How to migrate your commission based practice to a fee based financial planning model | FEE003 – Transcript

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So today we’re going to be talking about how to migrate your business to a fee based financial planning model and we’ve got eight steps that we’re going to go through. But basically we need to talk a little bit about fee based financial planning first and what is that model and all that sort of stuff. So the first thing we’re going to talk about is I’m going to ask you a question, I mean if you look forward three years what do you think will happen to your business if you don’t incorporate a fee based approach and in particular what dangers you know do you think you’re going to be faced with, what opportunities are you going to be able to take advantage of so what strengths do you already have that you can already use. So you know let’s just talk a little bit about that, let’s talk about some of the dangers.

Well some of the dangers that I’ve been looking at basically when it comes to a fee based approach commissions rate now are dictated by the manufacturers of the products that we sell and they basically state this is how much each product is going to pay. You know some of the investments do allow you to have some control over that but basically you know the commissions are set by the manufacturers and the dealers and you know in an effort for them to maintain their own profitability because right now time are much more challenging for these firms, so in order for them to maintain their own profitability they’re going to have to change commissions, it’s one of the easiest ways that they can add money to their own bottom line is by not having to pay as much on the products. So it’s the brokers, it’s the dealers, it’s the insurance dealers, the mutual fund dealers you know all of them, they’re all basically going through and revamping their commission structure, they’re revamping their pricing structure so the first step with a lot of the insurance companies now because the way the fixed income market is and their inability to properly you know put reserves in place in their long term bond market purchases that means simply that they’re having to raise rates. So the first person that’s going to get hit on the insurance side is going to be the consumer but then once the consumer starts to push back enough then what’s going to happen is the broker is going to get it or the agent is going to get it and it’s going to come right from commission. So number one I mean you got to understand commissions are coming down and so if we don’t find other ways of generating you know another source of revenue from our practice then our commissions, our revenues are going to start to decline as well.

Now everything is beginning to look the same right now so in the market place mutual funds all it’s very difficult to stand out, it’s very difficult for any of those products to differentiate themselves. So you know you can sit down and you can go head to head against any other advisor but the bottom line is you’ve still got the same products, their product kind of looks like yours, yours kind of looks like the next guys and so there’s no real competitive advantage. So you know everything is beginning to look the same so any competitive advantage you once had on a product is simply going to be lost and you know that’s a problem because everything seems to go through this phase of being commoditized and that’s what’s happening. Mutual funds are being commoditized, people are simply saying what’s the rate of return, what’s the MER and they’re basically comparing them that way you know so we’ve got to find ways around that, we’ve got to find ways to add value and charge for that value.

Consumers are really pushing back against product sales, you know they know now where they can buy certain things so it’s not so much of a need anymore to have somebody as a broker. What they’re looking for is they’re looking for more comprehensive advice and if you’re not able to give them that then you know you need to help them increase their confidence on making decisions and they’re looking for value, they’re looking for advice, they’re not looking for products anymore. They know at the end of the day they’ve got to buy something but you know what they can probably buy it themselves so what that means is they’re coming to people for advice and if you’re not there, if you’re not able to give them that advice in a comprehensive way they’re simply going to go somewhere else and that’s the reality. So you know some of the dangers you know if you’re not embracing the fee based model and you’re not embracing sort of how to incorporate fees into your practice you know these are some of the dangers that are going to become more and more of a reality especially with the big demographic shift that’s happening and you’ve got a lot of the baby boomers who are starting to die off and the wealth is going to be transferring to the next generation well the next generation is much more savvy and they’re looking for value from the advice they’re not necessarily looking for products so you know definitely keep that in mind.

Now some of the opportunities that we can start taking advantage of I mean people they’re definitely more willing to pay for good advice and you know take a look at any industry, any industry that’s providing value people are willing to pay for it. Any good restaurant you know maintains its lustre and they keep their clientele you know you go sometimes you spend a lot of money dinner well the reason why we go there is because we’re getting more value for our money than anywhere else. So certain places have it, certain places don’t. People are willing to pay for it so you need to create it. Comprehensive financial planning is becoming more recognized by consumers so what that means is that you know there are these lobby organizations that are promoting financial planning and you know the buzz term seems to be financial planning and they keep on coming back to you know referring to the industry as financial planners now more so than they are the insurance agents and investments sales. So you know that’s a good thing, those are some opportunities that we can start to piggyback on because consumers are getting a little more aware of the idea of financially planning.

