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Financial Planning Gains Interest

Because of the economic uncertainty, clients feel that they need a financial analysis to determine how to get back on track.

By Gary Kinghorn

Amidst the economic upheaval, financial planning appears to be increasing in importance and becoming the foundation for the practices of more and more advisors across the country. Surveys indicate that advisors who have relied heavily on financial planning have generally retained more client trust than other advisors, and that clients that are switching firms are interested in developing and monitoring a plan to help navigate the current economic crisis.

Surveys indicate that advisors who have relied heavily on financial planning have generally retained more client trust than others.

Putting aside the myth that most people are scared to look at their statements, most are willing to make financial adjustment or modify goals. They feel they need a financial analysis to determine how to get back on track. Clients who have had plans in place for at least a year are more inclined to retain their advisor because they can justify the acceptable amount of risk tolerance clients assumed through the downturn, even if they suffered financial losses.

Retention tool
Garrett T. Maddox, a financial advisor with Waddell & Reed in Houston, says, “There has been a heightened interest in financial planning with clients and prospects. Financial planning has helped calm my clients’ fears and reminded them to stay the course. It has been a great retention tool because the plan eliminates the hype and shows them how they currently stand in relation to their financial goals.”

However, clients do need to be better educated, according to a set of surveys recently released by the Financial Planning Association (FPA) that studied consumer perceptions of financial planning. One statistic showed that the cost of a financial plan of $144 was “inexpensive”, whereas a cost of over $400 was deemed “expensive” by consumers of all income levels. The implication is that many consumers still require education on what a financial plan is and the long-term value it can have over the entire planning horizon. This presents an opportunity for advisors who are willing to engage clients in this education process.

Not surprisingly, retirement goals are still the primary driver to get consumers to seek out a plan, although the rapidly increasing costs of education are a driver, too. According to the survey, 60.4 percent of respondents claimed to have a financial plan in place, with that number increasing to more than 72 percent in the over $100K-per-year income bracket. Consumers surveyed still remain naïve about the various financial planning credentials and professional designations, and a majority rely on recommendations by family and friends to find a qualified planner, and increasingly so at higher income levels, according to the 2008 Consumer Attitudes and Awareness of Financial Planning study conducted by Zogby International on behalf of FPA. Although some education is generally required to raise client awareness, planning is clearly appreciated by the majority of consumers, no matter which way you look at it.

A living document
To some extent, advisors will have to overcome client perceptions that financial plans do not take into account infrequent or unprecedented “black swan” events like the one we have seen over the past year, since planning generally relies on a combination of historical average returns or simulations of annualized returns over a long period. To counter this perception, plan monitoring is of critical importance, and an important feature of next generation financial planning packages and client portals. Financial plans have to be considered living documents and reviewed more frequently to take into account any historically abnormal market conditions. More frequent plan reviews require more attentive and frequent communication with clients, and better client management practices.

Jeff Rose, CFP, co-founder of Alliance Investment Planning Group in Carbondale, Ill., a fee-based financial planning practice that primarily caters to families and small businesses, says, “by always implementing proper diversification (according to the plan), none of my clients has questioned either the investments or the strategy that has been put in place. Many of my clients have been more interested in reviewing their current plans than straying away from them.”

Gary Kinghorn is director of Product Management at AdviceAmerica Inc., a leading provider of financial planning and client-relationship management solutions to major firms and independent advisors. Contact him at, or read his blog on practice efficiency and technology trends at


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