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Many strategic business and military leaders have characterized our current reality as a VUCA world – a business and social environment driven by Volatility, Uncertainty, Complexity, and Ambiguity. Compounded by economic and global disruptions, there has never been a greater need to employ a strategic thinking process and to communicate directly and simply. Nowhere is this needed more than in financial services and in our interactions with our clients.
The practical bottom-line for the financial profession is in its ability to help guide their clients’ financial future to improve the lives and state of mind of their clients. That is going to require a serious stepping back from the old routines of how the industry explains itself and conducts business. Many of the products and services presently on offer are too complex and this needs to change. The future of wealth management may well be in advisors embracing simplicity. That does not mean dumbing down everything and speaking only in monosyllables. In fact, embracing simplicity is hard work.
That is why we decided to talk with Institute member Jason L Smith, Founder & CEO of C2P — a financial training, coaching, and IP development company — and JL Smith Holistic Wealth Management — his independent Avon, Ohio-based financial planning firm. He is also the author of The Bucket Plan: Protecting and Growing Your Assets for a Worry-Free Retirement which is based on a three-bucket philosophy of strategically positioning assets to plan for and mitigate the risks that can occur in retirement.
Jason’s multiple endeavors, including creating The Bucket Plan® Best Interest Process for advisors, all focus around the goal to simplify the often complex world of financial planning for greater client engagement and results. We asked him to further explain his perspectives on bucket planning.
Hortz: How do you define “bucket planning” and its relevance for advisors?
Smith: There is a difference between bucketing and bucket planning. Bucketing is typically associated with distribution planning, which is where people are setting up ladders of income that will last for a period of time before that ladder ends and then they will move on to another ladder. This concept, particularly for bonds and CDs, has been used for a long time.
But bucket planning is an asset-positioning philosophy of segmenting your money based on the time horizon of when you will need to access the funds and the purpose of that money. You can absolutely ladder within the buckets as well, but bucket planning is more about behavioral finance and simplifying asset allocation for clients and advisors alike.
There are many clients who do not understand detailed pie charts, asset classes, sectors, and different portfolio components. That is where The Bucket Plan® has been integral as a tool to demystify those somewhat complex concepts and position money based on the purpose and the time horizon. This not only helps them make better decisions about how much risk they want to take within each bucket, but it helps advisors become both more knowledgeable and better educators.
That is where the relevance for advisors lies — in order to be more effective, you should simplify everything for your clients. Many of us in the industry are more likely to overcomplicate the planning process for our clients the more we learn and with each new certification we get. In my practice, I saw that it was critical to meet clients where they are, not talk over them, and remember they need our help. The Bucket Plan® process also uses analogies along the way, and clients now have a companion book they can read that has real-life client stories to connect with. For advisors, bucket planning is about serving their clients’ needs; for clients, it is about understanding your money and being confident in your financial plan.
Hortz: Can you give us a brief history of bucket planning and how you have evolved its application for advisors and their clients?
Smith: The earliest origins or mentions of what we call “bucketing” or “bucket planning” you can find comes from Harold Evensky, a retired professor from Texas Tech University.
My personal history of bucket planning is where I would talk people through time-segmenting out their money to make better decisions. The first box was the “now” box that contained money in the bank; the second box, or “soon” box, was the money they would need for income or withdrawals sooner than later; and the third box, also called the “later” box, was the money that was for long-term use that could accommodate more risks or volatility and ultimately in many cases, that money would be passed on to loved ones.
One day a client said to me, “Hey, those look like buckets,” when I was drawing out these boxes for them. Then that figurative lightbulb went on and soon clients were able to say, “oh, I already have a bucket list, but now, I have a Bucket Plan.”
I have evolved the bucketing approach’s application to advisors and their clients by making it into a philosophy complete with visual aids so clients could have a greater understanding of how their wealth is divided and be able to make empowered decisions. We built The Bucket Plan® financial planning process around this three-bucket visual and created tools to be able to ask the right questions. Then, we crafted concepts which aid in how stories and analogies explain something. All of these aspects of the Bucket Plan® Best Interest Process allow advisors to simplify the financial planning process.
But now, we make sure that we streamline the process of helping advisors ask all the right questions to gather the right information to put together an exceptional and tailored financial plan. The evolution was taking this idea and then surrounding it with tools and concepts into a sequential financial planning process.
Hortz: How does the bucket planning process help address heightened volatility and complexity going on and economic uncertainty that clients may be dealing with today?
Smith: Well, a good example is when the pandemic hit. Many investors were left scrambling amid the uncertainty this worldwide event brought, as none of us had seen anything like that in most of our lifetimes. However, not one of our clients made panic-driven decisions to pull their money out of the market. The fact that they had their Bucket Plans in place where their money was segmented based on the time horizon, as well as when and for what they would need it for, eased the “freak out” risk, which was very real at the time. In fact, we noticed that having a Bucket Plan in place actually helped provide the confidence for many of our clients to rebalance and put fixed income money into the market since there was a sizable buying opportunity of an almost 30% down equity environment.
If we think about behavioral finance, when it comes to economic uncertainty and volatility, The Bucket Plan® helps provide peace of mind that they have the money they are going to need when they need it. For example, in a year like 2020 with a pandemic or 2024 with inflation, a Bucket Plan can help clients realize things like:
- “I have enough money in my ‘now’ bucket, so I have an emergency fund with planned expenses also set aside.”
- “I have enough money in my ‘soon’ bucket to buy a 10-year window of income or withdrawals without being subjected to market downturns.
- “I have enough money in my ‘later’ bucket to account for long-term care costs that may arise, and my plan is structured in a way to account my desired lifestyle.”