Now we know that they probably think they have a financial planner in most cases when the reality is they don’t and so all we need to do is we need to start educating them as to what good financial planning is. People are looking for a relationship with a well thought out process so they’re not necessarily looking for a relationship with an individual, they’re looking for a relationship with a process that they can rely on and that gives us an opportunity to create sort of a team based approach and that team based approach will actually be embraced by a clientele when it’s well quarterbacked. Now you know what I mean by well quarterbacked if you are the senior financial planner or you are the creator of your financial planning you know way then people recognize that you know you’re the specialist when it comes to that particular financial planning way and they recognize that you can hire other people and you often times in order to run your business need to have support staff and a support team in order to keep it running. And so the goal for us really is to start to educate people that you know you need to form a relationship with a firm who has the right process that you’ve bought into, that you sort of agree with and you know focus on the concept of a team based financial planning.

Now you know I’m probably going to get some emails and some comments on this saying oh no, no it’s got to be you know one on one, individuals are looking for relationships and whatnot you know and I do agree with that and I think that there needs to be a good relationship with their senior planner however that senior planner doesn’t need to be the person who does everything and people will appreciate that.

Some of the strengths that you can already use I mean the hardest thing in the world I think our business is probably the most amazing because a lot of what we sell doesn’t exist. You know when you think about it we sell an insurance policy and what does that mean, well basically we’re selling confidence, we’re giving somebody peace of mind in knowing that if some eventuality were to happen they’re confident that somebody else is going to then either pay the bill or cover the cost or you know fund it or whatever. So you know we’re selling an intangible and when we sell an intangible it’s very, very difficult to do so we’ve got an innate skill set that really adds to our ability to sort of get in there and start selling you know a service. A service right now is kind of an intangible so there are some solutions that we can put in place in order to start selling those services a little bit better.

You know you already have right now, if you’ve been practicing you know even for a little bit, you’ve already got a group of clients who see you as their trusted advisor so when you bring the idea to them, the idea of comprehensive financial planning then whether they accept your invitation to actually do the comprehensive financial plan or not because remember you’re going to be charging a fee for it ad not everybody’s going to accept it but what they do then see is they see you as somebody who’s got more value than anybody else. So you know a lot of the fears people have when they’re looking at converting to a fee based financial planning practice is they’re like oh my clients are going to get upset because I’m going to be charging them a fee. In actual case it’s the exact opposite. They actually say you know what wow if you’re charging fees for that now maybe it’s not the right thing for me but if you’re charging fees there must be some extra value that you’re providing that other people aren’t. And so you know it does elevate you in their mind and it’s a good thing.

So you know the other thing that you’ve got going for you is that now I’ve put together this podcast and I’m talking to you about fee based financial planning, everything you need to know to make a better business and you’ve got that on your side so there’s now resources coming to you from front of the line people, people who are you know in the trenches doing exactly what you’re doing these are the people that you want to be getting some counsel from. So you know hopefully you can participate in this community, comment on the blog, comment on the podcast blog wherever, you know get involved and start to communicate a little bit because that’s what’s going to allow us to build – everybody to build a better practice.

So one of the big risks that people – well not risks I shouldn’t say, but one of the big things that keeps people from moving forward in embracing a fee based model is that they just don’t know how to make that initial transition. They get the fact, the numbers work, they understand that oh yeah in the long run man you can make so much more money, it’s much more reliable and so and so and so and so however getting there is the difficulty. And so the risk and the fear is that you can’t afford a drop in revenues during the transition period you know, I mean we’ve all got obligations, we’ve got mortgages, we got kids going through school, we’ve got kids getting ready for university, there’s costs and obligations that we have as financial planners too and when you come to rely on a certain level of income you know it’s very difficult to see that income go down. Well that’s one of the fears we’re going to see that happen and how we’re going to make it through that transition.

