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A core aspect of the financial planning process for many planners is not just the analysis and development of recommendations for clients, but the embodiment of that work into a written financial plan document. In the plan presentation meeting itself, some planners use this written document as a guide to walk the client through the analysis and recommendations, although many simply focus on key recommendations and points for the client to understand, and let the clients simply take the written document with them. Yet once the clients leave the office, written financial plan in hand, how many of them ever crack the spine open and take a look at it sitting at home? Anecdotally, it seems to me that most planners agree on the answer to that question: virtually no one ever opens up their financial plan document at any point after they walk out of the planner's office. Which begs the question: if "no one" ever reads the written comprehensive financial plan that's being delivered, why do we keep producing them?

The inspiration for today's blog post comes from some conversations I had yesterday with Dr. David Lazenby and Patrick Sullivan from a fascinating company called ScenarioNow. During our conversation, Lazenby and Sullivan raised some very interesting questions and ideas about the financial plan document itself, and whether/how integral it really is, or not, to the delivery of financial planning.

For instance, look at the experience we have in the doctor's office. We go in, we are evaluated, diagnosed, and prescribed a recommendation solution. In all likelihood, the only thing we walk away from the doctor's office with is a small piece of paper with our prescription. We don't ask the doctor for a written medical report of our symptoms, the doctor's analysis, and his solutions; we just want the answers.

Similarly, the written document summarizing the analytical process is not really the outcome of most professional engagements. The lawyer may prepare a written Will or trust for the client, but that IS the solution itself; the lawyer often doesn't prepare a written document explaining the analysis conducted to arrive at that solution. Not does the accountant in most circumstances. What we want in those cases is the solutions themselves, or a brief written summary of what recommendations are and the action steps to be taken. Not an extensive analytical document.

Yet imagine the alternative in today's environment: after an initial data-gathering meeting, the clients schedule a follow-up meeting to receive their recommendations. The planner sits them down and provides a single piece of people with a list of 5 action steps for them to take regarding portfolio changes to make, how much to save to the 401(k) plan, and how much of which insurance coverage to buy. The likely outcome? The clients would say "thank you very much" and walk out of the office and never implement? Why? They have no buy-in to the solutions, no basis to evaluate whether the recommendations seem appropriate, and simply put no particular reason to "trust" that the proposed solutions are the right ones.

So what does all this mean? I think it means the reality is that financial planners continue to deliver a written financial plan to their clients because it is one of the only ways they have to validate to clients that the due diligence and analytical work was done in what otherwise is a very "black box" experience for the client - you come in meeting #1 to deliver a bunch of data to the planner, and come back for meeting #2 to see what the black box analytical process spits out as your recommendations. There is little about the process that builds trust or develops buy-in for the clients to the proposed solutions, so clients must grasp for anything that they can to try to evaluate what is being recommended. One of the few anchor points available? The financial plan document, which serves as a giant "technical appendix" to support and substantiate the recommendations being delivered. It's not that the client necessarily wants to read through the details of that appendix. But in most situations, there simply is not enough trust built yet in the relationship for the planner to simply deliver a brief set of recommendations, without any other supporting information, and have enough trust from the client to act on those recommendations.

So in the end, it would appear that one of the primary reasons planners continue to deliver written financial plan documents to clients is not for the delivery of information, per se, but because it is part of the trust-building process. Although arguably, it is perhaps not the best way to try to help develop buy-in and trust from clients in the solutions that are developed, as I've discussed in the past (also stemming from a conversation with Dr. Lazenby). In a world where the planning process is more interactive as a means to build trust, perhaps the written financial plan becomes less a document to be delivered with the recommendations, and instead becomes even more just a true 'technical appendix' - a document that's delivered after the meeting is over, just to use as a future reference in looking back at the plan, but not part of the actual financial planning meeting at all.

So what do you think? Do you prepare a written financial plan for your clients? Do you think you could be effective in engaging clients to implement your financial planning recommendations if you simply gave them a single piece of paper with a list of recommendations and nothing else? What role does the financial plan document play in your process?

  • Richard C. Salmen

    Not all of are still delivering financial plans. I have been practicing as a fee-only planner since 1997. After making that compensation transition what my clients got (and still get) at the end of every meeting is a recommendations page with their to-do list and our to-do list. The start of the next meeting is a review of the recommendations page from the previous meeting. That history of recommendations pages is literally “the plan.”

    • Michael Kitces

      Thanks for the feedback on this.

