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Comprehensive Planning: The Core Value of Financial Planners

By Taylor Liao, CFP

When taking on a new financial planning case, we collect all of the client’s data and then we have a better understanding of their lives, than before. It’s like a story to us; a story of their past life and how they are planning for the future. We are in a very special profession: financial planning. The client trusts us because they believe we are professionals and that we have the goodwill to help them. What helps them trust us is that we are providing solutions to help them achieve their goals and not, simply, selling them products. What would happen if we only provided scaled advice to them instead of taking a comprehensive consideration of their situation? I, personally, would say that we are not doing our duty of being a financial planner.

It’s easy for our clients to find a salesperson to buy financial products from, because they are everywhere, from banks to insurance companies. What makes us different from product sellers if we are using the same, scaled advice approach, they are? The core value of financial planning is our comprehensive perspective. Financial product providers represent the old-world view. They:

  1. Find-out category-specific client needs
  2. Try to develop products to meet these needs
  3. Distribute these products through sales channels

But, are they really meeting the needs of their clients? Maybe, not. Before we arrange the product as a tool to achieve client’s goal, a comprehensive review is needed , so that we can choose the right one from a variety of sources to meet their requirements.

Scaled Advice Risks the Chance of “Missing Something”

A financial planner is often limited to the territory that is most familiar to them. A planner with an insurance background tends to provide advice mostly on insurance, and a planner who works for a securities trust company has the tendency to focus on investments. The advantage of financial planning, though, is that is spans across many focuses.

There are many factors that we have to be aware of when working with clients such as their:

  • Statement of cash flow
  • Balance sheet
  • Income statement
  • Investment and risk management..etc.

Why do we have to do that? Because the client’s resources are limited and they have to spend their money efficiently. The goals of a client are linked to each other and sometimes the accomplishment of one goal will have a ripple effect to another goal. This is the reason why we have to take a comprehensive view of a client’s situation, before we suggest any tool or product for them.

In 2004, Taiwan was scammed by a technology company. The price of the company’s stock was the highest one in the Taiwanese stock market, and the chairman had been elected to be one of the top “100 Technology Dives” by our local business magazine. Quickly though, without warning, the company declared that they couldn’t pay their corporate bond and they had to apply for bankruptcy protection in 2004. One of the investors, who was a retired teacher, wrote a letter to the judge who was in charge of this investment scam. She said that she had all her money (US$600,000) in the stock of the company, just 10 days before their bankruptcy.

The moral of the story is that when a planner uses only scaled advice, they take the risk of missing something and causing a plight of the client’s. Who can predict when we will step on a mine, such as the 2008 Lehman Brothers Collapse? By providing comprehensive advice though, we usually diversify the asset management for our clients. This reduces the risk of a dramatic loss of assets in investments.

Can a Client’s Needs Really Be Met with Just Scaled Advice?

A client will tell us all the goals they have in mind, and sometimes the goals are beyond their capacity range. It may be due to their limited resources, but the result is that they can’t execute all their goals at the same time. What options does a planner have in this situation?

  1. Tell the client the truth and help to adjust it
  2. Sell them product by providing scaled advice only

It’s easy to take the second option because we can earn a commission and not concern ourselves with future client issues, such as their cash flow or what goals they aren’t going to be able to accomplish. In my opinion, I don’t think that is the right way to treat a client.

As a CFP professional, we have the stereotype of thinking like a financial planner. In other words, we may think that it’s normal for a client to have standard goals they want to accomplish in their life such as: college education for their children, planning for retirement, and saving for a down payment on a house…etc.

So, when we meet with a 45-year-old client who doesn’t have a retirement plan, we think that this person should start their retirement plan, immediately. Financial planners think that retirement plans are very important and that it’s better to start early, especially with this client, because they are not far from the age of retiring. But, is a retirement plan the biggest concern to the client?

What Do Clients Want?

When we carry out to the process of presenting a report to a client, we usually start by asking them: “What is your biggest concern/focus for this report?” Then, we will talk more about the goals that they care about most. We know, very well, that it’s their life and not ours. The purpose of our planning is to help them achieve a better life. By doing this planning, it will help the client clarify what they want and what goals are important to them.

We, fully understand that financial planning is long–term planning and the process may continue for many years and almost all the follow-up has to be done by the client. If they don’t believe in their hearts that the financial plan is important to them, how can they make changes in their lives and continue implementing the plan for years?

A lot of our time is spent communicating with the clients. It’s ideal that after we have created the financial plan, we see the client making some changes in their life, and gradually progressing towards their goals. Providing scaled advice is the same as product sales and it will not substantially help the client. In my practice, we utilize our professionals to help our clients, and they pay us in return. But, I think the greatest reward is their appreciation.

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