Financial advisors who engage in comprehensive financial planning have stronger relationships with their clients, including higher levels of client loyalty and engagement, than advisors who offer only limited advice, new research commissioned by the Financial Planning Standards Council shows.

And clients who receive this type of comprehensive planning have a significantly more optimistic outlook and a much higher level of financial confidence than other clients, the research shows.

These were some of the findings of the first phase of a comprehensive five-year research study, called the Value of Financial Planning, which were outlined on Tuesday by FPSC president and CEO Cary List at the Canadian Institute of Financial Planners’ Annual National Conference in Niagara Falls.

Conducted by The Strategic Counsel, the first phase of the study was conducted between August 2009 and January 2010, and featured survey responses from more than 7,300 Canadians across the country.

The study found that advisors can benefit from engaging in comprehensive, integrated financial planning, which the FPSC defines as that in which an advisor provides financial planning for major life goals and events, or at least three of the following planning components: household budgeting, tax, retirement, estate planning, investing, debt or risk management. This contrasts with ‘limited financial advice,’ which the FPSC defines as engaging in just one or two of the aforementioned components.

“Planners offering comprehensive financial planning have stronger, more loyal relationships with their clients, and an integrated approach means more areas for advice and service, which results in deeper relationships,” said List.

Specifically, the study found that 47% of clients who receive comprehensive planning advice have worked with their planner for five years or more, as compared with only 38% of those receiving limited financial advice.

Furthermore, 34% of clients who had comprehensive, integrated planning reported that they spent five hours or more over the course of a year with their planners, compared with 16% of those receiving limited advice. And more than half (52%) of clients receiving comprehensive planning said they speak or meet with their planner once a quarter (or more often), compared to 32% of those receiving limited advice.

“You have the opportunity to guide every element of the financial plan and influence the products and services your client chooses in a meaningful way,” said List. “You’re much more likely to get more business from your clients as a result.”

The study also showed widespread benefits for Canadians who engage in comprehensive financial planning. For example, it revealed that these individuals have a significantly more optimistic outlook on their emotional and financial wellbeing, and are much more confident about reaching their goals and their ability to manage through challenging times.

“The study results indicate that the benefits of financial planning are much more than simply the accumulation of wealth,” said List. “There is real empirical evidence that Canadians who engage in financial planning are far better off than Canadians who don’t.”

Of the respondents who said they engage in comprehensive planning, 51% said they are on track to reach their desired lifestyle in retirement, compared to just 33% of those who receive limited financial advice, and 18% of those who don’t receive any financial advice.

The research also revealed that 61% of individuals who engaged in comprehensive, integrated financial planning felt confident that they will be satisfied with their financial situation in retirement, compared with 27% with no financial planning and 46% who had engaged in only limited advice.

Individuals receiving comprehensive planning advice also feel that they’ve improved their ability to save, have greater peace of mind, are less concerned about their financial situation, and feel better about having sufficient discretionary income to be able to lead the life that they want, compared to those receiving limited advice.

“By and large, the insights from this study confirm what we’ve always known,” List said:
“There is tangible benefit of financial planning.”

IE