What If Financial Planning Was More Like A Build-A-Bear Experience?

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Strategic Wealth, which provides an evidence-based approach to private wealth management for near- and current retirees, and Buckingham Strategic Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Read all of Michael’s articles here.

The Build-A-Bear Workshop Experience

The Build-A-Bear Workshop is essentially a store for teddy bears. But what makes Build-A-Bear unique - a company founded 15 years ago and now doing approximately $400 million dollars of revenue per year, selling teddy bears in more than 400 stores spanning over a dozen countries around the globe - is that at Build-A-Bear you don't just buy a teddy bear; instead, you have a teddy-bear-buying experience.

Because, as the Build-A-Bear tagline states, you don't just go to the store to buy a teddy bear; instead, you go there to make a best friend. Accordingly, at Build-A-Bear, you don't just buy a teddy bear; you have an experience making the bear, from selecting its fur, to sewing in its heart, to choosing its clothing and accessories, and giving it a name. A video commercial of the Build-A-Bear experience is shown below:

Unfortunately, the reality is that for several years, the Build-A-Bear Workshop stock (ticker symbol BBW on the NYSE) has been languishing - generally blamed for overly aggressive expansion after its early successful years, being hammered by the economic recession, and a challenge with weak same store sales numbers (after all, once you build your best friend, there's not a lot of reason to go back again anytime soon!). Nonetheless, the point remains that the company sells a relatively old and commoditized product - a teddy bear - at a significant markup, and in a process that not only takes hours to complete (when in theory a teddy bear could be purchased in minutes), but is prized because it takes hours to complete!

In other words, Build-A-Bear Workshop is unique because they were able to turn a low-price commoditized product purchase into a higher-priced multi-hour teddy bear experience.

Today's Financial Planning Experience

While the delivery of financial planning isn't exactly a commoditized product like a teddy bear, it's hard to say much positive about the financial planning experience, either. Yes, the outcomes of going through the financial planning process are good, delivering both psychological value and according to recent research some real financial value, too. But that's the outcome at the end of the process, not the client's experience of the process itself.

So what about the experience? At a recent presentation for the FPA Retreat conference, Dr. David Lazenby perhaps summarized it best, based on recent research he had conducted with focus groups of actual financial planning clients. The conclusion: "The financial planning experience is a combination of a dental exam, math class, and marriage therapy." Ouch.

While such a characterization of the financial planning experience sounds quite harsh, upon further reflection it appears to be sadly accurate. After all, financial planning does involve taking people through a process where they are scrutinized regularly (and often feel guilty about what they know they should be doing but haven't, whether it's spending more responsibly or flossing more regularly). And it requires people to deal with more math than they may have faced since high school or college (but with higher stakes, as flunking here means failing to understand your financial future!). And with couples, it often puts clients in the awkward position of being forced to discuss, and find compromise (hopefully!?), regarding long-term goals and current trade-offs that they never even considered before.

Simply put - while the outcome of doing financial planning may be positive, it's hard to say much positive about the typical experience of going through it!

Envisioning A Better Financial Planning Experience

So what might a better financial planning experience look like? The starting point is to re-envision the financial planning process from the client's perspective, as the reality is that unfortunately, much of planning is really focused on the financial planner, even in what is intended to be a client-centric process.

For instance, look at the data gathering process. Most people don't have their lives in perfect order (if they did, they probably wouldn't be hiring a financial planner!). Yet many planner firms will not proceed with a financial planning process until clients provide all the necessary data and documents... even though, as just noted, most people don't exactly have this information at their fingertips in the first place! "We" as planners insist that we should have this information first, in order to do our work, and so that we "don't waste our time" working with incomplete data... yet that sets up an unpleasant and awkward experience for the client, who not only has to do the real work of getting organized up front and actually gathering data, but also likely feels guilty and ashamed of the fact that he/she doesn't have the information ready and available for the planner! By contrast, what if the process of getting organized was actually part of the financial planning experience, where clients came in with all their disorganized and scattered information, and we as planners gave them the actual experience of becoming organized during the meeting? Or the client "discovery" process of personal goals and issues was not just some notes a planner scribbles on a yellow pad, but an interactive mind map that the planner and clients build collaboratively?

