Warning: How Financial Planning Can Cost You Clients

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.

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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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You Missed a Great Conference!

Wednesday, May 25th, 2011

The CIFPs 8^th 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​.tofee​ornot​tofee​.com

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