Advisors understand why detailed financial planning is important, yet the industry is still falling behind on providing substantial planning to clients.
The traditional approach of offering a simple goals- or cash flow–focused plan to clients, from which an investment plan can be built, is not enough, said James Fraser, co-founder and COO of Toronto-based software company Planworth, during a session on the big picture for financial wellness at the Institute of Advanced Financial Planners 2022 symposium in Gatineau, Que.
A solid financial plan can and should take into account up to 15 elements, he noted, and some examples were staples such as both tax and estate planning, business planning where applicable, retirement projections, life insurance needs, critical illness and long-term health-care planning, and debt planning.
This is not a newfangled concept, Fraser acknowledged, yet a J.D. Power study of investor satisfaction released in May 2022 included some distressing data. Of the more than 4,000 advised Canadian investors polled for that research, the report found that only 7% of respondents received all the elements that were deemed to be part of comprehensive advice — even though 40% claimed or thought their advisors offered full services.
One of the issues with this gap is investors are becoming more sophisticated and their needs more complex, Fraser said. He suggested advisors get ahead to show they “see the whole picture and are ensuring clients are in an excellent position.”
While “there is a place for functional advice” in more transactional advisor-client relationships — think of some insurance products, Fraser said — “there are lots of opportunities for aspirational planners to grow their suite,” driving greater client loyalty and more referrals.
One example is through the use of technology, he suggested. “It still surprises me how many advisors don’t want to give their clients much functionality [via dashboards or portals]. They’re worried about their role or their advice-making position.”
But having clients explore their priorities and be engaged is valuable, Fraser said. What you risk by not incorporating tech is having clients say, “Am I missing something? Is my advisor not leveraging the best tools out there?”
Another challenge to address is clients’ struggle to understand their advisors’ value propositions. This is especially a hurdle where financial plans and advice are static or outdated.
“Something that is a challenge for planners is keeping plans alive,” Fraser said. Not only is it inevitable that people’s lives will change, but there can be changes in law and in the economy. “Part of making plans compelling [to investors] is making sure plans evolve with them.”
Given people’s experiences with the pandemic and as industry pressure mounts due to the growth of do-it-yourself platforms and regulation, for instance, showcasing “intimate knowledge” of clients’ lives and goals is paramount to stay relevant, he said.
For those advisors who do offer comprehensive planning, the issue is figuring out how to scale that offering to meet client demand. And this is where building multi-disciplinary teams and/or working with external partners comes into play, Fraser said.
“You want clients to come to you when they’re anticipating things” or when they want to learn, he said, “and not [because] you’re not responding to or acting on things.”
Investment Executive was a media sponser of the Institute of Advanced Financial Planners symposium.