It’s not surprising that customers who have a financial plan tend to be more satisfied with their financial advisor than those who don’t have a plan, but how do you convince a client that having a financial plan will ultimately be in their own best interests?
As you can see below, when investors were asked about their satisfaction level with their financial advisor, those who had a financial plan were substantially more satisfied with their financial provider than those who felt they did not need a plan as well as those who anticipated needing a plan someday and those who had a plan from another provider. Eighty eight percent of those who had a financial plan (45%) rated their satisfaction as satisfied or very satisfied with their advisor. In contrast, only 68% of those without a financial plan (36%) rated their advisor satisfaction levels as satisfied or very satisfied.
There were few differences based upon age or wealth level, however, individuals who were Educators, Managers, or IT Professionals seemed to be more likely to have financial plans (and therefore ultimately were more satisfied) than other occupations.
Other types of planning also increased levels of satisfaction. This included having a retirement income plan, an estate plan and a strategy surrounding long-term care.
So what prevents an investor from wanting a financial plan? Who are these individuals that “do not need this type of advice”? And who are those that “will seek this advice in the future”?
- Many investors don’t have the time to gather the required information for a comprehensive financial plan. These individuals tend to be those investors who are working and generally are in their forties and fifties. The idea of gathering the requisite information just isn’t important enough to them. Advisors need to ensure that they have the ability to receive as much information as possible electronically. Additionally, asking the investor if you can work directly with their accountant may help you bridge the “not enough time” issue.
- Some investors believe they do not have enough assets to warrant a financial plan. It is important to explain to investors the benefits of planning regardless of the level of assets they may currently have. In fact, point out to them the likelihood of increasing their assets more effectively if a financial plan is in place.
- Those investors who consider themselves to be “really smart” think they can manage their financial life without planning. These are the investors to whom you might want to ask more technical questions. It may be that they really haven’t thought of everything!
- The idea of having to follow a plan may be daunting. For the many investors who don’t feel they are extremely disciplined, having to follow a financial plan may not be appealing. For these investors, highlight that the financial plan is merely a guideline. There are no serious consequences for not following the plan, however, there may be benefits by following the plan.
- Some investors are embarrassed about how they have been managing their finances and don’t want to share the information. This is one of the more challenging situations. It may be helpful to start with a limited amount of sharing. As their trust begins to grow, they may be willing to increase the amount of information they want to include in the plan.
As investment advice increasingly competes against formulaic solutions, advisors need to provide more holistic solutions to attract and retain investors. Financial plans are one of the best ways to build a strong and recurring relationship. It’s time to encourage all of your clients to invest the effort required for you to formulate their plan.
© 2018 Spectrem Group