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Financial Planning > Behavioral Finance

A Planner's Planner

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The best thing about covering financial planning is the planners themselves: the vast majority of planners I’ve met over the years have been smart, service-oriented, and well, nice. One of the smartest and nicest planners was Lynn Hopewell, who passed away on March 28 at the age of 69. In the ’80s, Lynn was a friend and mentor to a number of young (and some of us not so young) journalists who were trying to figure out the financial advisory landscape, including Bob Veres, Mary Rowland, and this writer. Certainly in my case, and I suspect in others, his kind guidance and gentle wisdom helped identify the issues that needed sorting out as financial planning began its struggle to slowly climb from a sales job into a profession.

Like many planners at the time, Lynn started his advisory career on the commission side of the business in the early 1980s. Actually, he was a client of Don Rembert in Tyson’s Corner, Virginia, who one day announced to his advisor he’d been doing some research and decided he wanted to be a financial planner, too. He asked Don for some advice about getting started, and Don promptly pointed Lynn at an empty office and put him to work.

After a few years, Lynn made the transition to fee-only planning, both for business reasons and because it suited his client-oriented approach. I can still hear him telling the story of how the first months of fee-only planning felt to him: “I always considered myself an ethical guy, and tried to do right by my clients. But I can’t tell you the relief I felt after I stopped taking commissions. All the mental gymnastics that I didn’t even realize I’d created to justify the products I needed to sell to make a living suddenly just disappeared. It was a weight off my mind to simply tell my clients what was best for them.”

That story left a lasting impression on me about the subtle power of economic incentives. If a guy as ethical as Lynn Hopewell could be influenced by the economic structure of his compensation without even knowing it, then what about the growing numbers of financial planners struggling to become professionals? I know Lynn felt strongly about this, too.

In the Van

The term financial planning pioneer is widely over used these days, but Lynn was certainly in the vanguard of many trends that have become common practice these days. With an MBA from Harvard, he was one of the first practitioners to approach financial planning as a business. First, by converting to fees (which, say what you will about the ethics involved, is simply a better business model).

In those days before everyone from Money magazine to Merrill Lynch had wholeheartedly embraced fees, it was a hard sell. For clients to get over the hurdle of what appeared to be an extra cost, they needed a clear understanding of the benefits they would get in return–which was hard to convey in 25 words or less, or even in an office visit.

Lynn simply refused to let folks become his clients, or even talk about them becoming clients, until they had met with him four times.

The first meeting was a brief description of his background, his approach to financial advice, and the services that his firm, The Monitor Group, was designed to provide. The second meeting was all about the clients: their goals, commitments, dreams, and current financial situation. In the third meeting, he presented the outline of a plan detailing where he thought they needed to go, and how to get there. Even at this stage, he refused to talk about them becoming clients.

Finally, in the fourth visit, he would explain his fees, how they were to be paid, and the structure of his client relationships. Only at that point would he ask people if they were interested in becoming his clients. Lynn told me about this strategy in the mid-1990s, after he had been using it for about five years. At that time, his closing rate was 100%.

Lynn was also one of the first advisors to realize that planning practices could become valuable enough to sell. More importantly, he saw what needed to be done to create that value: building systems and adding staff so that clients would feel they were being served by a group of professionals, rather than by one person, no matter how dynamic that person was. For the firm to continue after the founder retires, and therefore have value to a buyer, Lynn felt it had to become an institution. He sold the Monitor Group to Glenn Kautt in 1999.

The Client First

It was perhaps most impressive for one with Lynn’s business acumen that he never let business considerations overshadow the client-service orientation of his firm. He limited the number of clients he worked with, and only worked with clients who could benefit from his team’s skills and expertise.

He was even the inventor (as far as I know) of a compensation model which he called fee offset. If a client’s needs included commission-paying products such as insurance or annuities, instead of simply sending clients to another, potentially conflicted advisor, he handled the sale in-house, and credited the commissions against the client’s future fees. It was an added expense to the firm, without any corresponding revenues, but Lynn felt it was the best way to serve his clients.

That strategy was to cost Lynn more than money. The National Association of Personal Financial Advisors ruled that his fee-offset method didn’t qualify as fee-only (even though the advisor had no economic gain from the offset fees, and the clients received, if anything, a broader service). NAPFA consequently denied him admission into that organization. It was an incident he spoke of with considerable disappointment, but as far as I know, it never occurred to Lynn to adopt a more acceptable–but to his mind, less client-oriented–compensation model.

A former engineer, CIA officer, and technology executive, Hopewell served on the board of governors of the CFP Board of Standards and was editor of the Journal of Financial Planning for many years.

A prolific writer, he also published myriad articles on practice management and investment strategies, drawing on his unique perspective and intellect to consistently challenge conventional wisdom and advance the profession. The best example of his thinking is probably “Making Decisions Under the Conditions of Uncertainty,” a professional paper published in 1987 (available at

Until then, retirement plan projections were based on actuarial tables to determine the life expectancy of clients. Hopewell pointed out that because those tables indicated an “average” life expectancy, a number of clients would outlive their plans. His thinking laid the groundwork for the Monte Carlo simulations that have become an integral feature of financial planning software.

Although I’ve never articulated it to myself or anyone else, upon reflection, to me Lynn Hopewell epitomized the quintessential financial planner: professionally educated with a wealth of real world experience, client-centered to the point of affecting profits, but keenly aware that a successful practice requires a sound business foundation, almost compulsive in his drive to further the profession intellectually,ethically, and economically, and generous with his time for colleagues and journalists eager to expand their

knowledge and understanding. At a time when self-interest seems to rule so many agendas, Lynn stands out in my mind as what a professional financial planner should be.

Bob Clark, a former editor-in-chief of this magazine, sagely surveys the advisory landscape from his home in Santa Fe, New Mexico. He can be reached at [email protected]