After graduating from the University of Wisconsin-Madison, Patrick helped individuals with their insurance needs. Now in the FinTech world, Patrick is driven by his desire to help advisors adapt and profit from the ever-changing financial landscape.
Similar to how the financial planning needs of a client can vary, the way plans are created varies as well. There are four different types of financial planning models, each with its own set of advantages and disadvantages.
The most basic type of financial planning model is the individual planner. This is commonly found in the independent space, the insurance space, and in a variety of broker-dealers. In this model, advisors are essentially on their own to choose when to create plans, how to deliver advice, and whether to employ a paraplanner for additional help.
The advantage to this method is that individual advisors are able to be very hands-on with their clients. Conversations around goals, cash flows, and net worth will ideally result in a deep understanding of a client’s situation. This in-depth knowledge helps to establish a long-lasting client-advisor relationship that can lead to increased referrals and repeat business as current clients’ needs change over time.
Despite the advantages that deeper client-advisor relationships can bring, this hands-on approach can be less efficient. When the advisor has to spend time manually building, tweaking, and updating a financial plan, they sacrifice time that could be spent prospecting for additional clients. Also, the total number of clients they can handle has a lower ceiling.
With this model, it is important for advisors to implement a process that allows for plans to be created and customized quickly. Often, the most time-consuming task of gaining a new client is the onboarding process. Advisors should leverage client-facing tools such as the NaviPlan client portal to allow for data entry to be done by the clients themselves, eliminating the need for a lengthy in-person meeting or information to be sent back and forth over email.
On the flip side of individual planning is the central planning model. This approach is popular in the mid-sized RIA space and with compliance-oriented broker/dealers. In this case, a firm would establish a central planning department to build all plans for a firm that could consist of individuals such as paraplanners, CFPs, JDs, CPAs, and more.
This model affords the advisor more time to be the friendly face and personality of the company, while the planning department maintains a tight grip on the product and output being delivered. In certain situations, the advisor may still do the data gathering, but is primarily responsible for presenting the final plan and ensuring its execution. By doing this, the advisor takes more of coach role than a planner role.
With the central planning department responsible for actually building the client’s plan, the advisor can become more removed from the client’s situation and may not be as uniquely suited to truly understand the nuances of their financial needs.
A central planning model requires a planning solution that can support internal workflows for the various roles of users and how they engage in the planning process. It is important to employ a tool that can integrate with other technology such as a firm’s portfolio management software to reduce the need for data transferring and additional accuracy checks.
Supportive planning is in many ways a hybrid approach to the previous two planning models. There are a variety of ways this model can appear such as an individual planner who relies on a few home office workers for troubleshooting or a central planning team that steps in when an advisor gets a sophisticated plan. One version of a supportive model that seems to be growing in popularity is the idea that advisors will deliver a high-level “introductory/onboarding plan” to clients and then pass the data to a central team to build a more sophisticated plan after buy-in from the client.
This model helps maximize efficiency while allowing advisors to retain their hands-on client-advisor relationships. Still, this model can be difficult to implement and execute on. First off, advisors need to be able to do quick planning while gathering the necessary data to pass along to the central planning team. Second, the team of central planners needs to be talented enough to fully build out a partially developed plan and be able to effectively communicate this to the field advisor.
Similar to the central planning model, the supportive model needs a planning solution that can facilitate the multiple roles of users while simplifying workflows for approval. Seamless integration with a firm’s CRM will help the central planning team and advisor stay up-to-date on a client’s situation. Tools that make the initial high-level plan more engaging will help ensure client buy-in leading to the desire for a more sophisticated, holistic plan.
The last model that exists in the financial planning market is the consumer-driven plan. Robo-advisors seem to be leading this charge with light goal planning functionality. In my opinion, this model is the most flawed.
At the end of the day, a quick assessment done by a client on their own can set them up for failure. On the same note, a sophisticated plan requires an expert that can take different strategies and situations into consideration.
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