Financial planning not investment advice wins clients

I’m willing to go out on a limb and say the clients I’ve met value a financial plan showing them step-by-step how to achieve their goals more than just investment advice. Here are two recent success stories illustrating how focusing on planning met the needs of the clients and resulted in new business.

Case #1 – The comparison shoppers

I met with a prospective client about a year ago. While they were a relatively young couple, they had made many good financial decisions and were about 15 years ahead of the financial game for their stage in life. At our first meeting I gathered information, asked them what they were looking for and explained what a financial plan covers and costs (see a sample of our plans). The meeting went well and it seemed like they were going to hire us to create a plan for them.

Usually prospective clients make a decision within 24 hours but this case was different. For nine months they seemed to delay their decision, sending me the occasional email asking me if I offered a particular investment product or type of investment account. Just as I was going to throw in the towel, one of the clients called and dropped by the office. They wanted a plan and we were ready to work with them but I was curious as to why it took them so very long to make up their minds.

They said that over the months they had met with 5 different advisors. One had even created a “free financial plan” which included a statement of net worth (which was off by hundreds of thousands of dollars) and investment recommendations. Absent was a discussion on how much they needed to save for retirement, what insurance coverage was appropriate, and when they could afford to buy a cottage – all the things they really wanted to know.

Every advisor they had met proceeded to give them investment advice and we were the only firm that recommended creating a plan as Step 1. We’ve since created a plan, transferred over all their assets and the only issue they had after presenting the plan was: What if we want to save more than you recommended?

That’s a good problem to have.

Case #2 – Burning the candle on both ends

A long time client recently received an inheritance. Like many female boomers, she was at a stage where she was responsible for caring for both a parent and a child, all the while still working. Her original financial plan still had retirement a number of years away, however, she was exhausted and needed retirement to be in sight.

We updated her retirement plan showing her what an early retirement would look like. We helped her understand what her pension would generate, when CPP and OAS would begin and how much we would have to withdraw from her investments to meet her income needs. Ultimately, we were able to explain how much of the inheritance was needed to fund the early retirement gap and we were able to set a retirement date of only 8 months away.

She was so excited and relieved she started to write a cheque for the investments on the spot, even before I had mentioned what investments we were going to use! We took time to review the investments but clearly she was more interested in the financial planning advice. She left the office happy. She was actually thrilled to be going back to work, knowing that retirement was in sight.

In the end, the young couple they became clients because of our focus on creating a plan. The fact that we were the only firm that did not start off with an investment pitch was the deciding factor.

The overworked boomer wasn’t looking for an investment recommendation for her inheritance. What she really wanted to know was when she could retire and where all the retirement income would come from.

While these are just two recent cases, our experience has been that most of the time only financial planning advice (not investment advice) answers the questions clients really want answers to. Financial planning does take time but planning-focused advisors are rewarded with growing books of loyal clients.

Mathieu Paradis, B.Comm., CFP, CLU, FMA is co-founder of AdvisorPractice.com which offers advisors practical solutions to transition to a financial planning practice and offers a 12-week training program. He is a financial advisor and offers his clients comprehensive life goals financial plans.