      I can understand how this flows as an ongoing process from one review to the next, but is there anything further that you do in the initial process with a brand new client to develop and support trust in the recommendations the first time they see/receive that page?
      – Michael

      • Connie Stone, CFP

        By way of background, I am a fee-only financial advisor who charges exclusively by retainer, with no custody of client assets under management.

        After years of generating fiancial planning “books” that bored or confused my clients, I made a significant move to simplicity. This was based on survey feedback from clients, indicating that they most valued my non-judgmental listening, my experience and my advice. The written financial plans were valued much less; and in some cases, impeded our progress.

        This spurred me to revise my business model 3 1/2 years ago and join ACA, the Alliance of Cambridge Advisors ( ACA members generally provide simple (often one-page)financial illustrations/analyses and a summary of recommendations with follow-up action lists at the end of each meeting. However, I often use meeting time to take implementation steps with the clients to make sure they get done. One example would be rebalancing their portfolios. Clients sign onto their accounts and I help walk them through the trades that need to be done.

        I use Money Guide Pro (MGP) software for some planning topics. One of the advantages is that I can easily collect and download client information by using Cash Edge and FinaMetrica which are integrated partners with MGP. This eliminates the need to repeatedly ask client for data.

        Having worked extensively with high-compensated corporate executives, there are some complex situations when analytical illustrations may run several pages and can’t be avoided.

        In short, I try to limit the use of paper to those situations when it adds meaning and value – period. I spend more time focusing on the client relationship and goals, and much less on hassling with financial planning software and plans. My clients and I are both happier for it.

      • Amy Jo Lauber

        I am so glad you posted this Michael, you make so many good points.

        I do provide a written plan but it is small (20 pages max, not includiung required disclaimer pages)the majority is my written recommendations and action plan because (1) I KNOW people don’t read those big plans and therefore they are not beneficial and (2) I’m a huge tree hugger.

    • Philip K. Selden

      My firm has done comprehensive financial planning since the mid-1980s. First software was Rick Wells system from Atlanta on a Pertec computer! Had to calculate the taxes by hand, then enter into he software! At least 90% of our clients had comprehensive plans and they updated them annually – and we charged them a fee each year for the update. The plan is as much for the planner as it is for the client. Without it, the planner does not have an adequate picture of the entire situation. The plan gives the planner and the client the confidence in making and implementing recommendations. Your relationship with your client may not always be smooth, especially if clients need to cut back on their spending. But you will find that the client relationships are more durable, long lasting and most of the time transition into the younger generation(s). We are currently serving one four generation client. In summary, incorporate comprehensive financial planning intoyour practice, update it religiously each year and you will have many happy clients and a very satisfying practice.

  • Matt

    Totally agree with Richard here. We use eMoney which makes the “plan” a living breathing thing. It is constantly updating itself. As for the recommendations we do exactly what Richard does. A solid meeting summary with to-do lists and follow up at the next meeting. Our clients started asking a few years ago to STOP printing and delivering the physical plan each year because they never read through them. In this day and age everyone wants short, concise but valuable information and this is also true with financial planning.

  • Jay

    This isn’t likely a popular answer, but I think in many ways its to validate one’s fee. I work for a firm that doesn’t provide written planning documents because the reality is they are usually out of date the moment they are produced.

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  • http://@smbergin Suzanne Bergin

    Handing over a paper plan is symptomatic of our deeply rooted love affair with leave-behinds. We have been conditioned to give clients, prospects and centers of influence something tangible to take with them. We believe that the leave-behind can accomplish two important goals. It will make a good impression and that the client will study it, refer to it in the future, and trigger memories of us. The physical plan, however, is ineffective at meeting either of these goals.

  • Chuck Carrick

    We use eMoney also to provide a “Living Plan” for our clients. However I believe that a written “Foundation for Decison Making” or a fundamental finacial plan is still needed. This would incorporate the thought process which drives decison making for the client. It might include Prioritized Goals, Investment Thought Process, Client decisons on how to provide for gap planning etc. The eMoney program is great for quantifying and tracking the plan but it falls short in creating what basically is a Document for directing actions.

  • Daniel

    Wow you bring out great point over the last 17 years in the financial industry as a Financial Planner I have experienced what you have described many times. I like your example of the Dr. office. At the present time I am working on preparing a one page financial plan to present to clients. They don’t need to know what their tax liability will be in 30 years we don’t even know what it will be over the next 5 years. To me a Financial plan is all about what can I do right now to move toward Financial Independence. Lets concentrate on NOW not on what will happen in 30 years.

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Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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