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Mastering the Art of Financial Planning: 7 Tips for New CFP Professionals

By Cora Pettipas, CFP

To be successful, a new planner can approach their career in the same way we teach our clients to approach their finances. It needs to be done proactively, in the spirit of continual development and progress. Financial planning is an important calling and very fulfilling work. I have listed seven key lessons in my career that I wish I had been told as a new planner.

1. Financial planning is cyclical, not linear

Financial planning is a process, and is never finished. There are six steps to the financial planning process, but they may not be worked through progressively with a client. It is ideal when you can get from the discovery stage to plan implementation and monitoring in a quick succession of efficient meetings. However, that does not always happen. When you get ‘stuck’ with a client in terms of progress, it is important to ask yourself what stage are you in with the client. This is not just an academic exercise; it can help quickly re-orientate you to the next action items.

The discovery stage with your client is a very important stage, and may reoccur multiple times in a financial planning cycle. This is because all your recommendations and action items in your follow up meetings stem from what the client has communicated to you about their life, their values, their goals and preferences. It is important to listen and get past the social boxed answers clients will give you, and really seek to understand what they want from their life, so you can build the strategies to get there.

2. Client goals are not set in stone: keep the plan flexible

What surprised me most early in my career was how fast my clients’ lives and goals changed. When I first started planning, I thought my part was complete after going through the financial planning steps with clients, and coming up with a values based assessment and goals based plan. Maybe it is a reflection from working in an urban center with mainly professionals; but it was overwhelming how many clients would change their goals partially or completely in just one year. Babies, career changes, property purchases, divorces, new businesses, and a variety of child related issues can change clients’ financial plans significantly.

A financial plan is not static, but is a living document that evolves. Goals are not set in stone and life is changeable and very unpredictable. A client’s financial plan needs to be built with this in mind. It should have strategies to cover the client’s main financial goals, but built with flexibility so that if life changes, with your help, the client can change and rebuild the plan.

 3. Great notes are invaluable

When interacting with your clients, it is important to take very accurate notes on their situation and the advice you give them. When taking notes, it is important to write them in the spirit that they are going to read your notes. They probably never will, but in Canada they do have a right to read them. It is important to cover off what you recommended and offered the client, even if it was not accepted by the client; this is especially important if you are doing modular plans because the client does not want a holistic one. You have a fiduciary relationship with the client as a CFP professional, and need to make sure that all efforts were made to act in the client’s best interest.

The great thing about taking notes is that it is a great supplement to your memory. Even if you have a great memory, as your number of clients and years of experience increase, you will need the notes to assist you.

4. Not all clients are ready for a financial makeover

No matter how empowering a financial plan is, or how beneficial it can be for the clients, not everyone is ready for this giant step of intimacy with their money. You can gauge when a client is just not ready: they tend to procrastinate, reschedule meetings, and avoid bringing in the necessary paperwork. When a client is dragging their feet, it could be that they are just not ready for a proactive commitment to their life goals and their money. What I have learned through experience is these clients can be better served with a modular plan, as opposed to a holistic one. One goal can be addressed: a budget, debt re-structure, or a retirement plan can be done for the client, for example.

Doing one small thing well will empower the client without too much commitment on their part, and once they see the benefit of having one goal covered off, they tend to be more amenable to doing another modular plan, then later a holistic plan. It is important to remember that financial planning tends to be intimidating and very daunting to the majority of clients.

5. You do not have to ‘sell’ debt, but you have to ‘sell’ investing

Clients in general are very skillful at getting themselves into debt. You do not have to sell it to them. If you tell your clients that you can hang them in debt if they so choose, the answer is almost always, ‘yes please.’ Debt, and the true cost for borrowing, needs to be meticulously described to clients. I have seen so many good retirement plans blown up by ‘finding that dream house,’ or ‘the great condo in Mexico.’ Clients can and will do impulsive things (normally financed) that sacrifice the goals and dreams they have communicated that are more important to them. They have the high of the lifestyle purchase and then the debt hangover follows.

In contrast to debt, savings, and long term investment plans have to be ‘sold’ to people. Clients have trouble staying the course and sacrificing the present for the future. The present is important too, but the future tends to rapidly morph into the present. Savings and investment plans are best implemented after a life change, as they tend to stick better. An education plan is best started when the child is in diapers, a retirement savings plan should be well underway before your client has figured out how the photocopier works, and a debt repayment plan should be set out before the first mortgage payment.

6. A simple plan is more achievable than a complex one

When I first started in financial planning, I approached it like corporate financial planning. Any way I could maximize cash flow, yield and ultimate net worth, I implemented in the client’s plan. I came up with some brilliant financial strategies, ones that were so complex that they often had 8-9 different strategies per year. What I noticed with my clients in the follow up meetings is that the more strategies to implement in the plan, the less likely they would implement any of them. This was frustrating to me at first, until I realized that there is no value in having a beautiful financial plan document that is not utilized. It is practically useless and completely invaluable if the client actions nothing from it.

Upon this realization, I started creating simpler plans that only had about three main action items per annum. In order to pare it down to that, I sometimes did significant re-organizations of their finances first, so that they were only left with three action items. In addition, I kept saving plan contributions round numbers that were easy for the client to retain and visualize. Keeping the forecasted numbers simple kept the plan memorable, even if it was slightly less accurate. Ultimately, the financial plan needs to be kept as easy to use as possible to increase the probability it will be followed.

7. Take time to invest in your career

I have a tendency to put my head down and work; intensely focused on client needs. This is a great short term strategy, but I feel I may have missed out in stimulating discussions and enriching relationships with other planners early in my career. Now I try to make time for conferences, events, and luncheons because I find them so valuable in terms of idea sharing and relationships.

Mentoring is also vital. It is valuable to both be a mentor and to be mentored. It can be tricky to get a formal mentor because of the time commitment needed (the best financial planners are always the busiest). However, it can be as effective to create an informal network of mentors, planners you admire that have great skillsets. People tend to be generous with their knowledge and experience, and offering a cup of coffee or a lunch can buy you a wealth of knowledge from your mentors. Seek out from your mentors what courses or professional development you could take. Advice from individuals that are in your dream position, or specialty, can be most relevant.

These are the seven key lessons that I learned from experience. I hope they are helpful for new financial planners. Do you have any to add?

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