Executive Summary
As is often said, "financial planning is a process, not an event" and therefore is predicated on an ongoing relationship between the planner and the client. Yet the in-depth nature of a financial planning relationship presents challenges as well; it takes more time, it costs more money, and it becomes less accessible to many who either can't afford or don't want such a 'deep' relationship. But does it have to be this way? Could financial planning still deliver value even if it's NOT an ongoing relationship with an individual financial planner?
The inspiration for today's blog post comes from a recent discussion I had about the in-depth nature of financial planning, and a realization I had that we all seem to implicitly assume that for financial planning to deliver value, it MUST be built on a deep personal relationship.
Yet when I look to other professions, that's not always the case. Most Americans do not exactly have a deep, personal relationship with their doctor in the brief time they even see him/her as the doctor goes from one patient to the next; many do not even see the same physician from year to year for their annual check-up (if they even GET an annual check-up). Yet clearly doctors serve a need, provide value, and the practice of medicine is standardized enough that you actually CAN see a different doctor every year for an annual check-up and still receive value. Granted, people who have more complex and difficult ongoing health problems may wish to maintain an ongoing relationship with a primary doctor to oversee that particular condition; but for the overwhelming majority of Americans who are reasonably healthy (or at least, whose health problems are primarily solved solely by the wisdom of "eat less and exercise more"), a deep personal relationship isn't really necessary. There's a check-up, basic medical conditions and concerns are screened for, basic recommendations are provided, and the consumer receives value.
So can this model exist in financial planning? Arguably, many planners under the Garrett Planning Network are trying to implement an "annual check-up for a modest fee" kind of model, but is there opportunity to expand this further? Some planners trying to implement this model find growth challenges for their business, but is that because you can't provide value in a one-time check-up kind of transaction, or is it simply because we as a planner profession haven't done an effective job at conveying the importance of a regular financial planning check-up? I know I'm supposed to see my doctor once a year, my dentist twice a year, and change my smoke alarm batteries when I change my clocks in the fall and spring for daylight savings time; but the public has no widespread perception of the need - and value provided - for an annual financial planning check-up.
So what do you think? Can financial planning provide value in an annual-check-up format? Does there HAVE to be a deep and ongoing relationship with a financial planner to create value for the client? Is the growth and expansion of financial planning inhibited because of our reliance and insistence on having a deep personal relationship with clients, even if perhaps not all of them WANT such a relationship?
Michael, As always, you raise an interesting point. Do we need a financial outpatient clinic for people who just want to ask a few questions, solve a problem or two, get some advice, and go forth in the world? A place to check in to see if they are in fact still healthy? If there is one, I would like to know because I would LOVE to be able to refer people to it. I think many planners engage in deep client relationships because that is what is so fulfilling to us in the profession— having these meaningful relationships. Personally, I am not pleased with the medical profession because I feel it is too transactional and it is only on occasion that you find the professional who makes you feel at ease and spends a few extra minutes to answer your questions. I realize, of course that not everyone needs or wants that relationship from a professional so I concede that a more transactional, just tell me if I am okay model likely has merit. Planners who excel and enjoy glancing at financial data, reading the information and quickly synthesizing it to render a diagnosis may actually enjoy having this type of practice. It’s just not for me.
Kristin,
In all seriousness, you might reach out to the Garrett Planning Network to see if there are any GPN planners in your area. There are a few who do this exact kind of outpatient clinic “check-up” style of model, and I’m sure they would be very interested in your referrals. 🙂
– Michael
Having done annual check-ups for years, I think I have a handle on the major challenge. The problem with annual check-ups isn’t delivering the advice but getting the client to act on that advice.
It is a bit like visiting a personal trainer once a year and expecting your fitness to improve (obviously there are exceptions :-).
Financial planning for the masses needs to be about setting their lives up structurally so that their default behavior leads to a positive outcome. Ramit Sethi has a good book describing some of the systems people can set up for themselves.
And of course the flip side of managing savings, investments, insurance and debt is managing a person’s income, which is by far the biggest potential asset for young people. Anyone tackling the mass market needs to help people manage their careers.
In other words, this is a radically different practice than most planners have.
David
David,
Just thinking out loud, I wonder if we’re ultimately talking about two completely different services here in the first place.
Again, taking medicine as an example: The doctor does the check-up and tells me that I’m sick or healthy or overweight or whatever. But all he/she does is prescribe a solution. The pharmacist fills the drug order. The personal trainer helps me exercise. The nutritionist helps me understand how to eat better. Etc.
I’m very cognizant of the “implementation problem” in the advice-only planning world right now, but I’m not convinced that the only solution is that the advice-giver also has to be the one who directly facilitates the implementation. The doctor doesn’t meet me at the gym, or dispense my drugs, or provide me an extended lesson on nutrition. That’s done by other affiliated professionals. Could a parallel be developed in the planning world?
