on products over plans

Sometimes I think people need a reminder about why they’re investing. They’re not investing because they want to own one of the “10 hot funds.” They’re also not investing so they can talk to co-workers about what happened in the market. But the media, especially the financial pornography channels, are eager to focus the conversation on products and changes in the market.

So it’s no surprise that when we first get a call, conversations tend to start with a question: “Would you invest in X product?” Of course, the question is understandable, but it shows how often investors reverse the process they should be following. That’s why I love pulling out this sketch, Plan, Process, Product. It helps clients see what they’re missing when they focus on product first.

(Giveaway: Win a hand-drawn Carl Richards sketch on canvas)

I start the conversation by saying, “Yes, the investments you choose are important, but they’re not the most important decision you’ll make.” The most important decision involves the plan. Maybe it’s an investment policy statement or a simple list of goals, but somewhere, your clients have said, “This is what’s most important to me. Here’s my plan for the future.”

If clients hesitate or don’t seem to understand why you focused on the plan first, use this simple example. Until you decide where you want to go (the plan), how can you decide if you need to take a plane, a train, or an automobile (the product)? In between, you’ll review travel details (the process), like how long you plan to be gone. But it’s only after these two important decisions are made that people have enough information to get specific about the product.

(More from Carl Richards: Help clients cope when markets get scary)

I’ve also found this process helpful with new or potential clients. It offers a great introduction to investing and demonstrates your value as a planner or advisor. You’re not just picking products. You’re helping people understand where they want to go and the best way to get there. Of course, they could go out and pick a bunch of random products. But without a plan, without understanding the process, it’s hard to see how those individual products picked at random will help people reach their goals.

Carl Richards is a certified financial planner and director of investor education for the BAM ALLIANCE. He’s also the author of the weekly “Sketch Guy” column at the New York Times. In 2015, he published his second book, The One-Page Financial Plan: A Simple Way to Be Smart About Your Money (Portfolio, 2015).You can email Carl here, and learn more about him and his work at BehaviorGap.com.