Growing the value of your business

You want to run a hugely successful financial planning business that gives you a high level of personal satisfaction and the respect of your peers.

You want to exceed the expectations of your clients and gain qualified prospects actively wanting to do business with you. Your business is Australia’s first and pre-eminent branded financial planning business.

Take this quick self-assessment to see where you sit on the ladder of business value creation.

Section 1: questions

1. Do you seek clients who see money as a means to satisfy their life-goals rather than a goal in itself? (answer Yes or No)

2. Are you working towards automating or outsourcing the parts of the business that are becoming commoditised? (Yes or No)

3. Are your planners developing high level skills in questioning, listening, goal setting and trade-off resolution? (Yes or No)

4. Do your planners listen to your clients, helping them put dollar values around their goals and aspirations? (Yes or No)

5. Do they help your clients prioritise their goals and preferences? (Yes or No)

6. Do you ensure that couples individually and independently assess their risk tolerance and then help them reconcile any differences? (Yes or No)

7. Do you illustrate clients’ possible financial outcomes as those:

~ consistent with their agreed risk tolerance;

~ consistent with the risk needed to achieve their goals; and

~ consistent with their financial ability to take risks,

so they can understand the different outcomes and make their own decisions about what action is right for them? (Yes or No)

8. Do you always treat your clients with respect for their understanding and advise them of possible outcomes both positive and negative? (Yes or No)

Section 1: answers

1. Trying to provide winning performance to performance-oriented clients is a no-win situation. Planners should seek to provide solid performance tied to long-term goal achievement, leading to client satisfaction.

2. Providing appropriate advice and goal-oriented, strategic planning will be a full-time proposition. There is no time to be doing extraneous things.

3. In a client-focused practice, knowing your client and goals resolution are key practice objectives.

4. Clients need to understand the costs associated with goal achievement in order to be willing to fund them, modify them or discard them.

5. Clients may be vague, uncertain and unrealistic about their goals. Until the client is clear about where they want to go and what they may have to give up, real financial planning cannot occur.

6. Most risk tolerance assessments seek to nullify differences. This should not occur as each individual is entitled to their own assessment. There will always be differences with partners if risk tolerance has been psychometrically assessed.

7. Clients must fully understand what risk level they are comfortable with, what risk level they must undertake to achieve their goals, and what level of financial risk they can afford to take. Somewhere between these three risk approaches will be the one they agree to accept.

8. Respecting clients means understanding that they need to assess opportunities and threats and make their own decisions about what risks they are willing to take.

Section 2: questions

1. Do you always seek your client’s properly informed consent to the plan and any product recommendations you make? (answer Yes or No)

2. Does the service your clients receive match the service you promised

in your marketing material? (Yes or No)

3. Do you ask your clients their views on your service offering and delivery in a regular and consistent manner? (Yes or No)

4. Do you ask your clients how they prefer to be communicated with — for instance, in numbers, words or pictures? Are you working to meet that preference in your business? (Yes or No)

5. Have you, or are you, in the process of splitting the planning process into its five constituent components: qualifying client’s needs and capacities; strategy; selling and implementing plans; paraplanning; and technical specialisation? (Yes or No)

6. Do you avoid promoting the latest innovative investment product? (Yes or No)

7. Do you know the investment return that your planners delivered to each client for the past five years? Did the returns equal or exceed the agreed benchmarks established with your clients? (Yes or No)

8. Are you moving to simplify your portfolios? Are you moving your business on to one platform? (Yes or No)

Section 2: answers

1. A shopping list of implementation actions does ‘not a financial plan make’.

2. Remember the adage, under promise — over deliver.

3. Your clients’ responses, even complaints, are what you should be building your business on.

4. Clients will only hear you if you are speaking their language.

5. It is impossible for one person to be proficient in every area. Develop a well-rounded team and use it efficiently.

6. Most clients only need ‘spend less, save more’ advice. What time and energy are you wasting chasing novelty?

7. Clients need to see time weighted performance figures so they can see whether they are tracking on schedule and are able to judge the worth of your investment advice.

8. Clients do not need the best investment performance, they need appropriate, easy to understand and simple to administer advice — remember the ‘KISS’ principle.

Section 3: questions

1. Do you focus on client outcomes in descending order based on what is predictable and controllable — cash flow management, insurance, estate planning, tax and social security arbitrage and, finally, investment advising? (answer Yes or No)

2. Do you separate financial planning from investment advising in your service offerings? (Yes or No)

3. Do you charge for initial and ongoing planning separately from product recommendations and investment reviews? (Yes or No)

4. Do you provide comprehensive regular reviews that go beyond investment reviews? (Yes or No)

5. Are you adding to your planners’ investment knowledge of the residential property market in general and understanding of the market where your clients live in detail?

Do you regard the client’s home as a financial asset? (Yes or No)

6. Do your clients pay total ongoing fees of 2 per cent or less of funds under management, and is this falling? (Yes or No)

7. Are you integrating debt management into your product and service offering? (Yes or No)

8. Are you working towards identifying insurance shortfalls in your clients’ needs analysis and improving the processes for sale and implementation of insurances? (Yes or No)

Section 3: answers

1. Starting with the controllable allows the planning process to be more accountable.

2. Clients need to see that it is the strategic planning that adds value — investing is only a tool for achieving strategic goals.

3. Following on, clients will pay for recognised value; if you devalue the planning process they will too. They will not be less willing to pay for it.

4. Annual planning reviews must cover all areas of the financial planning process.

5. It is ridiculous for financial planners to close their eyes to direct property investment and not to consider the family home within the financial planning framework. The majority of client wealth is invested in property.

6. Planning has to become efficient, effective and cost conscious.

7. Both sides of the lending equation need to be catered for — clients acting as lenders and as borrowers.

8. Insure first and appropriately and you will manage both client risk and business risk.

Scoring your results

Add up your scores from each section. For every ‘yes’ answer, give yourself one point. For every ‘no’ answer score zero points. For every question where you do not know what I am talking about, subtract one point.

Your results can be translated as follows:

n A score of less than seven tells you that you are not in the process of building a ‘real’ business.

n A score of eight to 14 tells you that you have started on the path of building a valuable business but still have a way to go.

n A score of 15 to 20 tells you that you have got ‘it’. You not only recognise that planning is a process, but you have moved a significant distance in turning your planning practice into a real and valuable business.

n Score over 21 and the world will be your oyster very soon.

Concluding thoughts

Have you ever wondered why there are no national financial planning brands except for the ‘comfort’ brands developed by large organisations? We call them ‘comfort’ brands because these are institutions where the prospective customers know there are deep pockets to meet any court settlements should they need to sue. Brand enterprises provide a consistent and differentiated client experience that is valued by customers.

In most common-named financial planning enterprises there is no notion that a prospect in the Brisbane suburbs will be serviced in the same way as one in central Perth. “Every one is treated differently because they are different” is the claim. They add: “Our clients’ needs and circumstances are unique and their plans can only be constructed using the insights of a financial planner.”

This is, of course, arrant nonsense. Clearly, every individual client, and their family, is to some extent unique. Their resources, goals and aspirations form a unique financial situation. But the processes for assisting them articulate their goals and providing a roadmap going forward are simple and will soon be a commodity.

Successful financial planning businesses will use these processes to develop a strong, recognised and profitable brand.

Paul Resnik is principal of Paul Resnik Consulting Group. Email your thoughts to him at [email protected].