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?