How to Be an Effective Pro Bono Advisor
In what ways should your approach vary?
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It’s that time of year when many advisors and firms consider providing pro bono services as a way to give back. Despite these good intentions, advisors often make incorrect assumptions about how to help people with low incomes or in financial distress. It takes a great understanding of their goals, backgrounds, and concerns to avoid having one's attempt at pro bono advice do more harm than good.
In fact, it turns out that when doing pro bono work, advisors can lean on the same skills and knowledge they have built for their wealthy clients. But it’s also important to know what you don’t know. Advisors need to avoid biases about what lower-income families need, biases that can end up deterring pro bono clients from continuing to get help or even cause negative financial consequences.
Below are just a few examples of lessons I learned early in my career as a financial planner and as a trainer for financial counselors who collectively worked with hundreds of working-class families in the United States:
But these details are just part of the bigger-picture approach needed for really being of service with pro bono clients.
It’s Not All About Financial Education
Many advisors assume that good financial advising for people experiencing financial insecurity is about teaching poor people how to make better money decisions.
The problem is that this approach assumes that a lack of financial knowledge or discipline is the client’s main problem and implicitly blames people for their financial difficulties. As an advisor, it’s important to remember that clients are the experts of their own lives.
I also know firsthand that there are plenty of wealthy people who get stumped by the complexity of a credit report.
So, at the beginning, it’s often not about educating the people you are trying to help--it’s really about educating yourself. When it comes to our wealthy clients, as advisors, we know that if we ignore the context of our clients’ lives, we can’t provide relevant advice. And it’s no different for those who can’t afford to pay for advice.
Why a Focus on Budgeting Can Be Harmful
With wealthy clients, advisors would never start by questioning their budget. But for people experiencing financial insecurity, that’s generally where advisors begin. Let’s explore why an instinct to start with budgeting for a low-income family can set you off on the wrong foot.
A budget-centered approach to pro bono advising focuses on naming and prioritizing wants (discretionary expenses) versus needs (nondiscretionary expenses). Then you work to decrease spending on the wants.
But let’s say you were working with a pro bono client and see a line item on their checking account statement for fast food.
You might ask the simple, unfortunately too common, question: “Have you considered eating out less?”
Here are potential reasons a client's budget may show relatively large dining out expenses compared with grocery expenses: His stove broke, and his landlord refuses to repair or replace it; she might not have time to cook because she's caring for family and working multiple jobs; eating out is the only uninterrupted time the family can spend with the children; or the car broke down, and he would have to take public transportation involving multiple bus lines to reach the nearest grocery store.
The reality is that clients may not have the flexibility in their lives to alter that budget line.
A budget-centered approach ignores the myriad financial barriers clients might face that pro bono advisors may be able to assist with, such as reversing student loan wage garnishment and steering clients away from predatory financial services.
You may even lose the opportunity to uncover the root of the clients' concerns and why they sought help in the first place. What might seem as a neutral suggestion regarding lowering expenses could also be a deeply personal and offensive one to the client. Pro bono clients face financial stress while shouldering all the negative societal messages that are placed on people who experience financial difficulty--because so often we blame people and question individual actions but not the systems that cause poverty.
Lean on the Skills You’ve Already Honed
So, where do you start? You already know what it takes to be a great advisor. Unfortunately, I’ve seen too often that when working with low-income clients, advisors forget or ignore those foundational skills and instead rely on widespread misconceptions of poverty to guide their pro bono efforts.
With wealthy clients, advisors know to maintain a holistic and birds-eye view of their goals, assets, and other important factors--before zooming in to offer recommendations. Providing high-quality pro bono services means treating pro bono clients like you would treat any other client.
In other words: Listen and learn about their lives, goals, and priorities and gather the necessary information before analyzing and developing recommendations.
Here are some principles and recommendations--that should be familiar to financial advisors--to keep in mind when working with pro bono clients:
Developing relevant expertise for a specific pro bono client demographic takes time and dedication. Ultimately, being a great pro bono advisor means understanding that the choices people make are limited to the choices people have. Pro bono support done right increases the kinds of choices people have.
Phuong Luong, CFP, is an educator, financial planner, and investment strategist focused on economic justice and closing racial wealth divides. She is currently the Investment Strategist for Adasina Social Capital and the founder of Just Wealth, a virtual, solo, fee-only RIA. She is also the online facilitator for the Boston University Financial Planning Program. Phuong is a subject matter expert in ESG and regenerative investing. The views expressed in this article do not necessarily reflect the views of Morningstar.