Well the reality is that when you make the transition for the right reasons and seek out the right new clients your overall revenues will go up. if you’ve made this migration, so if you’re listening to this podcast and you’ve already done that and you’re nodding your head right now and going yeah that’s absolutely true, you know I’ve done it I’ve seen my revenues go up and so on then I want to know about it, I hear about it, what’s your experience been like, was it a good one, was it not a good one. My experience I’m going to tell you about a little bit later it was a great one but I don’t know maybe other people haven’t had that experience but so far the people that I’ve talked to, the other advisors I’ve talked to who actually have made that change have loved it, they think it was one of the best things they ever did. So what happened to your revenues during the migration period, did they go down, did they go up, let’s talk about it a little bit so comment on it. I don’t want to know what the numbers are unless you want to share that but I just want to know if it was a positive or a negative experience because I found it very positive and you know there was a study that I came across, there was an AXA Financial, formerly the Equitable, in 2000 – in September of 2000 in Financial Planning Magazine there is an article in there that was written and it basically talked about the results of AXA Financial migrating to a fee based financial planning model. Now those participants who participated in the pilot program to migrate to a fee based financial planning approach here’s what they saw. They saw their overall sales went up by 31%, their life insurance sales went up by 24% and their investment sales went up by 73%. So you know they definitely, the people who participated in the program there was a monumental difference between the ones who did and the ones who didn’t because the ones who didn’t participate in the pilot program and just carried on in the commission based model their overall sales during that same time period went down 12% to 15%.

My experience, my experience has been that from the day that I’ve made that commitment to just never taking on a new client without going through a fee based financial planning approach, charging fees, from the day that that happened I have never seen a decline in revenues year over year. It amazes me you know sometimes because there are some years when I’m actually you know I feel like I’m working less, I mean right now I’m working a lot more because I’ve got a lot of other projects on the go but when I went through the transition period my workload actually went down and down and down so I was working less hours but my income kept on going up, my revenues kept on going up, top line revenues kept on going up, bottom line expenses kind of stayed the same. So you know all the things and all the tools that I’ve put in place really made for a tremendous experience in my mind and my experience has been nothing but positive.

Now you know there’s other challenges and we’re you know starting out from scratch, that was my experience, I’m taking things to the next level now and trying to really grow the practice and so you know there’s the challenges that go along with that and we can get into those challenges in a later episode but I tell you going from a commission based process to a fee based process I have never looked back. You know done the right way, following the approach that I followed I just haven’t seen the revenues go down and if that’s one of the biggest fears standing in your way I’ll tell you right now my experience was that it wasn’t and if you’ve also had the same experience just put a little note on the comments, say you know what I agree my experiences was this is what happened, you know my revenues went up on my insurance sales and for me honestly that’s where a lot of it came from because I’m dual licensed I was able to see a real increase in my insurance sales, tremendous increase in my insurance sales and the main reason is because I had more time. I wasn’t so focused on the investments and doing all the investments anymore because I’ve hired that out to other investment counsellors and whatnot but I didn’t see the revenue drop, the over revenue drop didn’t go down. I actually saw the revenue streams level out a little bit in that I wasn’t so reliant on one stream anymore and that makes for a much more stable business.

So what is fee based financial planning. I’ve been using the term for a while and there’s you know a variety of terms out there. Now I’m going to start off with fee financial planning. So fee financial planning is when you charge a fee irrespective of product implementation for the writing of a comprehensive financial plan. So there’s the fee only model and then there’s the fee based model. Now I’m going to talk about the fee only model. Fee only model this is and these are my definitions, these aren’t sort of industry standards or whatever but I think you’ll kind of agree with how I put it up here, so fee financial planning on the fee only model this is when you charge a fee for the writing of a comprehensive financial plan period. You charge a fee for the maintaining of that financial plan through regular progress report meetings period, that’s it. That’s the only way in my mind if you’re going to call yourself a fee only financial planner that’s the only way you can generate revenue from charging fees for the monitoring or the writing of a comprehensive financial plan.