Similarly, look at the process of delivering a plan and getting clients to buy in to the recommendations? Right now, plans are still often delivered as giant tomes, even though we collectively acknowledge that virtually no one reads them, and despite this we not only continue to provide them, but insist on updating them every time the client has a question or wants to try out a small adjustment! The end result - the planner provides a plan in the meeting, the client asks about the impact of retiring two years later, the planner re-runs the plan and sends it out a week later, the client asks about the impact of saving more money instead of retiring later, the planner re-runs the plan again and sends out another version another week later, the client asks about the impact of saving more money and retiring later, the planner re-runs the plan yet another time and sends out yet another version yet another week later... a miserable and unproductive process, to say the least! By contrast, imagine the results if the plan is simply live software on a giant screen in the planner's office, which can be updated interactively with the client? The end result - instead of a slow, tedious back-and-forth process that may literally take weeks, the client gets to test drive the financial plan in minutes and come to a conclusion that the client helped create - which improves buy-in to the plan and implementation of the recommendations to boot! (Of course, the caveat to this is that we also need some better financial planning software to help facilitate this process!)

Why The Client Experience Matters

I can imagine some people are thinking "but my clients are happy and they refer me already; why does all this matter?" The answer is three-fold.

The first reason this matters is because, in the end, most financial planning firms don't generate nearly as many referrals as they should given the significance of what we do to help people. In other words, planning firms grow by referrals despite how ineffective and uncomfortable the experience is, because the outcomes still that valuable. But can you imagine how many more referrals could be generated if clients left your office after having a great financial planning experience? Not a lot of clients share "Wow, what a meeting with my planner today. My husband and I left mentally exhausted, slightly confused, and barely speaking to each other after a fight about when we should retire; but hey, at least now we can go back in 3 weeks and find out how much we'll need to cut our spending to retire." Nor would many referrals come from sharing that experience anyway! By contrast, imagine if the outcome was "Wow, what a meeting with my planner today! We walked into that office with a giant box of scattered envelopes and papers because we never seem to have the time to keep up with it all. We left with a perfectly sorted box of file folders with everything where it needs to be! I've never felt so organized in my life!" Now THAT is an experience that will be excited to share and refer, and those who hear it will actually want to contact you and do business to get the same experience and immediate, tangible positive outcome!

The second reason the client experience matters is that as more and more people become CFP certificants and deliver comprehensive financial planning, the results of financial planning are becoming more readily available and it's important to maintain differentiation. The simple reality is that "customized, individualized personal financial advice delivered by a professional with extensive education and experience" just isn't much of a differentiator anymore. But having a fantastic client experience is. Although we're likely a long way from financial planning services becoming fully commoditized, there is nonetheless a rising challenge to maintain differentiation.

The third reason the client experience matters is simply your ability to price your services and earn a profit from them to run a successful business. The reality is that people will pay a lot more to an experience business that charges them for the feelings they get from engaging, rather than just a product business that sells stuff or a service business that charges for services rendered. That's why Build-A-Bear sells teddy bears for more than Amazon, and why we'll pay more for family tickets to a 2-hour movie experience at the theater than we will to buy the movie on DVD once and own it for life. This entire phenomenon has been dubbed "The Experience Economy" (after an article and later a book by Joseph Pine and James Gilmore), and represents an emerging new trend for businesses.

Or simply look at it this way - can you imagine how successful your financial planning business would be if your clients happily paid twice as much for your services and wanted to spend hours going through the process and the experience of it, just like families do with Build-A-Bear? How many referrals do you think you would generate if you gave your clients a Build-A-Bear-style financial planning experience?