A More Effective Approach—Sometimes
While formal financial plans can be ineffectual and sometimes counterproductive, financial planning certainly is not. On the contrary, the ability to understand a client’s financial world and identify opportunities to meaningfully improve it is extremely valuable. The knowledge and skills that constitute financial planning are very valuable. They also provide a powerful foundation upon which to build a highly successful advisory practice.
For those clients likely to follow through when they get their formal financial plans, such an approach makes sense. However, for the remaining clients, a different approach is required.
For them, instead it’s likely more effective to move away from the comprehensive and take a very targeted, incremental approach. Formal financial plans cover a number of areas, and since implementation is the criteria for success, for these clients, a focused step-by-step approach usually proves much more effective in getting them to take action.
The approach starts with identifying a client’s most pressing needs and wants, those that align with the expertise the advisor can deliver (Fig. 3). What is really keeping the client up at night? And can that be addressed by financial planning and high-quality products?
Beyond expertise, it is essential for the advisor to understand their clients too: Their psychology is the primary factor in determining their needs and wants as well as how to best frame the recommendations.
The advisor can then position financial solutions for the client, and if the choices make sense, the client will commonly take action.
Very often, the path to success means focusing not so much on the client’s entire financial life but instead on pressing needs. It’s easier in those cases for the clients to take appropriate actions (and for you to implement them). When the issues are too complex and time is of the essence, it motivates all parties to center on what is really important at the moment.
After that, you can address other needs and wants.
Russ Alan Prince is president of R.A. Prince & Associates.