|Copyright:||(c) 2010 SourceMedia Inc , Source: The Financial Times Limited|
|Source:||Financial Times Limited|
Some advisers are finding that offering full financial plans casts a halo effect on their businesses, even if most clients don’t get one.
What’s more, financial planning is an advisory approach to investments. It elevates what has traditionally been a basic, commission-based service into a wealth management offering, and because a full financial plan broaches multiple product areas, including savings, loans, college, estate and retirement planning, it increases opportunities for advisers to cross-sell their services. Yet not all clients want or should have a plan, and it hardly seems economical to offer full-blown plans for every soul who enters a bank.
A majority (62%) of 278 bank-based advisers who responded to a survey by
Not all advisers said they feel that they need to have a CFP, and certainly plenty of financial consultants write financial plans without one. In the survey, 39% didn’t think a CFP was necessary, and 10% said that their “series licenses provided all they needed to be an excellent planner.”
The CFP designation, conferred by the
However, advisers who are CFPs say the training is well worth it. “Having a CFP is like having a Good Housekeeping Seal of Approval,” said
All advisers responding to the survey said that financial planning helps them increase business: 88% see financial planning as somewhat, if not very, important in expanding their businesses; only 3% say it has no significant bearing on the growth of their practices. Moreover, 91% report that financial planning, along with continuing communication leads to deeper client relationships.
For one, financial planning can help uncover hidden assets, DiPietro said. “One of my first clients was a
And as an advisory approach gains traction over a transactional one, financial planning opens the door to a broader range of product solutions and a more sophisticated client base.
Hughes, who manages
Probably no more than 10% of his clients seek out his services because he is a CFP, Hughes said, but those who do “tend to have much higher assets and go quickly from prospects to clients. There’s definitely a segment of people for whom the CFP resonates, and they tend to be high net worth.”
Internally, Gorham regularly promotes its advisers’ CFP status to private bankers and commercial lenders and the depth of planning helps them solidify relationships with local lawyers and certified public accountants.
In addition, said
Even if reps don’t have a CFP, program managers should, said
While Harris has offered comprehensive financial planning to its private banking clients for more than a decade, about four years ago it decided to make planning a core element for mass-affluent clients as well. (Ten of its 65 advisers are CFPs and 10 more are in the process of getting certified. Harris picks up the costs for the training and study support.)
Advisers also report that the trust that develops through a planning relationship helps keep clients calmer and focused during troubling markets and economic turmoil. “My business weathered the crash very well,” Bradaseric said. “Planning prepared us with sizable emerging funds and well-thought-out paths for the future. That gave clients a sense of comfort at a time when comfort was hard to find.” Seventy-six percent of the survey’s respondents say their clients were calmed by having financial plans during the 2008 meltdown.
Clearly, financial planning promotes a client-centric environment in a transaction-based business. But advisers and reps agree that it also involves more work and therefore isn’t always economical.
About half (54%) of the survey respondents say the planning process takes at least three client meetings, although 46% say they can get the job done in one exploratory meeting and a follow-up. “It’s fairly labor intensive,” said
Survey respondents agree. One-third says clients need at least
However, it found that most clients didn’t need more than basic budgeting because they had more debt than assets.
Still, the program has two planners in each major metropolitan center across its area of operations and “they’re busy,” Kruse said. Each planner writes about 60 plans a year and does annual follow-up reviews with each client.
Planners contribute to revenue across the bank’s product spectrum when they recommend courses of action. They earn bonuses based on their effectiveness, measured by whether they regularly schedule annual reviews and how much additional revenue their planning clients bring to the bank. This is credited to a normalized grid, which is product neutral so it doesn’t matter to the planner whether a client opens a fee account or takes out a loan. “Whatever planners feel the biggest need is, that’s what they’ll emphasize in the presentation,” Kruse said.