Three Key Strategies for Driving the Intangibles of Financial Planning ROI
By Tori Anguiano, CFP ®, Baker Boyer
Quantifying return-on-investment when it comes to financial planning can be tricky. Stocks and other investments are easy enough, but attempting to quantify the intangibles can end up missing the point.
Why? Because it’s those intangibles that can make or break a long-lasting financial planning relationship. Forming a successful financial planning relationship requires more than just managing assets and monitoring markets. Below are three keys to succeeding at the intangibles.
Key Strategy I: Build Trust Through Effective Communication
Communication is the bedrock of any successful relationship. Financial planning is no exception. Good communication is not just about relaying information, although that’s important. Rather, it’s imperative that both parties—the client and the planner—actively listen and engage to fully understand each other’s objectives, expectations, and concerns.
It sounds straightforward, but it can take time to achieve real clarity. Clients may initially be unsure of their goals, or may not understand how important it is to share the “why” behind their financial goals.
Integral to communication is transparency in managing expectations and providing clear documentation. A financial planning relationship can easily go off the rails if the client has unrealistic expectations. Documentation can serve as a sort of commitment for both the financial advisor and the client: a promise to follow through on agreed-upon strategies.
Key Strategy II: Make Continuing Education Mutual
Of course every financial planner must stay on top of changing market conditions, tax laws, and new investment vehicles. That knowledge and expertise is what the client is relying on, and one of the main reasons a client pays for financial planning. But every client is different. Some may want to delegate all responsibility and have no interest in learning more about the market, the investment landscape, or the intricacies of tax law. Others want to know more so that they can be more active partners in their financial decisions. So, it’s important to provide clients with digestible education based on their interest level. This is a really great way to help foster successful planning relationships because keeping clients educated can help with managing emotions and preventing impulsive decisions when investments are down or life circumstances necessitate changes.
Key Strategy III: Approach Financial Planning as a Means to an End
Oftentimes, people think that financial planning is a one-time thing. Financial advisors know otherwise, and must work with clients to ensure that they, too, understand that financial planning is an ongoing and unwavering focus on the end goals. Because reaching those goals requires regular evaluations and the flexibility to make adjustments that keep the plan aligned as circumstances and finances evolve. When a client feels that they and their advisor are working together toward a common purpose, it elevates their trust and, ultimately, their satisfaction with their plan and their advisor.
Measuring progress, and how you measure progress, is an important part of every financial plan. That may entail achieving account growth benchmarks. But it may also mean structuring and managing a plan to cover a child’s education—in which case, meeting that benchmark should be recognized and honored as you discuss new goals with the client.
In closing: Perspective Matters
Ultimately, much of financial planning boils down to goals and aspirations that don’t necessarily translate well to a spreadsheet. A client may prioritize having one parent at home to raise the children, or freeing up time and budget for travel or early retirement. Looking strictly at the numbers, having both parents work, or working until full retirement age, would be the best financial recommendation. But if that quality of life is the top priority for the client, that’s where financial planning can really shine.
It may not look impressive on paper to some, but to the client, it’s everything.