Five Critical Components of a Real and Differentiated Financial Planning Proposition.

I was recently lucky enough to read an article by the leading American writer on advisory matters Mitch Anthony ‘Creating an ROL-Centered Practice’. This blog is unashamedly based on that article. It knocked my socks off! It brought answers to many of the questions that I had been asked by advisers over recent years.

-What’s of value in what I provide?
-What’s in the plan that the client will value?
-What are the key ingredients of great planning?

It gives both a clear direction to advisers in their transition from product promoters and insight to existing planners in their pursuit of improved service.

The task of creating a financial plan is often viewed by clients as a one-time event that easily becomes outdated. As a financial plan becomes outdated, clients begin to chafe at paying a fee for what they perceive as less effort. The real value is in monitoring the plan—hinging on how personal, how frequent, how relevant and how synchronized the monitoring is to the client’s life

For a financial plan to be a living, breathing instrument, it must be infused with aspects addressing individualized life needs in the context of money that basic data gathering, analysis, and projections alone cannot provide.

The ultimate end of a financial plan is that it will comprehend a client’s meaning as it relates to his or her means. The plan will articulate the why as well as the how. Why are we developing and monitoring this plan? This question must move beyond clichés like, “So I can retire” or “So I can have enough to not worry anymore.” It also must move beyond simple metrics that often are determined by factors and causes beyond the adviser’s control.

The value of the planning process must be felt as well as seen. There are five core values that need to be articulated and delivered. These values address client’s real needs as they relate to their money.

Organization. Help bring order to your clients’ lives.

Objectivity. Provide untainted perspectives that lead to suitable and rational money decisions.

Proactivity. Help clients anticipate and prepare financially for life transitions.

Accountability. Help clients follow through on their commitments.

Partnership. Help clients make decisions that move them toward the best life possible with the money they have.

Mitch examines how adviser’s might articulate these values to clients in conversations and processes.

Help Bring Order to Your Clients’ Lives

Few people possess a sense of perfect calm regarding the various financial decisions they have made in their adult lives. Many have a sense of dread or denial regarding sustainability of their investments, policies, loans, commitments, and options. The conversation that gathers all the pieces of the puzzle to demonstrate the big picture is of tremendous value.

Two actions are needed to bring a sense of financial comportment leading to financial peace of mind (1) a micro-assessment of cash flows, and (2) a macro-assessment of all investments, loans, policies, and other financial commitments.

Provide Untainted Perspectives that Lead to Decisions

Where can we go for advice that is not hinged to the dispenser’s personal purse? To the cynical consumer, the lawyer could be advising the pursuit of a specific action to ramp up hours billed. The dentist could be exaggerating the risks of not pursuing a recommended treatment to increase monthly revenue. The adviser could be recommending a fund, plan of action, or policy to pad his own upfront or recurring income. You must demonstrate the value of objectivity in conversations with clients through absolute transparency around remuneration.

Help Clients Anticipate Life Transitions

Money goes in motion when life goes in transition, and every practitioner is concerned about money going in motion. They want to be on the retaining end of the equation when it is their client’s current portfolio, and they want to be part of the conversation when it is a prospect. The mistake many make is being too late to the conversation regarding specific transitions.

Help Clients Follow Through on Commitments

Mitch describes an adviser who defines his value to male clients in this way: “I’m like the best man in your wedding, listening to the promises you make and holding you to them.” Ask any successful individual if there are matters that need attention in their financial life, and the answer most likely is “yes.” What keeps them from attending to the details and getting matters settled is a lack of accountability.

Clients need someone to hold their feet to the fire when it comes to important matters in their financial lives, including having a current estate plan, properly insuring their chief assets, avoiding unnecessary risks, properly researching investment opportunities, living within their means, etc. An adviser who educes these responsibilities from the heart of the client and holds that client’s attention to completion is of inestimable value.

Help Clients Make Decisions for the Best Life Possible

Rather than being a facilitator or broker of investments, the adviser needs to resemble the role of CFO for the client’s life. To succeed, a partnership is required, which needs to be defined as the adviser’s role and responsibilities, and the client’s role and responsibilities.

The client needs to understand that you are not playing in a comparative game with other advisory firms and that you can only work with what they bring to the table. Planning for your clients’ financial lives is impossible if they only tell half the story and bring a third of their assets to the table. Clearly a lack of trust leads to this reticence. To succeed, your clients must understand you are working with them—not just for them. You, the adviser, have expectations of the client, and the client has expectations of you. Expectations include thoroughly knowing a client’s situation, awareness of the assets and liabilities at play, as well as timely action and follow through on the client’s part.

Communicate to Differentiate

Why should you communicate and validate these five values in your planning practice? When these values are transmitted to clients, you no longer have to wonder if clients appreciate your value and if you’re relationship is at risk because of unfortunate markets.

Mitch argues that the result of this approach is that client relationships move toward a life-driven rather than a numbers-driven dynamic. This not only means firmer footing for you in those relationships, but also greater value being delivered to your clients on a self-perpetuating basis.

There is little doubt in my mind that Mitch has put forward the key ingredients of a value proposition that is only relevant to a smaller number of prospective clients than many others currently in play in the market. But what better way to differentiate your self in the market?

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