Now a fee based model. Fee based model is when you charge a fee for the writing of a comprehensive financial plan check, that’s one, when you charge a fee for the maintaining of that financial plan through the regular progress report meetings that’s two, so same as the fee only model. However now when you provide the implementation services should a client request the financial planner implement the plan for them that’s important because that’s where I say okay fee based the difference between the fee based and fee only is that if you’re fee based you are able to implement a plan for a client. Now you don’t require it and I don’t think you should ever require it, I think you should always talk about you know get the client for the fee only planning first, you want to get the client writing of the comprehensive financial plan and get them to buy into that whole comprehensive approach but then at the end of the day they’re going to need to implement it somewhere. So they have a choice, they can implement it themselves, they can go find somebody else to implement it or they can have you implement it. This is why I like the fee based model because when somebody asks us to have us implement the plan for them now basically you’re implementing two things, you’re either implementing investments or you’re implementing insurance.

On the investment side fees are generated based on a percentage of assets charged separately to the client account. So it’s critical on the investment side in my mind to have complete full discloser. So the way we do that if we’re dealing with if it’s a mutual fund we charge our fees to that account separately. If it’s a fee based account through an investment referral agreement with an investment counsellor we charge our fees separately. So what that means is that the client will see on their statement that there was a fee charged for financial planning services and that fee is disclosed to them so they see it on their account. On the insurance world that’s a little bit different because right now in Canada anyways we don’t have unbundled fee type products. Currently in Canada we don’t have that type of solution so you know the reality is we just can’t do a fee based approach on the insurance whether it be life insurance, critical illness, disability, long term care you know all of that we don’t have a solution right now. Not all provinces in Canada allow for rebating so I’m in the province of Ontario so I’m not able to rebate on the insurance side. I know some of the other provinces, Alberta I think is one that you can do some rebating but we’re not allowed to do that in Ontario and you know the whole concept of rebating, I don’t know whether I agree with it totally, the thing that’s important about a situation where you’re making some commissions on insurance just ensure the recommendations are based on logical solutions to the financial planning issues at hand. So you know you want to make sure that you’ve got a logical reason for recommending the particular structure or type of policy or whatnot and that’s what makes it so easy when you’ve written the whole financial plan and you come up and you can establish a need it’s hard to say well I don’t really need that because the need has been there, it’s based on the client’s goals and wishes and so by putting that need together you know and showing that need and illustrating it properly and illustrating how it impacts their financial plan it does increase their desire to have the insurance solutions put in place. Just make sure you know there’s some good disclosure around that.

So fee based financial planners should be fully licensed in my mind for implementation but have full disclosure of that fact. You see when you put together your letter of engagement which is a later step in the process you want to make sure that the client is fully aware that number one you’re charging a fee for the plan writing and number two if they implement through you you will receive compensation from the investment firms and the insurance firms. Just make sure that full disclosure is there, it goes along the lines of fee based because everything is based on the fee. The insurance I get that it’s not like that right now, hopefully that will change as time goes on but you know fee based to me is just making sure full disclosure is there.

Now on the investment side you can still look at a commission based structure if you want to implement it just kind of goes against what the whole premise is all about and I tell you when you get into larger and larger accounts clients just aren’t going to stand for it, they just won’t go with any imbedded commissions, they want to see everything up front, they want to know exactly what they’re paying for.

So when it comes to fee based financial planning there’s really two stages. There’s the plan writing and then the plan implementation. So with the plan writing you know that’s the fee financial planner, that’s when you’re basically saying I’m charging you a fee for the analysis and the comprehensive financial plan writing, I’m going to put together a comprehensive plan and you know you can elect to take that plan and implement it whether you want. Now as soon as they cross the line and they say you know what I’d really like to have you implement the plan for me because I don’t want to have to educate somebody else, I don’t want to have to go find somebody else that can implement the plan because then they’re going to ask me a lot of questions and that’s the reality is that clients when they want to work with you and they’ve gone through the process and the whole plan writing process they want you to implement the plan for them. So you know with the fee only sort of planners that are out there that really, really promote oh I don’t do any implementation I often times wonder well then you know what do you do, are you just letting your clients sort of out there hanging out to dry and saying well go find somebody to do it or if you’ve got a relationship with somebody well that’s great but you know you’re leaving your business to much to chance on somebody else’s ability to properly service and unless you’ve got somebody that you really, really trust it’s very difficult especially when you’re saying like I’m a fee only planner and I’m not receiving any compensation from the implementation side of things. So you know that may be but I know of other, I’ve seen some fee financial planners where they say well I don’t do any implementation yet they have another interest in another company which does implementation. So it’s kind of a – I don’t know doesn’t sit well with me. Basically if you’re going to call yourself a fee only financial planner be fee only and if you’re going to call yourself fee based then that’s fine at least that opens the door and says you know with full disclosure that you are going to be receiving some compensation from the implementation.

