Posts Tagged ‘Benefits Of Financial Planning’
Wednesday, March 14th, 2012
The last twenty years have seen many changes in the investment industry. Among the most important being the adoption of financial plans by many advisors as a cornerstone of their client offering.
As a whole, this has been a huge positive for both advisors and clients. But a plan is only as good as how it is implemented and my recent conversations with some investors illustrate the important steps advisors must take to follow through on their planning efforts.
The positives of financial planning
Conversations with investors quickly drive home the benefits of financial planning.
Especially in rocky markets, financial plans give clients confidence that they have a roadmap to their long term objectives. They answer the “how much do I need “question that is a top concern for investors; and identify how much clients need to save to hit their goals. Financial plans can also drive home the reason that investors need portfolios that offer returns above the risk free rate; even if clients don’t like the volatility that comes with those portfolios.
Price Powell of research firm, Corporate Insights has worked with many leading investment firms measuring client satisfaction and share a wallet among over 50,000 investors.
He’s identified eight attributes that correlate with higher levels of client assets. First among those is having a financial plan in place. In Powell’s words, “He (or she) who owns the plan owns the client.”
Note that you don’t need a 30 page plan for clients to feel they have a path to success. Especially for less complex situations you can often do everything you need to in six or eight pages (and many clients prefer a more succinct document in any event.)
The pitfalls of financial plans
Last fall I spent some time talking to investors and was struck by concerns about their financial plans among some of the clients I spoke to. These concerns didn’t relate to the plans themselves, but rather to what happened after the initial plans were developed.
Investor complaints (which, just to be clear, come from a small minority of clients) fall into the three categories.
The first can be summarized as “Whatever happened to my plan?”
These are clients who worked with their advisor to prepare a plan but haven’t heard any mention of it since. Clients expect that their plan will serve as a roadmap against which their progress will be measured. Even if the news is not good, advisors need to incorporate a conversation about how clients are doing again their plan into every client review.
The second set of complaints relates to plans that are out of date.
“My plan was prepared eight years ago and hasn’t been updated since” one investor told me. “My wife and I have both switched jobs and our circumstances have changed dramatically. I just don’t think that a plan based on where we were almost ten years ago is relevant today. We mentioned this a year ago but nothing’s happened. We’ve been talking about whether we need to change advisors to ensure our plan is up to date.”
The final category of complaints is directed at advisors who are seen as being overly passive.
“Given what’s happened to markets, it was no surprise that we’re behind on our plan” was what still another investor told me. “When we met with our advisor, we expected that we’d have a conversation about either moving some of our goals back or making some changes to get back on track.
Neither of those things happened; instead she said that we should expect to fall behind at certain points and that we shouldn’t be concerned. We walked away wondering if we’re working with the right advisor.”
Incorporating financial plans into client conversations
Every experienced advisor knows that the plan itself isn’t what drives value to clients; it’s what happens as a result of the plan.
Clients who go through the planning process typically expect that their financial plan will be an ongoing topic of conversation with their advisors. It may be that you haven’t fallen victim to any of the traps investors complained about when it comes to financial plans. Just in case, consider these questions:
1. Are discussions of progress against their financial plans incorporated into every client review?
2. Have all of the financial plans for your clients been updated to reflect their current situation?
3. Are you being proactive in suggesting amendments to client goals or strategies in light of what’s happened to markets?
The answer to all three questions may be yes; but if you fall short with any of these with even a few clients now’s the time to remedy this. That way, clients will feel they’re getting the full benefit of the time they’ve invested to develop their financial plan, and won’t be vulnerable if approached by another advisor promising that working with him or her. Your clients will always have up to date plans in place.
Tags: Adoption, Attributes, Benefits Of Financial Planning, Client Assets, Client Satisfaction, Confidence, Conversations, Cornerstone, Corporate Insights, Investment Firms, Investment Industry, Investors, Pitfalls, Portfolios, Roadmap, Rocky, Term Objectives, Twenty Years, Volatility, Wallet
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Wednesday, May 25th, 2011
The CIFPs 8th National Conference Review
By Marc Lamontagne, CFP, R.F.P, FMA
This is my second consecutive year attending this conference and once again the agenda was PACKED. Each day began about 7:30 am and typically went to 6:00 pm, with dinner starting pronto at 6:30. You clearly earn your CE credits and receive your money’s worth at this conference.
The agenda was a smorgasbord; enough to quench the thirst for novelty of 500 to 600 attendees. The highlight was undoubtedly Hermann F. Leiningen with RBC Global Asset Management. Leiningen was very funny, and he managed to walk the audience through several complex economic scenarios and sustain their interest!
