Certified financial planner Jason Hamilton says even though there's a crying need for pro bono financial advice, too few advisors have experience with the types of situations they're likely to encounter providing it.
Most financial professionals, said the founder of Orange, California-based Keep It Simple Financial Planning, are trained to help wealthy clients invest their money in ways that will net them the highest returns. Little in their schooling or lives has prepared them for working with someone who's in need of pro bono service because they can barely afford their monthly expenses.
"The majority of CFPs, they come from middle-class backgrounds," Hamilton said. "They don't know what it's like to struggle to pay the bills and make sure the lights stay on and the kids are fed."
A new partnership formed between the Certified Financial Planner Board of Standards, a professional group for financial planners, and the nonprofit organization Foundation for Financial Planning seeks to remedy the situation. The groups announced Nov. 29 that they're formalizing a long-standing relationship used to provide training and resources related to pro bono services for advisors. The new partnership will work primarily to bring additional attention to existing resources such as
Maureen Thompson, the vice president of public policy at the CFP Board, said that in promoting pro bono service, she and her colleagues took some inspiration from long-standing traditions in professions like the law.
"We are trying to help instill a spirit of giving and volunteerism among CFP professionals," she said. "We are also trying to let them know there are resources to help them serve clients they perhaps don't naturally serve."
In a
And among people with low incomes, relationships with financial advisors are too often non-existent. The need is
Low-income clients are perhaps not the first priority for an industry that tends to go after high net worth individuals. But business interests are not the only barrier to pro bono work.
Jon Dauphiné, the CEO of the Foundation for Financial Planning, said many advisors express anxiety about the prospect of dealing with a different sort of client. He said that's one reason the foundation's training sessions aren't meant to teach a set of advising techniques. The goal is instead to remind planners how knowledge and techniques they already possess can be useful to pro bono clients.
"Because advisors are usually dealing with really complex issues, they sometimes forget how grounded in the basic principles of finance they are," he said. "That's what this really comes down to."
Dauphiné said advisors are not the only ones who come to pro bono sessions with anxieties. Clients are often fearful that they'll be judged for making poor financial decisions or not knowing how to budget properly. He added that advisors can take a big step toward allaying the concerns by gently probing to find an example of a good decision or behavior. Once a client's confidence has been built up a bit in that way, then an advisor can move on to suggesting improvements.
"This lets them know: You are not as far behind as you think," Dauphiné said. "It also lets them know you believe in your client, and that helps pierce the shame."
Hamilton said his interest in pro bono work stems from his upbringing. He and his three siblings were raised by a single mother who, largely because of poor investment advice, struggled to save. After Hamilton underwent training as a financial planner, he went back over his mother's finances and calculated that a conservative investment strategy would have given her anywhere from $300,000 to $500,000 for retirement. But because of an insurance advisor who had told her for years to sock away $1,300 a month into various whole-life policies, she had only $60,000.
Hamilton said his desire to prevent similar outcomes has been the biggest impetus for his work for the past 7 years with a nonprofit set up by his in-laws. The group, Avance Latino, offers a program called the
Despite those barriers, Hamilton said, the IDEAL Wealth Academy has a track record of helping the 100 to 150 people who go through the program each year build up a savings of at least $500. Oftentimes, he said, advisors who are working with low-income clients need to start by explaining aspects of the financial system that many Americans take for granted. Hamilton noted that people in need of pro bono services are often skeptical of banks, either because of bad experiences or because they come from countries with shaky banking systems. So an explanation of the Federal Deposit Insurance Corporation and its guarantee to back up $250,000 worth of deposits is often in order.
Another key, Hamilton said, is follow-up. Although the IDEAL Wealth Academy technically offers pro bono services, it will usually ask clients to pay something upfront. It can be as little as $20. Even that small an amount will help ensure clients are invested in the program and give them an incentive to heed the advisors' recommendations and report back on the results. Hamilton said the money is refunded, sometimes with a match of the client's savings, once the program is completed.
"We've found this is a way to get them to show up more often and make sure they are doing their homework," he said.
Other advisors agree that a lack of follow-through can be a barrier to providing pro bono services. Jennifer Kang, the founder of New York-based JWK Financial, said she started doing free financial planning work during the pandemic. Although she did get some sense of satisfaction, she too often went without seeing any result from her labors.
"I say a financial plan is not really relevant unless there is execution," Kang said. "I had to ask myself: Is this worth my time if there is no follow up?"
The new formal partnership between the CFP Board and the Foundation for Financial Planning builds on work the organizations have been doing to promote pro bono financial advising. Besides offering training and resources to help advisors learn of pro bono opportunities, the groups are collaborating on research to better understand the need for these services and the desire to provide them.
The CFP Board has begun asking planners to log their volunteer hours every year when they apply for renewal of their certifications. The board also hired a full-time pro bono manager, Moley Evans, in February. Part of her mandate is to increase the number of certified financial planners providing pro bono services by 10% this year. A press release announcing the new partnership said the board "is well on its way to achieving that goal." Joseph Feese, the CFP Board's director of public relations, said he couldn't immediately provide details.
Thompson said there's no plan now to make pro bono service mandatory for obtaining certification as a financial planner. Rather, the hope is that advisors will be drawn to the work because it presents them with a chance to use their talents for the greater good.
Not all clients in need of free advice are low income, Thompson said. Some are people who have been diagnosed with cancer or other chronic diseases and are worried about covering the medical bills. Others might be elderly couples struggling to understand the ins and outs of Social Security or having to make difficult end-of-life decisions.
"Most people do this because it's personally rewarding," Thompson said. "People who do it feel like they are giving something back. For most people doing pro bono work, that's the selling point — giving back to the community."
