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...
Learning about stock options is a staple of investment education; whether it's the investment section of the CFP certification curriculum or the Series 7, virtually all planners learn about the basics of stock options. However, in practice, options are very rarely used for hedging the typical client portfolio, due to a number of reasons. Nonetheless, there is perhaps an even better use of options for hedging - not to protect a client portfolio from the next bear market, but to protect the profit margins of the financial planning practice!Read More...
When hiring new planners for associate planner positions, many firm owners say they want to find someone just like them; in the words of Peter Lynch, they “buy what [they] know.” It is human nature after all – we prefer staying in our comfort zone and don’t operate as well with the unknown. However, in practice this is often exactly what a firm does NOT need; if the firm owner skill set is strategic visionary, relationship manager, and primary rainmaker, then the firm should strive to find candidates with complementary skill sets to fill in gaps. Especially in a small organization, too much overlap will lead to inefficiencies. Nonetheless, some business owners choose to go this route anyway. So if you are going to hire a 'mini-me', what should you be aware of?
There is a prevailing view in the independent financial planning community that when financial planning is ultimately recognized as a profession, and is regulated on the basis that advice must be delivered in a fiduciary context, that the independent planning community will take the center stage, as big brokerage firms will be afraid of the fiduciary liability.
But what happens if the opposite occurs - if a major firm steps forward to embrace fiduciary financial planning and seeks to pose a credible challenge to the independents? How might big brokerage firms transition in a fiduciary financial planning world, and can them stem - or reverse - the current rising tide of defections out of the brokerage world?Read More...
The big news this week is that Schwab has announced plans to allow independent advisors to franchise a local Schwab branch, receiving support from Schwab in the form of a (small) starting book of clients, financial support, a turnkey system with the latest Schwab technology, and perhaps most important: the Schwab brand name. Although the early response form some is that this will potentially disrupt existing Schwab Institutional relationships, I have to admit: to me, it sounds like a great opportunity for some entrepreneurial advisors - especially breakaway brokers.Read More...
If there's one piece of investment advice that's almost universally agreed upon by financial planners, it's this one: don't bail out of stocks after a bear market. In fact, the entire foundation of wealth accumulation in the financial planning world is predicated on a healthy exposure to stocks for the long run, especially during the accumulation phase.
The planning world has attached itself to this stocks-for-the-long-run focus over the past two decades with its shift to an assets-under-management (AUM) business model, where revenues and value for the firm are tied to the markets in a similar manner to the client's wealth and (future) income.
Yet in recent years - and especially since the 2008-2009 bear market - some planning firms have been starting to shift away from the AUM model, opting instead for more stable income business models like retainers. Yet this raises the question: if clients are supposed to stick with stocks for the long run and stay the course through temporary market downturns, are planners being hypocritical by not doing the same thing with their AUM business model?Read More...
In our intra-industry debates about compensation models, there is an emerging view that one of the challenges of charging for assets under management (AUM) is that by charging based on investments, your clients will become investment-centric. The prescribed cure to this is to use another compensation model, such as charging a flat retainer fee, or an hourly fee. That way, clients will not always have their attention drawn to the portfolio that derives their fee, and the planner can help to focus them on other aspects of planning. Yet this raises a fundamental question: does charging AUM fees cause clients to be investment-centric, or are clients investment-centric and therefore preferring AUM fees?
