I’d like to expand on a topic from last week’s IA Advisor Summit in Washington, DC. Over breakfast I had a discussion with a couple of advisors about financial planning. We discussed our processes and areas of analysis and how they were received by clients. Of particular note was the topic of implementing the plan’s recommendations. On that, it seems we shared a common frustration. The frustration that can occur when we, as planners, have crunched the numbers, prepared a thorough analysis, selected the most appropriate strategies, and presented them to our clients, only to find their eyes are glazing over. Since we are completely convinced that our suggestions are prudent and absolutely in the clients’ best interests, there should be no doubt that our clients would see that, right? Well, perhaps not. I think we make the mistake that our paradigm is their paradigm.

I mean, if it’s the best thing for the client, why wouldn’t they just jump on board? Well, experience is, after all, the best teacher. I have found the implementation part of the planning process to be the most difficult to complete. I think there are several reasons for this, chief among them are that clients may not be able to process the large amount of information we provide them as easily as we may think.

When I go to a doctor for my annual physical, he lets me know if there are any problems. In the absence of a medical abnormality, all I might get is a phone call telling me I’m fine. On my last exam, I requested that my doctor mail me the results so I could see my level of cholesterol, white and red blood cell counts, etc. I reasoned that if I had this information I could compare it with future results to see how things have changed. Well, they were happy to comply, but added that very few patients had requested this before. Hmm.

Now back to the breakfast discussion. These advisors had reached a point where they only do planning for specific issues and not as a comprehensive offering. They also spread the recommendations out over several calendar quarters, implementing strategies for a specific area each quarter. While I wholeheartedly agree on the second point, I still hold hope for the first. Without comprehensive planning, the possibility of error increases due to the fact that when changes occur in one area (e.g., returns are lower than normal), it affects other areas (retirement may be delayed or the estate may be smaller). There is such an interrelationship between tax, retirement, estate, investment, insurance, and so forth that without a comprehensive plan, you may be opening yourself up to serious problems later.

So here’s the dilemma: give clients what they need or give them what they can process. When you find the right balance, and it’s different with each client, you’ve found planning utopia.

Thanks for reading