Now the fee based approach works really, really well with mid to high net worth clients. The commission based approach is really in my mind for lower net worth clients and the reason for that is not everybody can afford the fees, not everybody should be able to afford the fees, not everybody should need the comprehensiveness of a fee based financial plan. Sometimes people just need to get started and you know if they have a smaller account it’s difficult to get good advice. You may not doing the full comprehensive plan but even to sit with them and give them advice you do need to be compensated for that and you know if the client moves forward and they’ve got call it a hundred thousand dollars and you put it into an account, even if you’re getting a 1% trailer on that you know it’s not really compensating your for the work that you’re doing over that year. So that’s where I believe that the commission based model still works is for lower net worth clients so that they can gain some advice from some pretty qualified people because those qualified people are now willing to meet with them because they’re being compensated to do so. So the term fee only should be reserved only for those who will not and do not implement any financial plans in any way. Fee only advisors you know they should not have another company such as an investment counselling arm or an insurance brokerage that they refer them to that will garner an indirect benefit for them. Basically if you’re going to call yourself fee only you can’t have any other compensation coming in from any other source, it just doesn’t sit right, I don’t think it’s ethical, I just don’t think it makes a lot of sense.

Now fee based you know this for the planner who charges a fee for the financial planning but does not require the client implement through them. Now I stress the does not require, you want to be able to. I have clients that don’t implement through me. Most of our clients do, okay. So when you spend the time doing a comprehensive financial plan you know most clients will end up implementing through you and that’s one of the reasons why your implementation rates go up when you do embrace the fee based financial planning model. I don’t like the idea of rebating okay. I’ve heard some people in the industry they say well I’ll charge a fee for the financial plan but if they implement through me then I’ll rebate them their fee or I’ll waive that fee. I think that you know it reduces the value that the financial planner has. I don’t like the idea of rebating, you know let’s do what we can as an industry to increase the actual and perceived value of a financial plan by not rebating and not undercharging. You know financial planning started to become popular when planners were – well they were basically saying oh I’ll do a free financial plan for you and they basically said I’ll do whatever I can because I want to get the implementation, I want to get your investments, I want to get your insurance so I’ll put together this free financial plan and I’ll just do it for you quickly. So people were thinking they were getting a full financial plan, the reality is they weren’t and you know a fee financial planner should be fully licensed to assist the client with the implementation of their plan if the client requests it. You know you don’t make it so they have to do it, give them the opportunity to go elsewhere but I tell you by rebating your fee it just kind of devalues it, it really makes the whole idea of comprehensive financial planning, that in my mind should be something you can stand alone on. My goal as a fee based financial planner is to operate my practice so it’s profitable through just the fees we’re generating from the financial plan writing alone and I want all the implementation revenues to be gravy on top of that. so you have to add a lot of value to it, you have to take time and really put some time and effort into creating a process that people will find value and people are willing to pay for so that they’ll keep coming back for more. So it’s very important that we do that.

So let’s talk about the eight steps now. So the first step in order to migrate to a fee based financial planning model is you need to learn how to market your unique process. You need to first of all get clients in the door so how do you do that, how do you get leads to get interested in you. Well you want to find out what is unique about what you do and create a unique process around that that you can market. So in essence what you’re doing is you’re turning your service into a product. It’s so much easier to sell a product because the products you know do things for people. Services they do things but they’re kind of airy fairy, they’re kind of you know hard to get your head wrapped around. And so when you can turn your service into a product now people can actually say oh yeah this is great, this is you know whatever it may be. So you know you turn it into a product. So take your unique process name it, call it something, document it so that people can start to see what it is you’re talking about.