Take away: Expect U.S. interest rates to stay low for at least the next nine months or until there is a jobs recovery, stocks are still trading at the lower end of the band due to continued global economic uncertainty, and the demand for oil from China and India has barely scratched the surface.
Like any conference there were a few mutual fund company “talking heads,” although the more interesting material came from industry participants such as Cary List, President and CEO of the Financial Planners Standards Council. List presented some of the findings of their recent consumer survey on the benefits of financial planning. This is news that all CFP professionals will want to share with their clients and prospects. Shawn Brayman, President of PlanPlus, offered us an overview of the top academic and industry research in the field of financial planning. However, he had so many fascinating papers to discuss, it was unfortunate he had only an hour to cover his material. And yours truly gave a short presentation on the recent 2010 Advisor Survey Report, concluding that the delivery of financial advice is not that different between fee and commission models.
Susan Wolburg Jenah, President & CEO of IIROC, provided an update on the Client Relationship Model (CRM) proposals that will impose greater disclosure on the industry in order to increase investor protection. However, the CRM has dragged on for so long and morphed so many times, it is hard to believe it will ever materialize. Asked by an attendee how the developments on compensation in the U.K. and Australia might affect us here, Wolburg Jenah said that IIROC was keeping a close eye on developments that could potentially influence compensation models in Canada, although it is preferable that industry participants “voluntarily” assess how to better align the interests of clients and advisors.
The final day ended at noon, but the morning still had several excellent speakers such as Dr. Dale Orr, Jamie Golombek, and Kevin O’Brien, who filled the morning with great nuggets of wisdom.
Take away: Dr. Orr from Economic Insight provided his short-term predictions for Canada’s economy: negligible inflation, the dollar will trade close to par or maybe even higher if the price of oil increases, short-term rates will be higher in Canada than the U.S. (again putting upward pressure on our dollar), expect the Bank of Canada policy rate to increase by 25 basis-points at every fixed announcement date for the next three years until it reaches the target of 4% to 4.5%, and finally, don’t expect to see a balanced federal budget until 2014–2015.
Jamie Golombek from CIBC Private Wealth Management, who always stages a grand show, regaled the audience with stories of creative brokers who supposedly found loopholes in the TFSA contribution rules. He also offered several useful tax strategies, updates, and suggestions on advising your clients based on recent tax court decisions.
Take away: Advisors should be recommending to almost every client that they top up their TFSA contribution room prior to making RRSP contributions.
And finally, certified financial planner Kevin O’Brien from Kevin O’Brien & Associates told the audience his sometimes funny, sometimes heartfelt story of managing his parent’s messy estate before he became an advisor. It affected his current approach to estate planning so much that he published his story for other advisors to read in Where There’s a Will….There’s a Way.
Overall, it was an excellent conference, and I would highly recommend attending CIFP 2011 to be held in Ottawa from June 5 to 8. Media articles from some of the presentations are available on the CIFP website.
Fall Conference Alert!
There are two first-rate conferences coming up in the fall that I will attend and recommend as well worth the investment.
The first is the IAFP Annual Symposium in Banff from September 23 to 25, 2010. This one is particularly enjoyable; it is more symposium than conference because it is anchored by a single financial planning case study. All speakers are required to reference this case study in their presentations and are encouraged to publish papers from their specialty perspective. This certainly eliminates the disorientation one can sometimes feel listening to multiple talking heads on several diverse subjects at other conferences. This year the case study is about a retiring business owner who also happens to be a financial planner (is this a coincidence?). The symposium culminates with a half-day discussion on the case study by the 125+ attendees.
The second is the Knowledge Bureau’s (KB) Distinguished Advisor Conference in Orlando from November 14 to 17, 2010. Knowledge Bureau faculty speakers such as Richard Croft and Doug Nelson are top notch and KB President Evelyn Jacks obviously used her time wisely recruiting the likes of Don Stewart, CEO Sun Life Financial, while she was a fellow member of the Federal Task Force on Financial Literacy. The other compelling reason to attend is this: each day ends at the utterly civilized time of 1:30 pm, giving attendees ample time to enjoy the sun and nearby amenities with colleagues and family.
Marc Lamontagne, CFP, R.F.P., FMA is a fee-based financial planner with Ryan Lamontagne Inc., fee-model practice management trainer, and author of To Fee or Not to Fee II — How to design a fee financial advisory practice. www.tofeeornottofee.com
Tags: Benefits Of Financial Planning, Cfp, Client Relationship, Consumer Survey, Economic Scenarios, Financial Advice, Financial Planners Standards Council, Global Asset Management, Global Economic Uncertainty, Greate, Industry Participants, Leiningen, Mutual Fund Company, Rbc Global, Recovery Stocks, Relationship Model, Second Consecutive Year, Smorgasbord, Survey Report, Talking Heads
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