I have worked with firms large and small to redefine their value propositions and engage clients in new ways. I often ask myself: is "planning" the right term for their work?
The market seems to define financial "planning" as easily commoditized and replaced with automation. After all, TV commercials say the same thing: our firm can help build your plan for the future. Even with regulators moving toward establishing new standards for advisers, will clients ever know the difference between a financial adviser, a registered investment adviser, and a financial planner? Moreover, the term "robo-advice" minimizes the roll of human touch in advising.
Is it time we set more meaningful terms to match a new model of financial services?
Right now, the financial services industry considers selecting investments for a client as creating a financial plan. The client tells the adviser how much money they can afford to invest and the adviser – human or machine – recommends an asset mix. Sure, there might be a discussion of diversification or changing asset mixes over time to "de-risk" a plan, but essentially a recommended investment mix is "the plan."
This is a pretty thin value proposition, and one tech like robo-advice can easily replace.
Many firms might counter that they're moving toward "goal-based planning." The model is identical, but now we're throwing in unique goals like university and retirement. This process uses the goal date as a target point for the investment outcome. Yes, using goals might assist in selecting the type of recommended account. However, the process remains the same: selecting assets based on the client's available investment capital.
Bottom line? Mere goal-based planning is still a thin value proposition.
Financial planners don't need to be the ones creating these "plans." Anyone in the industry can recommend them. There are specialists like tax advisers that focus on tax efficiency for a client. An adviser might assist a client in creating an estate plan. Insurance advisers recommend guaranteed products. And yet, we don't refer to these as insurance plans but rather as product recommendations. Mortgage advisers provide mortgage product recommendations, not mortgage "plans." In many cases, technology can be as efficient as making these isolated product recommendations.
So what is the single experience that integrates all items – savings, investments, goals like university, debt, mortgage, tax, transition of wealth, protection, and beyond? After all, the same adviser can both recommend financial products and advise on all aspects of a client's financial life.
This experience should include the discussion of goals, goal timing, and goal prioritization and how one goal might interfere with the potential outcome of another goal – regardless of the asset mix. There should be a discussion of tax efficiency and how saving and investing using specific tax wrappers might benefit the client's ability to achieve their goals. The use of mortgage and debt is an important subject that needs to be reviewed before a savings and investment discussion. An insurance discussion is a must. Clients should understand if they are properly protected from the unknown. Client needs to visualize the impacts of "what if" if they decide to do things differently. No matter the level of wealth, a discussion of cashflow for now and about the future will provide a healthy dose of reality to affordability and client expectations.
The bottom line is none of these financial decisions are in isolation. They are intertwined in how clients think, feel, and live. Focusing on any one of them and ignoring the others means the recommendations made are incomplete at best.
Investments and other financial products are a means to the end, but we need a new term to talk about the entire process above. Calling it a financial "plan" doesn't do it justice. It's time to find a new term for the journey.