Number two is you want to create your own fee schedule. So you’re going to attach a fee to the financial planning work you do. So what you’re going to do is now that you take step number one which is to market your unique process you’re now going to charge for that unique process. Take a look at each stage of your process, you can charge for that. There are different ways you can do this. You can say okay well I’ll charge for each stage. I’ve heard of people who are charging for just the initial discovery process and then they have you know different fees for different stages along the process and people will pay it as they go. Others and this is the approach that we take, we charge what I call an all you can eat fee for the entire process or program. So a client can take a look at the fee schedule and say okay well I want this program and I’m going to buy the program. And so we charge for the program which includes a comprehensive financial plan and everything that goes a long with it and we have different programs for different segments of the market.

You can create various programs for the different niches that you work with and charge a different rate for those niches. So if you’re dealing with business owners or chiropractors or veterinarians or dentists or plumbers or whoever, if you have a niche you can actually build your process and market your process which is specifically designed to solve the issues and concerns and challenges of that niche. Once you’ve done that you’ve actually made your process more valuable to that particular niche which means you can charge a higher fee for that process. The thing that’s important about charging the fee often times people say well how do I charge a fee, you know what do I do. Well the easiest way to do it is simply charge it to their credit card. You know it’s no fun to actually have to have anybody write a cheque or send them an invoice and all that sort of stuff. So I always find that if you’re able to charge it to their credit card then go ahead and do that.

Now once you’ve done that step three is you’re going to template and script everything. So you’re going to script your entire sales process, become one with it, completely understand it. I’ve actually gone through and I’ve scripted every word that I say through the whole process, how I introduce things, how I go through it, what questions I ask, when I ask the questions and I did that because I want to sort of turn it into a bit of a routine, I want to be able to turn it into something that I can replicate over and over again. Kind of like the McDonald’s analysis, not that I want everything the quality of McDonalds but the thing about McDonalds is that it’s reliable, you know that no matter which store you go to their fries are always going to taste the same. So they’ve got that level of power because they’ve templated every process of making a French fry so they know it’s always going to taste the same, you know everything about it is going to be reliable.

Ensure you have at least two free initial meetings so you know a prospect really has a chance to find out more about you. You do things differently now. If you’ve embraced a fee based financial planning process you do things differently. You also want to make sure that it gives you a chance to find out if this is a person or a couple or a business who you really want to work with. As a fee based financial planner the best thing you can do is focus on areas that you enjoy working in, on clients that you enjoy working on and if you can niche it down do so. It’s not a requirement, you know niching is important. You don’t just want to take a shotgun approach but you want to have a chance to interview them, you want to give them a chance to interview you because you’re actually charging a fee for it. So it just gives people a little bit more comfort in knowing that the first initial – or at least the way our process works is the first two meetings there’s a no obligation you know free complementary no pressure let’s just find out a little bit about each other, that’s what the two meetings are for.

Now by then end of those meetings I basically say at the end of the second meeting you should have no unanswered questions and you’ll know exactly what it means to move forward with or services if we both find it appropriate to do so. And so that comes in handy but you want to be able to script all this out so that you just know what you’re going to say when because often times I’ve seen other financial advisors will sit down and they’re kind of afraid to present the fee especially at the beginning, it’s very, very nerve-racking to present the fee and unless you have a track to run on you could just sabotage yourself, you could just not get to that point. You’ll try and talk around the whole idea of presenting the fee. But if you’ve scripted it out you know that you’re following the script and sooner or later you’re going to get to the point of presenting the fee. So it can be a real confidence booster as well for you.

The other thing you want to do is make sure you use a letter of engagement. All professionals will have you sign some sort of a letter of engagement. When you’re charging a fee people want to know exactly what it is they’re getting and what the terms of the contract are so we’ve put together a letter of engagement and we make sure everybody signs it, it’s where we get them to sign off on the credit card that they’re going to be using, it lays out exactly what the services are that we’re going to provide, what the fees are that we’re charging them and you know it makes the whole approach to fee based financial planning that much more quality. So definitely take advantage of using a letter of engagement and then use a 50/50 approach for your payments or for the way you charge things. The way we do it is we take 50% of the fee upfront and that’s basically to retain us. So the upfront fee says okay I want to move forward with you, we charge the credit card 50% of the initial year’s fee and that’s the starting point so now we’ve got that. It helps with cash flow because it basically gets money in the bank quite well. But one of the problems with a fee based approach on the implementation side if you rely on that solely your cash flow actually goes way down upfront because you have nothing coming in, it’s not like when you have an imbedded commission that you get something upfront. So when you sell an investment product it may take a while, it may take a few months before you get your first semblance of compensation or revenue from that so you’ve got to be able to weather that. Well one of the ways we do that is through the fee based financial planning when we charge for our financial plan, we charge 50% of the fee upfront and people pay it upfront and so that helps with cash flow as well.

