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Getting With The Plan: Why It’s More Than Just Investments

Consumers seek financial advice at different stages in their lives, from when they purchase their first home to when they start a family. Advisors should encourage goal-based financial planning at all stages to successfully prepare clients not only for retirement but other goals along the way.
Often clients tend to shift their focus to retirement saving only when they start to age. But the reality is that the sooner clients start saving toward retirement, the easier it will be for them to reach their goals.

Financial Plans Versus Investment Plans

Early in my career, I found my clients and prospects didn’t understand the difference between investment planning and goal-based financial planning. “Investment plan” and “financial plan” are often used interchangeably, but there’s a big difference between the two.

An investment plan is just that, a plan to save toward one specific goal, such as retirement. Clients stick to the plan based on risk tolerance, diversification and asset allocation to maximize returns.

A goal-based financial plan is a more holistic view that involves an assessment of every aspect of the client’s financial life versus investment plans that view each goal in isolation. Client understanding of this distinction is key, especially in today’s world.

Many prospects are under the impression they have a financial plan. But after I ask them a few questions, I help them realize what they really have is an investment plan, which isn’t aimed toward long-term goal planning. This realization concerns them, and this is how I started successfully converting prospects to clients by helping them solve these unanswered questions. This was my entry into the financial planning world. By providing this service, positioning products to cover a need became much easier.

Goal-Based Financial Planning

Although financial advice involves the sale of a product to fill a need, financial planning provides a service. Goal-based financial planning is understanding what money means to my clients and how they would like to provide for their loved ones along the highway of life while preparing for any obstacles that may come their way. It’s a helpful tool to use with individual clients and company audiences. To adapt retirement planning into a goal-based framework, you can ask clients or employees key questions to reveal their financial priorities, such as:

  • Do they prioritize saving for education costs over retirement?
  • Do they pay off the mortgage or increase how much they save toward retirement?
  • What type of products should they purchase to meet their retirement goals?
  • Will they have enough to provide for their desired lifestyle?

This approach will reveal what needs to be done to create a holistic financial plan that will help them achieve their retirement goals. Their plan needs to cover debt management, cash flow analysis, insurance as needs and means change, tax planning and, most importantly, understanding that all these elements are linked together.

Trends With Employer-Sponsored Plans

As companies reduce or eliminate pension plans, consumers feel they are left to plan on their own for retirement. On top of that, consumers are faced with increased life expectancy that implies they may outlive their savings. This trend is both a challenge and opportunity for benefit advisors.
Benefit advisors have a greater role and value to employees who are fortunate to have company-sponsored plans. This role enables us to communicate more frequently with employees and develop personalized retirement strategies with them. This will lead to strong relationships with the employers. On the other hand, benefit advisors may face challenges with prospects as they see other companies reduce or eliminate pension plans.

Prospecting Opportunities In The Community

Retirement specialists can work with key community organizations and hold informational seminars to promote business growth. One of my clients presented me with a unique opportunity to share my insights and expertise with our community. As a result, I have presented a seminar about a comprehensive approach to retirement to the employees of the Niagara Regional Police for the past 17 years. They had another advisor who could provide information on investments, but they did not have anyone who focused on a comprehensive financial planning approach. My client felt that it was important to share information about the process she just went through to those in attendance at the event.

Even though I presented strictly from an educational standpoint, I was able to hand out business cards. While the results were not immediate, I eventually realized the long-term value of this opportunity, which has created a steady flow of prospects over the years. From our clients and the seminars, we have had more than 50 referrals this past year and closed more than 90 percent of them.

When I started in this business 19 years ago, the focus was on product selling. Goal-based financial plans were not a prominent strategy. But the industry and society have changed since then as our clients’ lives have become much more complicated and fast paced.

Consumers have a lot of information at their disposal, but they do not always have the time to implement or understand it on their own. As advisors, we can help individual clients and employees establish a goal-based framework to promote successful retirement planning.

Investment Plan vs. Financial Plan

The two terms are used interchangeably, but there’s a difference between the two.

An investment plan addresses the following issues:

  • What are your goals?
  • When do you need to reach those goals?
  • How much do you have to invest now or incrementally, as time goes by
  • Do you have concerns about taxes, or assets you already own?
  • How much risk are you comfortable with?
  • How often do you want to adjust your plan?

A financial plan looks at all or part of the following:

  • Summary of assets and debt.
  • Budget based on income and expenses to help client save for the future.
  • Evaluation of insurance coverage and needs.
  • Investment plan for how to grow the money the client puts aside.
  • Estate plan.
  • Consideration of the impact of income taxes and changes in the law.

Aurora Tancock, CFP, FLMI, AIAA, is president and owner of Aurora Tancock Financial Services, a financial planning firm located in Ontario, Canada. She is also an author with more than 30 years of experience in the financial services industry. Aurora is a 17-year member of The Million Dollar Round Table with six Court of the Table honors. [email protected].

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