As financial planning continues to grow, it becomes more and more competitive, and increasingly difficult for firms to differentiate themselves. As a result, firms slow their growth rates, and some struggle to survive or grow at all. While most firms work harder and harder to make marginal improvements in their process, service, and value, to differentiate themselves from their competition, there is an alternative available: to seek to completely redefine the financial planning value proposition, letting go of things that are no longer truly important, and instead focusing on creating value that will make financial planning relevant to new audiences. And as financial planning enters the digital age, there is perhaps more opportunity than ever to begin doing things in a completely different - and better - way. So if you could rewrite the financial planning value proposition from scratch, would you still be doing it exactly the way that you do? Or is the reality that by letting go of "the way things have always been done" we could recreate a financial planning offering that would reach more people than ever? Read More...
Running a successful planning firm means not only being an effective financial planner, but also having the support of an effective staff. While a good hiring process can help to ensure that the right people are on board, the reality is that providing appropriate compensation with the right incentives can greatly facilitate the success of the firm. Yet there is much disagreement about the best way to provide incentives: should it be based on individual merit, or the revenue of the firm? Many suggest the former, noting that staff can control their individual merit more than they can impact the growth in the firm's revenue. But is it really true that staff - who are not out on the streets trying to find and develop new prospective clients - have so little impact on the revenue of the firm? Recent research suggests otherwise, as firms with revenue-based incentives nearly tripled their revenue growth from the bottom of the markets in 2008, compared to firms with merit-based bonuses. Which means in reality, your staff may impact the planning firm's revenue far more than you realize!Read More...
In an ideal world, everyone in your office would selflessly collaborate together in pursuit of the common goal to serve clients and ensure the success of the firm. In reality, though, your staff and co-workers probably run the gamut, from people who are really focused on the team and the good of the firm, to those focused just on themselves, to those who don't seem particularly motivated to do much of anything at all. The latter, in particular, can be the most frustrating when mixed in with an otherwise proactive and motivated team. But new research suggests that surprisingly, if you want to upgrade the demotivated team members and make your office "tribe" more collaborative, the key first step is actually to try to make those individuals more interested in just selfishly helping themselves!Read More...
Over the past decade, an increasing number of financial planner baby boomers have reached the point that they would like to retire out of their practices; as a result, the 2000s saw a dramatic increase in the focus on succession planning, including how to prepare a financial planning firm for sale and steps to make the business more saleable and valuable.
Yet the reality is that once a financial planning firm is saleable and able to function effectively without the daily involvement of the founding principal, it's simply an investment holding like any other one; except it has an incredible cash dividend yield on top of significant appreciation potential.
Consequently, as the process of transitioning firms to saleability continues, a new challenge is beginning to emerge: planners who are successful in making their planning firm saleable and valuable are suddenly finding that once that point is reached, they no longer necessarily want to sell (all of) their business after all, which would force them to reinvest the proceeds into lower-return investments that could diminish their own retirement!
In recent years, as more and more planners have shifted their businesses to an AUM model, it has become increasingly popular for the media, when quoting planners, to note the firm's AUM. In response, a backlash has also begun to emerge, as many planners justly point out that the magnitude of the firm's AUM does not necessarily correlate with the quality of the firm's financial planning advice or how "good" the planner really is, and consequently suggest that the media stop quoting AUM statistics in articles. Yet while I agree with the criticism - AUM is not likely a very effective measure of how good a planner's advice might be - I still think it's highly relevant. Not because I'm trying to understand the quality of the planner's financial advice, but because it provides immediate insight into the nature of their financial planning practice and the relevance of the challenges the planner may face.Read More...
Most planners struggle to grow their businesses and bring in as many clients as they wish. With the surge of social media in recent years, from Facebook to Twitter to LinkedIn, an increasing number of consultants have hailed social media as the great marketing equalizer, capable of allowing even small planning practices to establish a marketing presence. Nonetheless, most planners are thus far reporting limited success with their social media efforts; a recent study suggests interest may already be waning. Yet at the same time, most planners have had little success with any form of targeted marketing efforts, relying instead of the slow flow of referrals from existing clients as a primary source of new business. Which raises the question: is it that social media in really ineffective for growing a practice, or is it just that our woes with social media are representative of our ongoing difficulties in clearly defining the value we provide and the target clientele we wish to reach, leaving referrals as the only option left?
From the planner's perspective, the data gathering meeting is a core part of financial planning. As the 6-step financial planning process itself stipulates, you can't begin to analyze a client's situation and formulate recommendations until you have the client's data in the first place. Yet from the client perspective, the data gathering meeting can be an arduous process, and is also easily procrastinated, potentially delaying the entire planning process. It certainly is not something that most clients would describe as a positive or enjoyable experience. So what would it take to re-formulate the entire data gathering interaction, to change it from a planner-centric process into a client-centric positive experience? For starters, it needs lose the name: let the "data gathering" meeting become the "Get Organized!" experience!Read More...
As planners continue to seek ways to make their businesses more stable, successful, and profitable, it has become increasingly popular lately to talk about including separate fees for financial planning services, often in the form of a retainer. As the general view goes, doing so allows you to stabilize your income with a steady retainer base, and simultaneously helps you to better reinforce the value of your financial planning by setting a clear price tag on it.
There's just one problem: When you look at business models outside of our industry, we see the reality is that setting a separate price tag on standalone services does NOT help consumers value and appreciate the service more. In fact, it helps them to minimize use of the service, and absorb the cost only reluctantly (and sometimes even resentfully) when absolutely necessary.
So does that mean by charging separately for financial planning, we're proactively DISCOURAGING clients from utilizing our financial planning services and encouraging them to think more investment-only!?Read More...
Market volatility is a stressful time, not only for clients, but often for planners as well. Not only does client activity rise, with more phone calls, meetings, and some hand holding, but at the same time revenues come under pressure, as new (and sometimes existing) clients often become less willing to implement, and firms with revenue is tied to the markets can actually see an outright decline in income. But the latter part, at least, is not something you have to just accept; there are ways to hedge the revenue and profit risk in your practice, and so far, those strategies are doing exactly what they're supposed to!Read More...
A recent common refrain at conferences is that when done best, financial planning is a process, not an event - meaning that financial planning is not about delivering "THE plan" at the end, but about the ongoing process of continually aligning money with goals as life and circumstances continually change. In turn, this implies that the value of financial planning will be rooted in the ongoing experience that the client has while engaging in the planning process. But how good is that experience, recently? Perhaps not so great... as one researcher's recent focus group described financial planning as feeling "like a mix between a dental visit, math class, and marriage therapy." Ouch.Read More...
