Financial planning is hard work. It’s hard work for the clients, who must spend far more time than they are accustomed in the process of digging through their personal financial lives and their goals. It’s also hard work for the financial planner, who invests an incredible amount of time into the process of creating a financial plan for the client, entering client data into financial planning software, “crunching” the numbers, and then crafting a written plan to explain and justify the results and the associated recommendations. Yet as planning software becomes increasingly more complex, we are approaching a difficult crossroads: the depth of the planning software requires more and more time to do the analysis, and necessitates more and more written detail to support the software output. As a result, the planning process itself drags out, taking hours and hours to create a plan and weeks and weeks to deliver recommendations to clients. But when did the complexity of financial planning software begin to drive the planning process, instead of being a tool to expedite it? Has our financial planning software become the enemy that’s ruining our productivity, instead of improving it?
The inspiration for today’s blog post is a recent study released by the FPA on the fees that financial planners charge for their services (which was just highlighted in my Weekend Reading column). What was notable in the study, though, was not just the fees that financial planners charge for their services, but the time it takes for them to actually use financial planning software to complete a written financial plan.
How Long Does It Take To Create A Financial Plan?
As the figure shows, while a quarter of financial plans take a relatively modest 3-5 hours or less, another quarter of them take 6-9 hours, while nearly 50% of all plans take 10+ hours, including almost 30% of plans that take more than 15 hours! All to develop a single financial plan! And while I will grant that for a small subset of firms, their typical client is so affluent and complex that it requires extensive analysis time, I have to question overall if it’s really true that 50% of all financial planning clients have situations so complex that even a full-time professional financial planning expert needs 10+ hours to figure out what to do!
Moreover, the arduous time to complete the financial plan also stretches out the timeline for turning around the plan to the client. The FPA study also revealed that only a quarter of planners actually deliver the written financial plan less than two weeks after the initial discovery meeting (which, coincidentally, is about the percentage of planners who take no more than 5 hours to complete a plan); the remaining 75% of planners take at least two weeks to deliver the plan back to the client!
All of which raises the question – what is it we’re doing that takes SO long, and do we really NEED to do it that way? In my own experience, a large portion of the time necessary for plan construction from the FPA research is in fact attributable not just to the process of analyzing the client’s situation and crafting recommendations, but in using our financial planning software to support the actual creation of the written financial plan. Yet as I’ve written previously, it’s already a little unclear why it is we as planners spend so much time building financial plans when we all acknowledge that virtually no one actually reads them.
Is Financial Planning Software Too Complex?
It appears to me that we have created a difficult circular problem for ourselves as financial planners. It takes time to do the analysis for a financial plan, in no small part because of the complexity of our software. So we gather our client data, and disappear for a week or two to work through the software and craft a plan. But we can’t just come back with a brief list of client recommendations on a single piece of paper, because clients won’t trust it and act on it after we’ve been off with our black-box software for so long. So we need to justify our recommendations by providing a written plan to support the software output. But the thoroughness of the written plan – even if only to serve as a trust-building exercise – in turn requires so much time, it drags the process out even further, and the plan takes still longer. And heaven forbid the client has a question we failed to cover in the initial version of the plan… then we tell them to come back in another two weeks while we run the updated information through the software again!
Is there a way to get off this productivity-destroying roller coaster? I believe there is. The solution is to give clients a more interactive planning experience, where much of the planning “work” is done live, on the spot, with a screen showing a plan that the client can manipulate, with the planner sitting nearby acting as navigator and guide for the process. Anything the client wants in written form is simply printed at the end of the meeting itself. If the client needs any educational materials for a specific issue, those can be delivered too, at the time. But the rest of the written plan disappears as unnecessary.
Because simply put, the client doesn’t need a giant written financial plan when the client was a part of the plan construction process itself, and can kick the tires and take the plan for a test drive and make a final decision on the spot. In other words, with a more interactive planning experience, the client gets buy-in to the plan and an outcome that can be trusted, because the client has become part of the building process in the first place. In this context, financial planning software that supports a real-time collaborative and interactive client experience returns to its rightful place as an enhancer of productivity, not a detractor.
There’s just one real problem. We don’t really have financial planning software that is up to the task. At least, not yet. But it may not be far off, with an array of new financial planning software offerings coming to the industry lately. Can you imagine the experience for the client, not to mention the efficiency of your practice, if the bulk of the planning really could be done in a 2-hour meeting with software that effectively supports the process… cutting out not just a dozen hours of written plan construction, but a 2+ week delay as well?
So what do you think? If there was a financial planning software package that was so easy to use, it could analyze a client’s situation on the spot, would you use it? Would your clients engage (more) in the process? Could it make your practice more efficient? Have we unwittingly held our own financial planning process hostage to the limitations of our software, instead of using the software to enhance our financial planning productivity?