One of the biggest challenges we consistently face as financial advisors when creating a financial plan for clients is simply getting the data we need to actually do the plan in the first place. Because, without any information to enter into the financial planning software to begin with, it’s impossible to assess a client’s financial situation, show them the consequences of various trade-offs, and ultimately make our recommendations. Yet while for at least some clients, the problem with getting data is that they literally don’t know their own financial details in the first place – thus their need to hire a financial planner! – more often, the real issue is that the client doesn’t actually understand why they need to provide the data in the first place, and what they’re going to get out of the process.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why it’s not enough to just make the data gathering process mechanically easier for clients (e.g., with online data gathering forms instead of manually entering data into a printed data sheet), and why creating a Sample Financial Plan for prospective and new clients is an essential step in building enough trust with clients that they’re willing to gather and comfortable in sharing their financial information with you in the first place.
Historically, getting clients to complete data gathering forms has been a challenge simply because it’s tedious and time-consuming to fill out a paper form. And the situation is even worse for those who most need financial planning – because their financial lives are currently so disorganized – as the disorganization that makes them want financial planning is also the disorganization that means they don’t even know (and potentially don’t even know where to find) their own data to enter into a form in the first place!
Fortunately, as we move towards a more integrated digital age, the difficulty in obtaining financial planning data in the first place will be mitigated by account aggregation tools. Instead of manually entering information into a form, in the future all clients will have to do is link their accounts to their advisor’s portal, which will then automatically download the pertinent data into the planning software!
Still, even though some of these automations are starting to come online, a client’s hesitation to share their personal financial data often has less to do with the time involved, and more to do with the trust that clients need to feel – in the advisor themselves, and the value of the advisor’s process – before they allow an outsider to have a peek into their personal financial lives.
Because in a world where one of the biggest challenges financial advisors face – besides actually finding prospective clients in the first place – is demonstrating the real value of an intangible financial planning service, one of the most effective ways to get buy-in from new clients is to actually show them a Sample Financial Plan of exactly what they’ll get, and tangibly prove why it’s worthwhile. As even though the real value of what financial planners deliver is the actual process of defining goals, getting clients organized, and delivering advice, that sample financial plan is often the one and only tangible deliverable that clients can see to judge the value of the process.
The bottom line, though, is simply that if you are struggling as an advisor to get clients to share their financial information with you (whether via a data gathering form, or account aggregation), or are having trouble even getting prospective clients to sign on with you in the first place, it implicitly suggests that clients are just not seeing the value that you say you bring to the table. Because, even though we know that the financial planning process is worth it, ultimately, the onus is on us to show our clients that investing their dollars, time, and trust in your services is justified. For which the starting point is to create a Sample Financial Plan to really show clients the relevant value you can bring to them!