The remaining balance is payable once the financial plan is written to the client’s satisfaction. That can take a while, you know it can take two weeks, it could take two months it could take you know six months but basically you want to get to the point where the client says yeah I agree with everything here, I’m going to implement all of this jus the way it is, this is exactly the plan that I want to move forward with. At that point they then walk away with a binder that has their version of the financial plan in it and that’s the plan that we’re going to be using for benchmarking going forward.

Now when you’re writing your financial plan step six says use quality financial planning software okay, don’t use free software. Pay for a licence and learn to use the comprehensive planning software programs that are in the marketplace. Now I’ve looked around, I’ve looked I don’t know how many different planning programs I’ve looked at, I personally have settled on NaviPlan. Now the learning curve is a little steep but more and more when I look around most of the other fee based financial planners or people who are sort of embracing a comprehensive planning approach are migrating to NaviPlan. NaviPlan has a US version, they have a Canadian version, they’re very well capitalized, a fairly large company, their software updates are quite regular and the planning you know I’m not going to say it’s perfect because it’s far from that but it is one of the best that I’ve ever used. There is another one out there that I’ve come across, a colleague of mine is using it, called VisionWorks. I haven’t decided to make a migration over to VisionWorks because you know for me I’ve with NaviPlan for so long it’s just that there’s a lot of work involved and I don’t know if I would necessarily get the benefit from doing so but the thing VisionWorks has is they have some really interesting modules where you can add on a trust component, you can add on an estate planning component, you can add on – sorry not the estate plan, you can add on a corporation component as well. So if you’ve got business owners that have multiple corporations you can incorporate all that planning in there. it’s not as easy to do that with NaviPlan so there are some limitations there and I’m sure there’s some limitations on the VisionWorks where NaviPlan does a better job but at the end of the day I think they’re both quality ones and I’m only saying that the VisionWorks is because a colleague of mine who I think does a great job and has a great practice he has looked around and he was using CCH was another one in Canada you know it’s another comprehensive one but he had some challenges with it and he decided to go with VisionWorks. So I personally like NaviPlan and VisionWorks I’ve looked at – I think I’ve looked at everything and I personally settled on NaviPlan just because it’s something that I’m comfortable with and once you get to know the software and you get to know how to reveal the information, clients will often times in our process they’ll have questions about where certain numbers came from and if you can’t go into the software and find those numbers and be able to justify those numbers it’s very difficult to gain confidence. So you need to really learn the program you know and NaviPlan has some great tutorials that allow you to get into it and then they’ve got a good helpdesk that you can call and they’ll help you through quite a bit of that as well. So again it’s not a sales pitch for NaviPlan because they’re far from being perfect but they are in my mind one of the better ones.

Now step seven is you need to break the presentation of your financial plan into multiple meetings. The one thing you don’t want to do is overwhelm a client. It’s confusing enough when clients are coming in and you start to present to them all the stuff you’re going to do for them, all the things you’re going to look at and all the analysis you’re going to do, that’s like wow that’s a lot there. It’s the first time they’ve ever been exposed to true financial planning so don’t overwhelm them. What we do in our practice is we break initial presentation into two meetings so we have part one and part two. In part one we take a look at their retirement plan, their investment plan and their education plan to make sure that’s all working. Now with the education plan and the investment plan we also include in the plan our recommended implementation solution so that a client can think about it. we want them to be aware that you know at this point because it’s another revenue stream for us we want them to be aware that we can actually implement the plan to get them on track to where that we feel they should be or they can do it themselves but we want to make them aware of that. So we go through the retirement plan, all the calculations just to make sure that the plan is doable, education plan and then the investment plan as well.

