Kristin Shea, Sept 2017
What do you talk about with your clients when you meet with them? How do you measure “growth”? What about “progress” or “risk”? How does your approach affect your ability to cultivate your relationships with clients?
Most financial advisors are classically trained to work with their clients based on the traditional financial planning approach. Using this method, an advisor will primarily focus on the returns of the assets and allocations compared to market benchmarks to determine how much “growth” the client is experiencing, what kind of “progress” they’re making, and how much “risk” they are exposed to.
If you are primarily talking to your clients about percentages and dollars or you are consistently finding yourself justifying the performance of an asset, you may be a student of the traditional financial planning school of thought. If that’s the case, you also may want to reconsider your approach.
Today's industry leaders are adopting a goal's based planning system as opposed to the more traditional methodology. In today’s world, your clients want more control over their financial lives and simultaneously demand unique and personalized financial plans based on their own wants and needs. By using a goals-based planning system, you will develop more holistic financial plans, provide more customized service, and strengthen client relationships.
Clients who work with goals-based planners:
- Have more clarity on their investment decisions
- Feel a sense of control over their financial future
- Are more confident in their financial plans (and planners)
- Have an enhanced decision making ability
- Complain less
- Are less likely to switch advisors
By practicing goals-based planning, you will:
- Attract new clients
- Gain trust
- Increase client retention
- Differentiate yourself from other advisors
- Have a lesser likelihood of losing clients during market volatility
- Have a reduced need to explain performance
- Have a higher suitability correlation
So what does that look like?
Goal’s-based planning assumes that the unique experiences, preferences, and personality of an investor are the driver of their financial behavior. The foundation is a focus on developing measurable short-, intermediate-, and long term needs over the course of a client’s lifetime that are then prioritized by what is essential, preferable, and discretionary.
Once the advisor has a good understanding of what the client wants to accomplish (and avoid), the advisor will work to establish a timeline for each goal and identify a unique strategy to meet each. This allows the client to have a better understanding of who they want to be as a person as well as their financial goals, and the advisor can be more intentional with conversations and the plans for each portion of a portfolio.
The key to a successful goals-based planning practice is staying in regular contact with the client to monitor the plan and their progress towards the goals. Advisors need to be on top of circumstances that may affect the goals of an individual or the ability for them to meet them. You should be conducting regular reviews or at least staying in close contact with clients to make sure the plan is consistent with objectives.
Where do we start?
- Introduce the approach to your clients at the first meeting. Explain that your key objective is to ensure the client meets their wealth management goals.
- Ask your clients what their real life goals are. What do they want for them selves in their life time? What do they want for their loved wants? Your clients are unlikely to speak in terms of performance and percentages.
- Develop an agreement that your success will be measured based on achievement of goals, NOT by investment performance. If your client meets a goal, you deserve an “A”!
- Establish servicing standards on the front end – how often you should meet and the manner in which you stay up to date on life changes.
- Restructure your meetings:
o Start with asking for an update on the client- both personally and financially
o Confirm that the goals that have been developed are current and make any necessary changes.
o Ask your clients if they are meeting their goals.
o After the goals have been reviewed, then review investments. Investment performance should be reviewed in terms of goals meeting, not comparing to benchmarks.
- Make sure your marketing materials and messaging is consistent with the goals-based approach.
By practicing the above, you can transform your practice into one that will make both you and your clients happier and successful - short and long term.
For more ideas on how to transition to a goals based planning, click here to schedule a meeting with me. Also, connect with me on LinkedIn or check out my blog for more ideas and strategies to take your business to the next level.