Study shows financial planning works

Hiring a CFP professional to create a financial plan will improve your financial situation and give you peace of mind. I’ve always believed in that statement and observe the results daily in our practice, but there wasn’t any statistical evidence to back up my claim. Now, there’s plenty.

The Financial Planning Standards Council (FPSC) began interviewing 7,383 Canadians for their 5-year Value of Financial Planning study in 2009 and now the first round of results have been published.

The study covers financial well being, emotional well being and the impact of working with a CFP Professional. A detailed summary of the study is available in the Spring edition of FP Standard but here are a few key findings that really show the impact of planning for both clients and advisors.

Results of interest for clients:

42% of those with no planning (this includes the do-it-yourself group) feel their finances are out of control compared to 17% of those with comprehensive integrated planning. This shows that we as advisors can have a significant impact on our clients’ emotional well being.

18% of those with no planning feel they are on track to reach their desired lifestyle in retirement compared to 51% of those with comprehensive integrated planning.

Again we have a huge opportunity to make an impact, this time on our clients’ financial well being, by focusing on financial planning.

Study participants were also asked to identify goals that were meaningful to them and with every financial goal identified (taking a vacation, paying down debt) the percentage of those who felt they were close to reaching their goals was significantly higher amongst those working with a CFP Professional.

Much of our focus during reviews in our practice is on helping our clients achieve their goals. We show our clients their progress towards each goal on our Client Dashboard in much the same way that the United Way uses 20-foot high thermometers to show the progress of their annual fundraising campaigns. Last year a client went to the base camp at Everest and another client recently started saving to build a well in Africa.

Results of interest for advisors:

• CFP professionals spend almost 25% more time with their clients and speak with their clients more frequently than non-certified advisors (advisors without CFP certification).

On average, the value of investments of clients working with a CFP professional is 71% higher than those working with non-certified advisors.What this means to me is while I spend more time with each client, I am compensated for my efforts – a winning partnership for both clients and me.

The FPSC study also found fewer than one-in-five Canadians have a comprehensive financial plan. Herein exists a massive opportunity for us to grow our practices by offering clients the planning they need and want.

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.