Use this debt management litmus test

Every time I speak to advisors, I hear the same message. They say they already do debt and cash-flow planning.

Read: Good debt versus bad debt

But we’re not speaking quite the same language. When I ask more questions, “I’m doing this already” really means:

• I have a really great intake form and it includes a liabilities section
• The odd client who claims to be having trouble with debt receives a talking to from me about priorities. We might do a budget, and then they’re fine.
• I refer clients to a lender if a client talks about their mortgage or some other debt enough.
• I lecture clients about the things we should all spend less money on.
• I’m really frustrated because I don’t understand why people can’t control their spending, so I give them a few tips.
• I refer many of my clients (which can actually mean 10 of 400) to an all-in-one provider with whom I’ve got a referral relationship. It works.

You may see the disconnect. As I spelled out in last month’s column, what these advisors do already is not what I’m talking about. And here is the litmus test.

An advisor who claims to be doing debt and cash-flow management — but isn’t — has a very low number of mortgage referrals proportionate to clients.

Read: Help clients pay off debt

But, when you do debt and cash-flow planning effectively with every client, you find out most people do not have their debts organized in the best way possible.

Then, you end up referring your clients consistently to a lender with whom you have a good working relationship to have the structure of their debt changed.

Read: Consumer debt bubble and you

So ask yourself, “What percentage of my clients have a current mortgage or debt solution referred by me?” If you percentage is below 60% and you don’t have evidence that more than 40% of your clients are debt free, you and I are speaking different languages.