It is all about having the confidence to stay the course.
Hortz: On another important dimension, how exactly does this process address any of the SEC Best Interest standards and state by state regulatory initiatives?
Smith: We refer to The Bucket Plan® as a best interest process. That branding was inspired by the DOL when the fiduciary rule came about. At that time, we knew that we were teaching financial planning to advisors in a space where a lot of other financial institutions were not. For example, on the insurance side, many institutions were mostly focused on selling their products, not sound planning. We noticed similar things on the investment side. There was not in many cases a financial plan to lead to the products as the solution, it was just immediately directing people to the product as the solution.
We have always believed that, similar to pharmaceuticals, selling a solution before a problem is diagnosed and a treatment plan is laid out can lead to issues. That is why our process was created around due diligence and fact finding about the clients’ needs and goals, so we can produce the best recommendation for them.
So, when the DOL fiduciary rule was first implemented, we had so much confidence in our process and what we were teaching financial advisors all over the country that we decided to go directly to the Department of Labor and the SEC and present The Bucket Plan®. We also hired a top law firm to help ensure we were dotting all the I’s and crossing the T’s to meet the best interest standard according to the DOL fiduciary guidelines and the SEC.
And so, by following the process, we make sure we gather the right data to act in the client’s best interest while also helping them understand how we are serving them and why we are making the recommendations we are — all in a simplified way.
As far as state-by-state regulatory initiatives, when I designed The Bucket Plan® process, I made sure that it was versatile enough to be scaled not only to each client’s diverse financial needs, but also so advisors anywhere in the country can use it. That is because The Bucket Plan® provides a framework advisors can customize a plan based on state regulations and the individual they are serving.
Hortz: A key component to your bucket plan approach is coaching advisors on becoming a holistic advisor. Can you explain this approach and its importance in context to your advisor programs?
Smith: The approach is all about the transfer of knowledge. The financial services industry as a whole has done somewhat of a poor job in training to ensure the seamless transfer of knowledge. There are several reasons this has only gotten worse, but one that we aim to solve is that many people have switched over into the independent practicing space where advisor business owners simply do not have the training support and resources.
That’s where we come in by having what we call our “Three Uniques” which are three key concepts that all of our educational efforts emanate from to meet their core needs as aspiring holistic advisors. We meet new advisors all the time that struggle with not having a defined planning process or streamlined training programs. In addition to teaching the younger generation of financial professionals, these same advisors also need help with hiring, onboarding, providing a career path, creating a succession plan. Our various programs assist with this full spectrum of holistic advisor needs.
Hortz: What is the distinction you are making in saying you are a “learning company” versus a training company?
Smith: Our driving force is to specialize in how the adult mind learns and facilitating the transfer of knowledge through different methods. That is why everything we do is also built out into learning modules online through our own platform. We also harness the unique benefits of live experiential training where we teach a concept, role play, and do group enforcement discussions. At the end, attendees take a proctored exam to make sure they studied and to help them retain the information. From there, we help them put what they have learned into action in their own firms by setting them up with mentors and coaches that continue to reinforce their knowledge.
The use of the term “training company” is so overused and ultimately diluted because with many in the financial advising industry, it often comes down to putting someone on a podium to talk at an audience and it is called training. Those watching often sit and take notes, and it is like drinking out of a fire hose. Then, they go back to their office with the intent to implement what they heard, but it often gets lost amid the sea of tasks: taking client calls, meetings, putting out fires, doing paperwork. And then nothing becomes of what they “learned.”
The transfer of knowledge never happened because how people really learn is not by listening. Some people can just listen and learn, right? Some people can just read and learn. But in our experience the better way to learn is by doing, and that is where the experiential training comes in and it is a big differentiator where we are reinforcing it in multiple modalities of transfer of learning. And the e-learning, the proctored exams, the experiential training, the mentors, and then actually helping them design their own Bucket Plans for their clients — each of those play into our strategy as a learning company.
It is about teaching financial advisors how to fish instead of fishing for them, and that is a big part of learning versus training. We strive to help advisors learn how to better help their clients learn, which goes back to the core focus of our firm to help American families with their finances by helping advisors.
Hortz: By the way, congratulations on The Bucket Plan book being named one of the top 10 retirement planning books of 2023 by U.S. News & World Report. Can you tell us more about that?
Smith: Yes, this was a surprise to us, we did not know this had happened until the article came out. We were thrilled to be in a rank of ten great books and to be recognized by U.S. News added to that even more. I was also incredibly proud that of all the books on the list, ours was the only one based on a financial planning process, which ties into what we have been talking about here. We are providing a concrete planning method for retirees to explore, not just talking around the subject and giving pointers. It is about the difference between holistic bucket planning and just financial planning — we aim to do more than just provide a solution without context. So long story short, this was a great honor for us.
Hortz: Any final thoughts or advice to share with advisors about bucket planning?
Smith: The Bucket Plan® was built to help provide peace of mind during market volatility and uncertainty, while also simplifying financial planning for advisors and their clients. The beauty of it lies in the fact that with just three buckets, you can elevate your client experience so that they can put their head on the pillow at night and sleep soundly knowing they have a plan. We are also proud that The Bucket Plan® puts the clients’ interests first and helps advisors adhere to fiduciary standards by having due diligence and making a deeper connection built right into the concepts and tools.
C2P is an organization comprised of specialized platforms, each designed to simplify holistic financial planning for advisors and the clients they serve, along with access to an array of investment and insurance vehicles to help advisors accomplish their goals. I encourage anyone interested in learning more to download our free eBook, which expands on the details of what The Bucket Plan® process looks like for an advisor, and to explore what our training has to offer.
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