Then once we’ve made some agreements on that we then set the stage for the next meeting which is where we get back together, look at any adjustments or changes, what if scenarios that we had to incorporate into the original plan from the part one meeting and then once we’ve done that we come back with okay well here are all the adjustments that we made and now we’re going to take it to the next step and we’re going to take a look at the insurance plan and we’re going to take a look at the estate plan. Now in the insurance plan we go through and we do a full analysis of all their life insurance needs, their long term disability insurance needs, we take a look at their health and dental plans, their group benefits, their long term care insurance needs, we go through everything to see if there’s a need there. What I’m doing at this stage is I’m trying to justify or trying to see if there’s an opportunity or identify a need is really all I’m trying to do. So if we can identify needs in any one of these now we have again another revenue stream that we can start to look at but it’s interesting when you’re doing the comprehensive financial plan sometimes it shows that the need is not there and when you can say to a client okay we looked at this, you’re perfectly well covered and we don’t really think that you need to make any changes there or you can then say you know what this need is a little more important because you’ve got at least – maybe you got a group long term disability plan it’s not perfect but it’s something so instead of using some of the extra money to top up the group disability plan when you really drastically need some life insurance why don’t we then just take the funds that you’ve got and put that towards life insurance and you’re not going to have a perfect plan but you’re going to have sort of good coverage all around. So it allows us to just have these types of discussions so it allows us to find the money to fund a lot of the implementation. And then on the estate plan again because the planning software has such great robust estate planning calculation for the clients where it’s appropriate we can start having the conversation about what’s going to happen on death, this is basically how much of your estate your going to lose to tax erosion and here’s some solutions that might protect against that if it’s a concern. Some clients say you know what I’m dead I don’t have a real concern with that, other clients say wow I’m losing how much to tax that’s ridiculous what can I do to stop that. So we take a look at some solutions for that at that point.

So now once we’ve broken those into the two initial presentation meetings there may be other implementation meetings, there may be other what if scenarios, other meetings that we want to get together with the client to say okay you know we’ve gone back to the drawing board, maybe they didn’t like the first couple iterations of the plan and so we’ve had to change things. And so we just go back and forth as many times as necessary in order to get the plan right.

Then at the end once the plan is done, step eight is you need to create in your process a financial plan monitoring program. So this is where you incorporate progress reports into the over all planning program so you can auto renew their plan with the progress report. You see people need a reason to stick with you and if you can say okay now we’ve got all the plan complete and done now every year we’re going to update it so we’re going to get back together and this is the fee for doing that and set it up on an auto renew plan. So if you’ve got their credit card they sign off on it with the letter of engagement, they now know that if they want they can just carry on with their services, it’s going to auto renew, they know what the fee is upfront and it carries on and they sign off for it. So you know it’s important to do that upfront because you know going back to a client every year and saying okay just to remind you there’s now another fee due you know it maybe – well in my mind it just says you know if times are tough, let’s say you took a client on in January and you know they were really motivated at that point and then the next year goes by, things didn’t go as well at work, they didn’t get the promotion, they didn’t get the bonus and suddenly they’ve got all these Christmas bills, they get a bill from you and they’re like well jeez I’ve got to pay the Christmas bills do we really need this financial plan, it’s nice to have and I do value it. So we just make it easy and we say look we’re just going to auto renew on your credit card, let’s sign for it now we know what the fee is going to be and we actually haven’t increased our auto renew fees ever so clients whatever they started with if they’ve been with us for ten years they’re still paying the same auto renew fee that they were and you know they kind of like that. So you know don’t go crazy with it, don’t you know increase it every year and you’ll have a nice revenue stream coming in as a result.

So you know at this point again go to, click on episode three and you know put some questions in there, put some comments. I’ve talked about a lot of things here, some things people will agree with some things they may not agree with. If they don’t agree with it I want to know, I want to know why, I want to get into a bit of a discussion with that and also check out the toolbox and the recommended reading list to see you know a listing of other resources I use to run my successful fee based financial planning practice, other books that I’ve read that I think are really quite valuable and you know a lot of the resources there I just couldn’t exist without them. So it’s basically your go to place for determining you know are there any other technologies that maybe could help you with some of your challenges. So get out there and build yourself a better practice.

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Copyright © Scott E. Plaskett 2012 All Rights Reserved. No part of this document may be reproduced without Scott E. Plaskett’s written permission.

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