More than 150 clients? Chances are you are not doing Financial Planning

Lifestyle Financial Planning Uk

Having been in the Financial Planning industry for over 26 years it is wonderful to see how we are moving from a sale driven approach to one where the clients needs take centre stage. We as Financial Planners, are moving from transactional to transitional relationships with our clients.

There are many reasons why this change is taking so long and hopefully RDR will expedite this. While we can blame Life Companies etc for not wanting to change, perhaps looking at what a Financial Planning business in an ideal world should look like, is a good starting point?

There is much talk of robo advice, direct marketing etc leading to the disintermediation of Financial Planners but does this apply to all Financial Planners? I believe there are two types of advisers, firstly what I would call “brokers” and secondly “Lifestyle Financial Planners” and they add vastly different value. What is the difference between these two?

A broker is your traditional salesman. Rewarded and lauded for selling lots of product to lot of “clients” making lots of commission. Life companies have for ages bowed down to these master salesmen, taken them on cruises, hunts, golf tours etc; basically, treated them as demi-gods (all life companies in SA have a few of these). These brokers have thousands of clients on their books although they know precious little about most of them. They have huge backup staff who respond to client queries and setup new appointments for their sales icon to keep the flows coming in!

These brokers see themselves often as fund pickers and many setup their own white label funds and see this as their value add. Conversations with clients are around world markets, the economy etc even though these brokers are not CFA’s and sometimes not even CFP’s. Most clients will not be seen by the broker even once a year in person. Every other broker is seen as competition and the whole brokerage revolves around the broker and production.

Advice here is mostly once off and has at the end of it a sale for the broker, there is very little real planning done except for maybe a few “special” clients who are special because of the revenue they bring the broker. The reason given for the little bit of planning done is lack of time as there are too many new “clients” to be seen. Birthday cards are sent by admin staff or automated and that’s about as personal is it gets for 90% of these clients.

A Lifestyle Financial Planner (LFP) uses a completely different approach. A LFP spends time getting to know his/her client; everything about him or her, their family, their background, their business, their dreams and aspirations and much more. This takes time, a lot of time initially and on an ongoing basis. What is key to a LFP is getting to understand how they can help their client achieve real success in their lives. Studies have been done that a true LFP can not look after more than 150 relationships and in fact the ideal number is around 100. Due to this a LFP must build a proper business which revolves around the client.

A LFP will charge fees rather than commission and the focus is on building long term, mutually beneficial relationships rather than transactional ones. The relationships a LFP builds are real, honest and most times end up as friendships. The LFP’s business has a real value proposition which is written down and has no linkage to any product or sales process. Advice here is based on the clients’ unique personal circumstance and is ongoing. A good LFP does not need to prospect as his/her clients refer their friends and associates to the LFP because the LFP is referable. LFP’s share and learn from other LFP’s to uplift themselves and the overall industry. They do not see each other as competition.

In closing, the industry is changing, what clients want, and demand is changing. No matter how long you have been in business, even if it is generations, the future in our wonderful industry will look very different to what it looks like today. Robo advice already does all of what the “broker” offers at a far cheaper cost and more efficiently. LFP as is exists today is a great start if you want to be a player in our industry in the future, but even LFP must continue to evolve. The client’s best interests must be at the centre of every decision made in our business and the money will take care of itself.