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The Benefits of Holistic Planning

The Benefits of Holistic Planning

Bringing clients comprehensive financial planning deepens the relationship and can bring in more business. But advisors need to learn how to sell it.

There are more than 67,000 financial advisors with the Certified Financial Planners (CFPs) designation, accounting for more than 20 percent of the total industry headcount.

With a new “fiduciary standard” for advisors coming down the pike, and the broker/dealers’ shift away from investment advice and toward holistic wealth management, the financial planner description seems a natural fit for many advisors, regardless of whether they hold the actual designation. Comprehensive financial planning includes cash management, accumulation of retirement assets, life and health insurance, education funding, tax planning and retirement income planning.

Advisors report that the largest benefit to offering a comprehensive financial plan is that it provides an organized approach to the client review process. Other advantages are increased asset retention and properly managed client expectations. At the core is a financial plan’s ability to strengthen the client relationship and that inevitably leads to more business.

According to a recent survey we conducted, advisors report that some of the biggest challenges to getting clients on board with financial planning were clients' reluctance to engage in the process (36 percent) and unwillingness to pay fees (33 percent).Indeed, it may be hard for some advisors to effectively communicate what a true financial plan looks like, which can lead to some of the client pushback. It is difficult to charge for anything when the goods or service being delivered, and the magnitude of its importance, is not fully understood. A half-hearted attempt to explain the value of financial planning can set off a domino effect where neither the client, nor the advisor, is thoroughly sold on the usefulness of a plan. Advisors during the next three years are looking to increase the amount of formalized financial planning that they do (12%). However, one quarter of them feel uncomfortable charging a planning fee, which likely influences the fact that less than half of all advisors actually charge for financial planning services.

An advantage of financial planning is a potential for a stronger future relationship with investors. That can be more beneficial for a practice’s bottom line. For advisors already doing a combination of brokerage and fee-based business, planning fees can be another way to diversify their revenue stream. The average fee for a comprehensive financial plan is nearly $3,200.

For advisors with a thoughtful and organized approach to client development, the implementation of a financial plan is likely a regular part of the onboarding process and not something that needs to be propositioned a few years after the relationship is off the ground. CFPs are more likely to engage with planning at the outset, which allows 13% to charge more than $5,000 per plan, double the percentage of non-CFP holder. Investors place value on advisors who lead with their financial planning value proposition while having undergone specific training to be considered experts. While the designation isn’t absolutely necessary to gaining success in this realm, it is a valuable asset to have as advisors attempt to differentiate themselves in an environment where clients are likely employing multiple advisors to manage a fixed pool of assets. and Cerulli Associates invite you to participate in a joint research survey which covers advisor product usage and their interactions with wholesalers. Participants will be provided with a complimentary copy of the Cerulli Advisor Edge, which covers investor opinion of investment products and risk appetite as well as passive investment usage among advisors.

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