Advisors are hesitant to write plans because it can be a painful process and it can require a great deal of time to gather the information the first time, says Mark Kemp of Kemp Harvest Financial Group in Harleysville, Pa.
“Even advisors do not have their own financial plans. Most clients do not want to go through the exercise and advisors do not know where to start,” Kemp says. “But it is easy to be self deceived about finances,” so putting a plan down on paper is worth the effort.
UBS feels so strongly about the advantages of writing a complete plan, it is offering brokers bonuses for writing them, the company announced recently. The advisors will be paid a bonus of up to 4 percent in deferred compensation of the revenue generated from clients who receive a plan.
Lisa Chapman of UBS Financial Services in Long Beach, Calif., says the team in her office will not see a prospective client unless they agree to have a complete, written plan done.
“I see this as the future of financial practice,” Chapman says. “Written financial plans are becoming the core of the business. Doing a financial plan is a way to develop a relationship with a client.”
Writing a financial plan is the easiest way to distinguish between those who are financial planners and those who are selling products,” says advisor Michael Kitces, a leader in the financial services industry. “Planners acknowledge that a lot of clients never read the plans, but I am not sure the clients would trust us to give advice if we did not demonstrate that we had done the work” to develop a written plan.
“But it does not have to be a 150-page document,” he adds. “We have to come up with a middle ground between no plan and a huge document that no one reads.”