If you've been to any session delivered by a practice management consultant in the past several years, you've probably need that to grow your business further, you need to standardize and systematize. In other words, you can't do everything differently for every single client and expect to keep growing much, because at some point your practice is so complex delivering 100 different services to 100 different clients that you just can't absorb the 101st without having your head explode (or alternatively, you couldn't possibly find the time to meet with the 101st prospect to try to get him/her as a client anyway).
In response, planners tend to complain: "But financial planning must be tailored to each individual's situation; and since every client is a unique snowflake unlike any other, so too must their financial planning experience/products/deliverables each be individualized, unique, and customized one client at a time."
Are there still ways to run an efficient practice in a world like this?
The inspiration for today's blog post comes from an advisor I spoke with recently, who lamented that the "standard business advice" of systematizing and standardizing a practice just doesn't work for him, because of the aforementioned "every client is unique" concern - a challenge I have heard echoed many times over the years. Unfortunately, though, I have to admit that I think this objection just doesn't hold water, for three reasons: 1) clients just aren't THAT unique; 2) it's about standardizing the deliverables and process; and 3) if your clients are all so different, maybe you're taking the wrong clients.
Clients Just Aren't That Unique?
I realize that it's popular these days to explain how every client is unique and every solution is customized to the client's individual needs... but come on, really? Clients need to spend less than they make. They'll save to retirement accounts for retirement, and college accounts for account. They need some life and disability insurance when they're younger, and long-term care insurance when they're older. They need documents to dictate what legally happens to their property, and who controls it, in the event of death or disability. Etc.
Of course, whether they should choose Roth or traditional IRA, 529 college savings or prepaid tuition plan, permanent or term insurance, etc., becomes part of the implementation details for that particular client. But the basics are pretty consistent, and the decision-tree that applies to determine which of these choices is appropriate (e.g., Roth versus traditional) itself isn't THAT complex. No offense to my beloved emerging profession, but we're not doing rocket science here.
It's About Standardizing The Deliverables and Process
An implicit assumption from the critics of the "you need to standardize" advice is that by standardizing, every client will receive the same cookie-cutter solution. This is not necessarily the case at all, though, because standardization may put consistency to the process and deliverables, but it doesn't mean there's only one answer.
For example, standardizing your investment offering doesn't mean "every client gets the same portfolio, regardless of their needs." But it could mean "every client chooses from one of 5 model portfolios, that have varying levels of risk and expected return, but are all built using the same series of investments that you already believe are best-in-class for the roles they serve." The clients will get an individualized financial planning recommendation, but the process and solution to implement it can still be the same for every client who needs a portfolio with those risk/return parameters. Yet different clients with different risk/return needs and goals will get a different (model) portfolio.
Similarly, while every client's financial planning needs may be unique, they can all still go through the exact same standardized financial planning process, which analyzes the same areas, and is delivered to the client in a financial planning document created in the same manner every time. In fact, when you look at businesses like Starbucks, it's the standardization of the process that allows them to be so effective in then customizing the outcome (the cup of coffee) for each individual customer!
For instance, while the actual recommendation about whether the client can retire, or not, and how much can be spent, or needs to still be saved, may vary client by client - but every client is going to get a retirement projection, in some software, with their data, with some recommendation made, that is provided to them in some kind of document. All of those steps can be standardized.
If Your Clients Are All So Different, Maybe You're Taking The Wrong Clients
Another implicit assumption by the critics to standardization is that clients are all so unique and have so many diverse needs, it's just impossible to standardize. Conversely, though, I'd ask the opposite question: does the fact that your clients are all so unique and diverse mean that you haven't done a good enough job to clearly define the niche in which you serve and who your target client is in the first place?
In other words, if you're struggling to standardize because you have clients who are retiring and need spending recommendations, small business owners who need qualified plan customization, and clients with young children who need college savings recommendations, then maybe you need to refine your business so you only work with retirees, or small business owners, or young families with children. If you can't standardize financial planning for your client base, standardize your client base so you can deliver consistent financial planning to them. As an added bonus, it might even help you generate more referrals, too.
The Bottom Line - Systematization Vs Customization
In the end, I have trouble accepting the mantra that "you can't standardize financial planning because every client is unique." Clients just aren't THAT unique, and either way, you can deliver a financial planning process to them in a standardized manner, and you can offer a standardized ARRAY of available deliverables/solutions to them. And if you still find your clients are each so unique that you can't standardize what you provide to them, maybe the problem isn't that financial planning is too diverse, but that your client base is too diverse.
Yes, I realize that we'd all like to serve everyone, and that's fine if you wish to do so, but if serving an excessively broad range of clients is preventing you from growing your business, just be aware that's a decision you made, and a decision you can change to bring focus to growing your practice if you wish.
So what do you think? Is it impossible to systematize financial planning when every client is a unique snowflake? Are we overstating just how unique each financial planning situation really is? Is focusing on a client niche a valid way to overcome the "I can't standardize" problem?
Nathan Gehring says
I really agree with this, particularly the first and third points (which I would really review as 1a & 1b.) Certainly everybody is unique, has a unique background and believe-set, and see’s the world just a bit differently. But that uniqueness is really only a major factor in the “diagnosis” stage.
Recommendations and advice virtually always come from the same toolbox of choices, as you point out. It’s simply a matter of degree that one technique is recommended over another for each unique case.
I would even argue a planner may be putting a client’s well-being at risk when making recommendations and using techniques that fall outside well studied and researched protocol. Protocol, process and standardization will improve, not harm, the quality of advice.
Defining a narrow niche is an off-shoot of this. The niche allows for more timely and accurate diagnosis…the uniqueness becomes less broad and the processes become more relevant. The planner becomes better able to serve their clients, and to do so at lower expense to the client and higher margin to the planner.
In every profession I can think of off hand, the generalist is at a disadvantage to the specialist because the generalist cannot be quite as process-oriented and efficient.
Susan Weiner, CFA says
This is such a “hot button” topic now. As you say, it reinforces your earlier post about niche.
Stephen Wershing says
Medicine gives us another useful analogy for this: The differential diagnosis. A doctor may have wildly different patients, but the process of figuring out what’s wrong remains fundamentally the same. The outcomes are different, and the paths the process takes you down are different, but diagnosis must be a single discipline if it is to work at all. Think of it as a decision tree where each branch of the process is determined by a sign, symptom or test. In our business, the quality of the outcome, and the skill of the practitioner, will be determined by the effectiveness the practitioner can follow this decision tree. The advisors I have seen who make the “snowflake” argument tend to know more about their solutions than the process,and have not given much thought or rigor to the discipline of planning.