Three Steps for Implementing an Effective Financial Planning Process

The US unemployment rate just hit a 10-year low of 4.3%.  All financial services firms are experiencing difficulties in hiring staff, but it seems especially difficult to find qualified financial planners.

Search any job board for financial planner positions and thousands of results appear with 79,315 listings on alone! The vast majority of these openings are at wirehouses and large broker dealers. If this is a fair reflection of the market, one would suspect that these large firms are assembling sizable financial planning armies in their back offices.

What is behind this effort? One driver could be the anticipated and eventually forthcoming fiduciary standards, which is applying pressure to provide more holistic advice. Building comprehensive financial plans for more clients would be one way to alleviate this regulatory risk.

One other factor is that many large firms are locked into long-term contracts for cumbersome financial planning software. When technology is not improving advisor efficiency, the only other option is to hire legions of back office staff and use the brute force method to create enough plans to keep pace with demand.

Interestingly, this problem highlights an opportunity for independent advisors. RIAs are more flexible and also have access to intuitive financial planning software that can capture the upside of this trend by adding value with less staff. As a result, they can grow their practices without breaking their budgets.

The secret is out: financial plans are valuable

Most advisors know that financial plans have intrinsic value. The industry has long positioned that it provides “peace of mind” and “a path to fulfilling long-term retirement goals”, but those outcomes sound fuzzy and imprecise. What exactly is the value of a financial plan?

There are several ways to look at it.

From the client’s perspective, a comprehensive financial plan can improve retirement outcomes by identifying ways to generate additional retirement income. Research published by Morningstar demonstrates that financial planning can create an additional 1.82% annually in additional retirement income. This substantial boost can allow clients to retire earlier and do so without compromising their lifestyle.

Of course, investment returns aren’t everything. Clients cannot invest their way out of a savings shortage no matter the market performance. The good news is that financial planning can help!

A study published in the Journal of Financial Planning found that a comprehensive financial plan is linked to as much as 50% higher savings when compared with a DIY approach. Combine higher savings with smarter investing and the value of a financial plan becomes clear.

We must also consider the value of financial planning to the enterprise. Wirehouses and broker dealer networks are expanding their back-office planning capabilities because financial planning leads to higher revenues.

Better retirement outcomes for clients and stronger revenues sound like a perfect scenario. However, there is a tiny wrinkle. Even though large enterprises are furiously hiring para-planners, our sources tell us that only a fraction of their client base gets a comprehensive financial plan.

We believe that the main obstacle to delivering more high-quality comprehensive plans lies in the way financial planning has been delivered.

The financial planning process is broken

Even though “financial planning” is on the service menu at many broker dealers, banks and wirehouses, the process is not exactly built for success. Here is what a typical client experience looks like.

  • An interested client receives a multi-page questionnaire that must be filled out at home. The package length varies, but 15-20 pages is not out of the ordinary. Many clients get discouraged, confused or frustrated by the complexity and the volume of questions. As a result, they never complete the package and drop out of the planning process at an early stage.
  • More diligent and better organized clients bring the completed forms into the bank branch and have a brief conversation with the advisor. The advisor sends the client home and forwards the forms to the back office.
  • Behind the scenes, a back-office CFP takes a couple of weeks to muddle through data entry and compile the first version of the financial plan. The output of the planning process is an unwieldy 100+ page binder full of charts, legalese and fine print that no one will ever read cover to cover.
  • Nearly a month from the time the client had initially expressed an interest in financial planning, the advisor is finally ready to present the plan. If the client wants to change a goal or an assumption during the meeting, the plan must be sent to the back office for revisions.

This financial planning process is clearly broken. It takes too long and advisors miss countless opportunities to truly connect and collaborate with clients. Clients lose interest and motivation and drop out of the planning process, even though it has the power to vastly improve their financial outcomes.

Finally, the output of the planning session is voluminous and too technical. Most advisors would confide that their clients keep perhaps 1-2 pages out of a boilerplate binder that’s thick enough to rival an encyclopedia volume.

Our verdict? Too much paper and time, not enough connection and collaboration.

What can an independent advisor do to fix it?

The bad news is that the big boys are staffing up their back offices and adding more planning offerings to better compete against RIA’s. On the other hand, they are failing in their attempt to reach all of their clients. Independent advisors can capitalize on this and beat their bigger competitors at their own game.

Here is the blueprint for success:  

  • Step One: Move financial planning out of the back office and into the front office. Compiling plan binders in the back office with the help of several CFPs that never get to see the client just does not work. Not only does it block the client from playing an active role in the process, it is too expensive and too slow.
  • Step Two: The true value of planning shines when the advisor can sit down with the client and facilitate a direct conversation about goals, values and resources. Firms should aim to create a “partnership” experience where the client is an integral part and an active contributor to the planning process.
  • Step Three: Take a critical look at your financial planning software. It’s time to transition from a glorified calculator to a platform that can power dynamic ongoing conversations about goals and resources. Choose the tool that allows for easy adjustment of inputs and generates immediate output for scenario analysis. Finally, beautiful and easy to follow output (including graphics) is a must. If your reports and recommendations can only be understood by a CFP, you need a software upgrade.

Tapping into the true value of a financial plan

The highest value of a financial planner is not in the ability to do complex math or understand technical subtleties of mortgage amortization and cash projections. It’s in the ability to facilitate a deep conversation, create better outcomes, keep clients engaged and accountable and, most importantly, get clients to take action. The best plan in the world has little value if it’s left to gather dust on a shelf!

Advizr’s ultimate goal is to create a financial planning platform that will drastically increase the delivery of financial plans to clients, ultimately getting them on track to achieve their goals. When every advisor can do the right thing for his or her clients by delivering dynamic financial plans quickly and efficiently, we will have accomplished what we set out to do.

To learn more about how Orion and Advizr can help you create actionable plans that support your clients’ goals, visit our Financial Planning page.

*This blog was originally posted at