Comprehensive Planning: Good for Clients or the Bottom Line? | Lord Abbett

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Practice Management

By 2016, advisors across all channels aim to have 43% of their clients receiving a full financial-planning experience, up from 33% in 2013.

This Practice Management article is intended for financial advisors only (registered representatives of broker/dealers or associated persons of Registered Investment Advisors).

When UBS advisor Gino Stumpo first began his career 14 years ago, he recalls being one of the few in the wirehouse channel to practice comprehensive financial planning.

Now Stumpo has plenty of company. An increasing number of advisors, both in the broker/dealer and independent channels, are looking to increase the number of clients who receive holistic advice, as opposed to modular service like investment management.

"From day one, I have done financial planning," says Stumpo, who is a CFP. "Comprehensive financial planning is part of my process and an imperative step of my process."

By 2016, advisors across all channels aim to have 43% of their clients receiving a full financial-planning experience, up from 33% in 2013, according to a recent research report published by Cerulli Associates. Meanwhile, the percentage of clients getting solely issue-focused planning, such as retirement accumulation or portfolio management, is expected to remain steady at 27% over the same period.

Consumer, Boomer Demand
Janet Stanzak, president of the Financial Planning Association (FPA), says her members' clients are showing a greater interest in the comprehensive approach. "Consumers are realizing, just as advisors are realizing, that there is so much value to (comprehensive) financial planning," says Stanzak, who founded Bloomington, Minnesota-based Financial Empowerment in 2004.

Stanzak, a certified financial planner (CFP) since 1986, says baby boomers are another driving force. An increasing number of them are reaching retirement age and need to address issues with their Social Security, defined contribution, and IRA plans. For advisors, she says, the onset of retirement, the start of a new job, when there’s a death in the family, or when couples divorce are good times to shift clients into a comprehensive planning relationship.

FPA's members include advisors across all channels, with 42% from wirehouses and regional broker/dealers, according to an FPA spokesman. Two-thirds of the organization's members are CFP practitioners. Stanzak says she expects an increasing number of younger advisors to pursue the CFP designation, a trend that will further drive advisory firms toward holistic planning.

Additional Fees
While steering clients toward a comprehensive planning approach is beneficial to them, it also provides a financial boost to the advisors, says Mercer Bullard, an associate professor at the University of Mississippi Law School, who also serves on the Public Policy Council of the CFP Board of Standards.

"Virtually every financial advisor looks for a healthy combination of fixed fees and percentage of assets under management," says Bullard, the founder and president of Fund Democracy, an advocacy group for mutual fund shareholders. "You can do well by your clients and yourself by selling more services that they need."

The fee structures for advisors who offer different services can vary by firm. Stanzak of the FPA says she charges for comprehensive planning separately from investment management, but many advisors also use ongoing assets under management retainer fees that include the financial planning work they do for clients.

"It depends on the business model…when they have the ability to charge more for a comprehensive financial plan," says Stanzak. "Advisors can increase their revenues because it's an added fee they can charge."

UBS also charges separate fees for financial planning and portfolio management, according to Chandler. He says the firm has seen a 161% increase in the number of advisors charging for financial planning in the past year.

Wirehouse Focus
Traditionally focused on investment management, wirehouse firms are increasingly encouraging advisors to adopt comprehensive planning.

Two years ago UBS Wealth Management launched a financial planning campaign called, "Advice—Beyond Investing." Since then, Jason Chandler, head of the Wealth Management Advisor Group in UBS's Americas division, says fee revenue for financial planning was up 80% in the first quarter, compared with a year earlier. UBS also hired 60 people to its new wealth planning analyst program in 2013, with plans to bring on an additional 75 this year.

"A key part of our strategy is to provide more holistic education," says Chandler. In particular, UBS advisors have concentrated with clients on mortgage refinancing, estate planning and insurance needs. "We really think this is how clients want to interact with their advisors," Chandler adds.

Stumpo, also of UBS, and who has spoken about comprehensive planning with other wirehouse advisors, says he concentrates on several client issues, including defined contribution plans, life insurance, social security, college funding, and long-term care.

"A comprehensive financial plan acts like a roadmap," he says. "It appears these days more and more individuals see the benefit of looking at the entire financial plan as one large living document."

Technology Emphasis
Patrick O'Connor, a senior vice president in the wealth solutions group at Raymond James, says the broker/dealer has always had a strong focus on financial planning, and increased efforts in recent years to boost the number of clients using the service.

The St. Petersburg, Florida-based firm unveiled Goal Planning & Monitoring software through MoneyGuidePro a year and a half ago, which O'Connor says improved the financial planning experience for clients. More than 70% of Raymond James advisors built at least one client plan using the software within its first year. And there have been more than 70,000 plans created since the rollout, according to O'Connor.

"What we see and what our industry has been trying to do the last two years,” says O’Connor, “Is redefining what financial planning is for the client."

— by Andrew Coen 



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