According to Investment Executive‘s 2013 Report Card research, clients are generally reluctant to go through the process of developing a financial plan, despite their financial advisors’ insistence on the importance of planning.
Almost 82% of advisors interviewed for the surveys say they create financial plans, yet only 52% of clients have a plan. Some advisors say clients are reluctant to provide the detailed information required to create a financial plan.
Here are some ways to make financial planning less daunting to clients:
> Identify goals
Like a diet or exercise program, financial planning involves working toward an objective.
“You have to have a goal in order to want to engage in the process,” says Jim Kraft, vice-president of wealth planning services at BMO Financial Group in Toronto.
Your client may indicate a long-term goal, such as retirement, or short-term goals, such as a vacation or a new car. Both types of goals are equally valid.
Advisors are programmed to work with the baby boomers — most of whom are now pre-retirees and retirees. However, Kraft says, younger clients, members of Generation X and Generation Y, are not yet looking that far ahead. These clients will be more engaged if you work with them to determine goals that are more in tune their stage in life.
> Keep the discovery meeting brief
Kraft suggests keeping the first meeting short, especially if you are starting off with short-terms goals. Gather enough information to start working toward those goals and move the planning process forward in subsequent meetings.
Al Nagy, regional director with Investors’ Group Inc. in Edmonton, prefers to keep numbers out of the discovery meeting altogether.
“The discovery meeting is not a meeting to be providing solutions, [or] for selling products,” Nagy says. “It’s all about asking questions.”
> Ask “cue card” questions
Nagy recommends using the discovery meeting to ask “cue card” questions. That is, short, uncomplicated queries designed to motivate clients to think about why they need a financial plan.
Nagy’s first question to the client is: “What kind of financial plan do you have in place right now?”
“There’s a reason why I ask that,” he says. “There’s an implication that the client should have a financial plan in place.”
Other topics for questions include: how your client manages his or her investments; whether the client prefers managing his or her own investments or using the services of professional; what keeps the client awake at night; and whether the client knows how much money it will take for a comfortable retirement.
The client’s response to the last question is usually negative. This leads to Nagy’s next question: “Would you like me to help you figure it out?”
From here, the client is in the driver’s seat; he or she can give the advisor the authorization to keep going.
Questions such as these help the client develop confidence in you as his or her advisor, which will ease any fears the client may have about divulging sensitive financial information.
This is the first instalment in a two-part series on getting clients on board with financial plans.
Next: motivating your clients to stick to the plan.