The constantly travelling founder and president of The Kinder Institute of Life Planning said he initially became a financial adviser to “make a living” and because he was “good at mathematical thinking”. But he also could not ignore a longstanding yearning to embrace his artistic passions and dissatisfaction with how consumers were treated. It was this “real weakness” in financial services that motivated him to write his first book for consumers, and the success that followed gave him the courage to pack in his day job and dedicate his energies to engineering change.
The book, The Seven Stages of Money Maturity, exceeded expectations when it sold 40,000 copies in his native US, but what surprised him most about its success was that half its readers were financial advisers. Rather than rejecting his theories, plenty of his peers embraced them and shared a similar discontent with industry practices.
“The number one weakness in the financial services industry is the trust levels, which are abysmally low,” Mr Kinder said. “Trust is doing things in the consumer interest, but the whole emphasis on advice has been product, on spreadsheet items and cashflow, which are things the consumer does not care about. The product is the last thing. You can buy products anywhere. The question is, do you trust the adviser?”
He blamed the prevalent “product-obsessed” culture on what advisers had been taught in textbooks and urged his peers to adapt by placing a closer emphasis on listening and building relationships – approaches that are integral to his financial life-planning project. As far as Mr Kinder is concerned, the responsibility of a financial adviser goes well beyond selling products to clients and until this is fully acknowledged the “trust gap” will always exist.
In his eyes a financial life planner asks more profound personal questions on what clients want to do with their money by exploring their inspirations and ultimate life ambitions. Until this process is complete, he said, a truly holistic financial plan could not be created.
He added: “Life planning is what has to happen before a financial plan can be designed. It is about meeting the client, establishing a great relationship, gaining trust and eliciting what the client cares about most. Only once that has been established can the financial plan can be done.”
According to Mr Kinder, this process can be achieved by dedicating the first meeting to listening and avoiding sales pitches. When delivered effectively, the meeting – crucially – can help advisers overcome “half the issues needed to build trust”. Moreover – contrary to fears from some that this extra time required to build relationships will prove too costly for the average client – he said an effective life plan can be delivered in just one hour.
This pledge to teach advisers how to deliver a “game-changing” life plan in one hour was just part of his ambitious strategy to transform how financial advice is distributed. The project, known as LifeSpire, is the biggest business venture Mr Kinder is working on. It involves consumers in the UK being given a free one-hour life plan to manage their finances – a project he described as bold but equally achievable.
LifeSpire, which is subject to funding, stemmed from Mr Kinder’s concerns over a growing advice gap and was part of his long-term desire to “institutionalise” life planning. He said it was influenced in part by the massive growth of Vanguard, the passive investment company that had turned from a laughing stock to the “number one provider of mutual funds”. Vanguard, he added, had made a success of delivering cheap, effective investment solutions, with a level of service that he aspired to replicate in the advisory profession.
Rather than launch LifeSpire in his native US, he opted for the UK because of the Retail Distribution Review and the greater “power and authority” that the regulator commanded on this side of the Atlantic. In the US he said there was a lot of lobbying against regulatory changes, which is why the Dodd-Frank Wall Street Reform and Consumer Protection Act had only been “half activated” despite being passed four years ago.
But while he was impressed with how the RDR had shifted more attention towards the client, he also voiced his concern about the large amount of regulation in the UK. Mr Kinder said: “The RDR has many weaknesses and strengths. The regulator saw we were too product-centric and wanted to shift it towards the client, which it achieved primarily by changing the price mechanisms.
“However, the UK is way overregulated. I look at some of the documents that IFAs have to hand out that consumers do not read, which is ridiculous, as is the amount of time that has to go into them. I am also concerned about the middle market. It is not fair that some people can no longer afford advice, although life planning per se is unregulated because it is not about selling products.”
Daniel Liberto is features writer of Financial Adviser
George Kinder’s career ladder
2013 to present
LifeSpire,
Founder and chairman of the board
2000 to present
The Kinder Institute of Life Planning,
Founder and president, author and workshop leader
1973 – 2004
George D Kinder,
Personal financial adviser and owner
1966 – 1971
Harvard University,
English literature and economics