– Michael
Michael,
Here is some more thinking out loud (i.e., rambling :-).
We most often go to doctors for immediate relief from pain. And because of surgery and drugs they can often deliver this relief within days. Which then reinforces the doctor’s value proposition.
For medical conditions that require lifestyle changes doctors are much less effective (and sought out less). After all most people who are overweight don’t need a doctor to diagnose them.
Unfortunately, planners have few tools that provide immediate relief. This is why focusing on transitions is often a good strategy for client acquisition because that is one of the times you can quickly provide relief.
For the doctor model to work in the mass market would require that planners be the gateway to accessing financial products (like doctors are for drugs). You could have vanilla financial products (e.g., checking, savings, fixed 30yr mortgage) that are accessible directly (e.g., over the counter), but all the more complicated products would require a “prescription”.
Without that regulatory protection, the financial product makers will simply bypass the planner and try to set up the defaults to their advantage rather than the customers.
Who is on the consumer’s side helping them implement in today’s environment? I agree with you that this may be a different profession. But it is one that currently doesn’t exist as such.
What do you think?
David
I don’t necessarily think you need to have a deep emotional relationship with every single client but there does need to be a committed level of personal engagement by both parties which is rooted in a deep level of trust for a successful engagement to occur.
We’ve found that our most enjoyable client interactions usually occur with the people we have developed a deeper personal relationship with but the absence of this doesn’t mean that clients aren’t receiving value or are dissatisfied with what is being delivered.
On the other hand, without an ongoing relationship we’ve found that clients typically don’t implement our recommendations thoroughly. Because of this, we’ve moved away from providing “one-time” engagements or working with people who simply want a plan that they can implement themselves. From my perspective, what good is a plan if people aren’t going to actually follow-thru and why should they waste their money with us. Most of the value of a well-designed plan is the implementation of the advice not simply the advice itself.
Josh,
Playing devil’s advocate here slightly, but you say “From my perspective, what good is a plan if people aren’t going to actually follow-thru and why should they waste their money with us. Most of the value of a well-designed plan is the implementation of the advice not simply the advice itself.”
If we look to medicine as a parallel… does that mean the majority of Americans are wasting their money on doctors, since the majority of Americans are overweight and the doctors are failing to facilitate the implementation of their “eat healthy and exercise more” advice? Are doctors failing as professionals by not having their implementing weight loss accountability plans for their patients?
– Michael
Michael,
Great conversation, as always.
In short answer to your question, yes, the medical industry is failing. For all our advances, the outcomes are surprisingly inconsistent and overall, our health as a society is not improving that much. (We are living longer, but I would suggest we are not healthier.)
The primary problem is that too many doctors focus on curing disease and not on maintaining or improving health. They are more like the brokers, when we want them to be more like planners.
But, do we need a deep personal relationship for them to succeed? No. We need for them to have a good support structure, to do things like provide us reminders to get done what we committed to do at our last check-up, or to prompt a phone call if we consistently fail to follow through on our commitments.
Medical underwriting of health insurance would help even more, but that is exactly the opposite direction society seems to want to go.
Steve
Great article, and good comments.
As stated in several comments above, the challenge is not so much giving the advice, but getting the client to actually undertake the “action steps” developed at review conferences.
This might involve changes in behavior (i.e., adopting better habits on expenditures). It might simply involve avoiding procrastination (itself a behavior). Or it might involve deep changes to how money affects persons, emotionally.
I would like to hear more about “financial planner as a coach” – from Michael and others. It seems to me that the best financial advisors “have their feet held to the fire” in terms of becoming better and implementing changes when they work with coaches on an ongoing basis. The same is likely to be true for clients. So, what are the best follow-up methods, to ensure clients actually do what they say they will do?
Thanks again for a great discussion.
Implementation is a problem to the extent that we allow it to remain one. Even clients with whom we have long-term relationships can fail to implement.
To make sure action steps are taken, I include implementation as part of the meeting when it’s possible to do so. Together with the client, we make phone calls, get online to make investment changes and so forth. That’s made all the difference with both long-term and one-time clients. As a result, I’ve see much more forward progress and repeat business from one-time clients.
Most of my client are on standard retainers, with the assumption of a long-term relationship to cover their comprehensive needs as they change through their lifetimes. However, I often help a small handful of people with project work from time-to-time. This enables those with lesser means to get the help they need without an on-going relationship.
[The model is based on ACA’s (Alliance of Cambridge Advisors’) principles and practices. ACA was founded by Bert Whitehead, who was also instrumental in the beginnings of NAPFA.]