Can “light planning” expand access to financial advice?

Traditional financial planning involves extensive information gathering, detailed reviews, and dedication from both the financial advisor and the client.

As a result, such a rigorous process is often reserved for those with enough assets or complexity to make that type of engagement worthwhile for the advisor.

Yet plenty more people need financial direction — according to a 2020 survey from FP Canada, only 57% of Canadians said they were were confident they would meet their financial goals (down 10 points from the previous survey in 2018), and 71% do not work with a professional financial planner.

“A lot of people don’t know what financial planning is; they just know they have a lot of questions that aren’t being answered,” said David O’Leary, founder of Kind Wealth, a Toronto-based fee-only planning firm. “They assume it’s no one’s job to help them.”

Those with insufficient assets to attract an advisor’s interest may be correct. But “light planning” — a term that has gained popularity along with the rise of robo-advisors — could be a solution.

Light planning “is not product-centric; it’s planning-centric, but it’s just not as deep of an engagement for both the advisor and client,” said Preet Banerjee, founder of Toronto-based MoneyGaps, a light financial planning software for advisors. (Calgary-based altruWisdom is another software that says it offers light financial planning, but directly to consumers.)

Instead of a comprehensive plan, MoneyGaps performs a “gaps analysis” that assigns a client letter grades based on their performance in eight financial categories, including debts analysis, life insurance and cash flow.

“A lot of people don’t want a comprehensive plan until they’re coming up to a major money moment in their life,” Banerjee said. “Until then, they just want to get on with their lives and keep doing the right things so they are in a place where they can benefit from more comprehensive planning.”

O’Leary has clients with this profile as well. While about half of Kind Wealth’s clients have a comprehensive engagement with the firm, the other half have situations that are simple enough to warrant what he calls a “quick-start plan.”

A typical quick-start, which is prepared over three to four weeks, involves intake and review meetings and analyzing all the client’s planning issues. “But we won’t work through those issues over time; we won’t help implement everything or be able to respond to questions later,” O’Leary said. “We point them in the right direction and then the engagement is over.” Typically, these plans cost about $1,500.

Banerjee said he’s seen advisors perform light planning for children of existing clients; high-potential prospects who don’t yet meet their minimums; and clients on a light-planning retainer, specifically.

He added that light planning can also work for clients who “still don’t even know what their life will look like in five years, never mind 40.” For those kinds of clients, there’s limited utility in spending a lot of time optimizing their plan, Banerjee said. Advisors will often tell him, “I need to get to the human component. Let me deal with the things that are hot on their mind, and I’ll focus on that, which will hopefully set them up for more [comprehensive] planning opportunities.”

Darryl Brown, founder and investment planner with You&Yours Financial, a Toronto-based fee-only firm, said he appreciates the philosophy behind light planning, but warned that advisors should be leery of simplistic reviews.

“A lot of clients want us to wave our magic wand,” Brown said, and give a simple answer to a classic planning question like “TFSA or RRSP?” Brown usually responds saying, “We can’t answer certain questions in isolation because your financial profile is interconnected across these different areas.”

Brown said there’s a “huge amount of value” in a comprehensive financial planning process — having an advisor “get on your back and round up all those documents and paint that picture” — even if a client doesn’t follow through with the resulting plan entirely.

“We obviously want [full] implementation for the plan, but if there’s not, that doesn’t make a financial plan engagement unsuccessful. I think there is value from having an unbiased point of view,” Brown said. “The challenge we have as a profession is communicating to clients that there is a lot of value in doing a comprehensive financial plan, but it is not necessarily for everyone and at every specific time in their life.”

Banerjee stressed that light planning shouldn’t be interpreted as an excuse for cutting corners — but even if it is, there can still be benefits.

“There are so many people who aren’t getting planning, period. They’re not getting comprehensive planning, they’re not getting light planning — they’re just getting product sales,” Banerjee said. “There’s a lot more people who would benefit from going from no planning to light planning than situations where it’s an opportunity for an advisor to shirk their responsibilities.”

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.