What is the value of financial planning? What do you get from it? What does it really do for you? Historically, the profession has tended to answer these questions with explanations like "financial planning brings you peace of mind" and "financial planning gets you on track for retirement [or other] goals." The problem is that these results are intangible and long-term, which makes them hard to define clearly and difficult to be held accountable to over a relevant time period. In fact, arguably one of the greatest challenges for the advancement of financial planning is our inability to clearly explain the value proposition and what clients will get out of it. So what's the solution? Financial planning needs to redefine itself from long-term intangibles to short-term tangible results; after all, clients who can really see that the outcome of the planning experience has benefited them become true advocates of our services, and build the habits that ultimately lead to long-term success! Which in turn raises the question: what are some short-term tangible results we can establish to better demonstrate the value of financial planning?
The inspiration for today's blog post is a recent commercial I saw for one of the latest the workout/exercise crazes, P90X. As with many similar programs, P90X commits that you'll see the results yourself when you look in the mirror in 90 days (or your money back!), and their examples and success stories are pretty impressive. In fact, I've included below a sample of one of the P90X commercials.
As I sat through the commercial, I couldn't help but think: what would it be like if financial planning could define itself to deliver tangible results like this in 90 days? Do we have to explain our value proposition in terms of outcomes that can only be measured in our heads (what exactly is "peace of mind", anyway!?) or over multi-decade time periods?
For example, as I've written on this blog in the past, the current data gathering experience - which is very planner-centric about getting the data we need to do a plan - could be transformed into a client-centric "Get Organized!" experience, where the client has an immediate, tangible outcome: at the end of the meeting, the client will walk home with a file box like this, filled with their sorted, organized financial information. Or better yet, the client can be up and running virtually using an online service like Mint.com, which in the future will be accessible for them anywhere, on any device! The point here: we don't just help clients get organized in the abstract; we provide them a hands-on, tangible outcome of an actual, physical file box that's organized and builds a foundation for the future!
What else might we deliver? How about 90-day results on client saving, investment, or debt goals? Help clients make decisions about how to change their spending, and then show the outcome 90 days later in terms of the amount of money that's now going into an IRA or 401(k), or how many shares of a mutual fund were bought. Or for the vast majority of Americans whose primary challenge is not savings but debt, provide the positive reinforcement of showing how their debt has been reduced by whatever amount, whether it's $10s, $100s, or $1,000s of dollars, and how their new trajectory will lead to future success. Imagine the client who comes into your office after 90 days and takes a pair of scissors to a paid-off credit card after struggling for a long time with debt. That's a client who will remember you and be thankful for your services for a long, long time to come.
I would note that the point here is not to be short-term about things like investment results - e.g., how much did your portfolio appreciate in the last 90 days - but instead to focus on changes to the client's behavior (from organized files to spending to savings and debt repayment) and how it has changed the client's financial situation. If the offering is rigorous and results in a material change to behavior, there should be a material change in the subsequent financial situation... just as P90X shows that a material change in your physical behaviors results in a material change in your subsequent physical health and appearance.
Now, I suspect some of you are probably thinking "Oh, come on, this is ridiculously short term. I'm here to help my clients succeed fiscally over the long term, not to cater to their short-term needs!" The problem is, that's not really how most clients think. The health industry has shown clearly through its struggles that "exercise now, you'll appreciate it 30 years from now" is remarkably ineffective for behavioral change. It provides no clear results, and therefore no positive reinforcement for the behavior, which makes it almost impossible for new habits to form. In other words, while it might feel "short term" to the planner, the reality is that this is how better long-term habits are built. Which means if we're really serious about helping our clients in the long-term, the way to do it is to think more short term with them!
So what do you think? Is it important to help make financial planning more relevant and tangible over short term time periods? What services or benefits could we deliver that show tangible results that could reinforce positive behavior and new habits? What do we offer that might have value to us, but not to our clients? What is the P90X of financial planning?