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By Donald Ray Haas, CLU, ChFC, CFP, MSFS
So, who wants to be a financial planner? Maybe you are satisfied in your present position or maybe you are exploring your options. What if someone offered you a new position that allowed you to: set your own hours, make lots of money, face interesting challenges, enjoy favorable public acceptance and have a great future growth potential?
Whatever you're doing now, consider financial planning, at least, for your future. Financial planning offers all of the above, and advice is certainly a growth industry, according to Jobs Rated Almanac (September 2000). In fact, this employment resource listed financial planning as the number one occupation in America, up from the 17th position a year ago.
Financial planning is a process. The good news is you don't have to recreate the process and it's easy to follow. After you learn six basic steps, even Fred Astaire would be envious of your agility.
The process starts with an agreement between you and your client on what it is you will do, what compensation you will receive and how long it will take. This step is called scope of the engagement. More on this first step follows in this article. The other five steps are: (2) thorough fact-finding about the client's circumstances; (3) studying, analyzing and evaluating the client's situation; (4) developing and presenting the financial plan to the client; (5) implementing the plan; (6) and monitoring the plan.
Scope of the engagement
While this step doesn't have to be in writing, it is best to start communicating with abject clarity and benefit both parties in the long run. Commit your agreement to a signed, dated and written document.
Items that are important to be in your agreement are:
Engagement agreement
Compensation--Who pays how much to whom and when
Advisor--Who is responsible for the service to be rendered
Content--What service will be rendered and what will not
Duration--What is the length of time of this agreement
Conflict of Interest--What are they and how will conflicts be resolved
Disclosure Statement--Acknowledgement that a disclosure statement was previously received
What I've experienced over the years:
- One-page agreements and those of many, many pages
- Those written in plain English and others using too much legal jargon
- Agreements in which the primary purpose is to cover liabilities
- Documents that produce total confusion
Realize that a financial planning engagement, hopefully, and most often, is the beginning of a long-term relationship. This relationship is enhanced more through complete disclosure of detailed procedures than it is through a legal deposition of waivers to protect the practitioner in case of a lawsuit.
I use a plain English, one-page document that each client can read and understand. This agreement is presented to the client at our fact-finding meeting, and they are asked to carefully read it and then to ask questions about anything or everything.
After reading the agreement, the client's first and often the only question is: "What do you mean by a 'potential conflict of interest?'"
Here is my response: "As a fee-and-commission financial planner, there could be a conflict of whose interest I am representing-yours or mine. When I recommend a product (insurance/investment) that could be purchased through my firm, whom I am representing, you (client) or me. I learned a long time ago that if I do everything possible to represent the client, it also turns out best for me. So, by placing your interest first, potential conflicts are reduced to an absolute minimum."
Usually, at that point, the client(s) are satisfied and simply go on to the next question or sign the agreement. However, if conflict of interest is still a concern, I further reassure the client: "Of course, if this is a concern, you have control because you have the right to purchase any product(s) from any source you choose." Another typical response is, "I do financial planning for about a dozen other financial planners. When I first wrote a plan for another planner, knowing that the planner would not be purchasing any product from my firm (the planner would place all insurance and investments through him or herself), I was very curious to see if my recommendations would match up. I was thrilled to learn that the recommendations were exactly the same for the same situation with my non-financial planner clients."
Even though the conflict of interest issue is often raised, it is not really a major concern for the client. Honesty and integrity seem to generate their own communication system. So, by truly being honest and placing the client's interest first, the client seems to intuitively sense this about you.
What I would like to say to the client but seldom do is that I have a very successful practice and whether or not they work with me won't really affect my standard of living. In other words, I have no need to represent them other than in a manner that is best for them.
Misunderstandings can and do occur, especially down the road, and that's why a written agreement serves both parties well. My financial consulting agreement is simple, and I plan to keep it that way, but I welcome your suggestions and questions via email at Donaldhaas@aol.com. A copy of my consulting agreement is available for downloading from the NAIFA Documents Library at http://members.naifa.org/documents/. It is called "Financial Consulting Agreement."
Donald Ray Haas, CLU, ChFC, CFP, MSFS, owns a financial planning practice in Southfield, Mich., and has been an insurance agent and financial consultant for 44 years. He can be reached at 248-213-0101 or at Donaldhaas@aol.com.Top | Back | E-mail to a Friend | Print
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