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BirdsEye View

Financial Planning is an elusive discipline. Everyone agrees its' the best way to build deep customer relationships and anchor a great value proposition, yet the general perception is, no one is willing to pay for it. Financial planners have been prospering for years, but their primary revenue source is investment advice, so people say. How to unlock the Financial Planning query remains a mystery. Below are some thoughts on paths to success with financial planning, some of which were gleaned from our last Wealth Management Forum.

Before you dive into the article, note the words Bill Beitler has shared with me regarding the 2007 Outlook: "The terrible thing we're doing to ourselves with the "special MMA" hit home in particular. I've been ranting in ALCO all year about the ineptitude of our brethren, how they've virtually abandoned normal pricing practices for core checking and savings products (no one in our market has moved these more than a few basis points as rates have marched north), thereby waking up a lot of "sleeping dogs", making all but the priciest of CDs obsolete, and driving everyone's cost of funds through the roof. Behavior like this would almost make you think the industry would do something silly, like give internet banking and bill-pay away for free to everyone (oops, that's right, we did do that?!?!). but hey, why generate any non-interest income; that would just take your eye off the ball as you work at compressing margin!" Bill doesn't mince words, does he? He concludes, "It's a good thing that true, aggressive service-oriented selling can still help a little guy like me drive business deposits up, preserving precious margin. And, of course, we earn our "BMW not Ford" loan rates wand fees with simple, old-fashioned service. Answer your phone, promise and deliver, say please and thank you, etc. etc. etc."

Have a delicious and fabulous holiday season , and consider making the world's best latkes recipe from my friend Amos Shucman; they are non denominationally delicious! Plus, Dick's coveted glazed carrots recipe is also posted for your dining pleasure.

The topic of financial planning is a painful one among Wealth Management executives. It's one of those businesses that sound perfect until you actually look at it. Planning should be a perfect relationship consolidator, THE opportunity to become a truly trusted advisor while getting a birds' eye view (no pun intended) of the client's entire financial holdings. Quite a few firms, many of them small, make lots of money in that business. So how come we can't find clients who are willing to pay anything for a good financial plan?

This question keeps arising in our Wealth Management Forum, as it did again last week. It brought the issue to focus once again, and some conclusions did occur to me following our discussion.

In order to be successful in financial planning, I believe the following questions need to be asked and answered:

1. What is the strategic purpose of the business?

   Why are we considering entering the financial planning business in the first place? Is it a "door opener" for other sales? A relationship builder? Should it stand on its own profitability? Is financial planning a retention tool or a profit center?

2. What process will we use?

   Financial planning can range from a yellow pad discussion to a triple bond paper bound presentation. It can be individually molded or fully standardized; sold centrally using a few select experts or through current relationship managers. Clarifying the right path for you is essential.

3. Who does it (the production end)?

   Is the product produced by a central cadre of experts who put together the "books" for others to present or is it done locally and by existing personnel within the Wealth Management group? Also, will you produce goal-based plans (life-style achievement) or cash-flow plans (getting to a pre-determined amount at the right time) or both?

4. Who does it (the presentation end)?

   The same question as the question in #3 above is being asked, but possibly with a different answer. The answer to the first question might determine the answer to this one: are you looking for a consultative approach that will result in sales, or perhaps an advisory approach that might not result in short-term sales but will improve customer retention.

5. How many will you do?

   Many banks that foster financial planning leave it to the relationship managers to select whether they will offer the service and how many presentations they will make. I believe that, if you're serious about financial planning, you need to goal how many plans and presentations will be done by each sales person and Trust professional each day or week; without such a commitment, the product will not fly.

6. What are the expected results?

   An upfront and clear definition of success is essential for any new effort, and this should be no different, even if you are only tweaking your planning program. Depending upon the answer to the first question, you can identify target metrics such as improved customer retention; balance growth; fee income growth; etc. for lagging indicators, and number of presentations; plans; customer calls as leading indicators.

7. Where is the tangible value to the customer?

   Many plans look fabulous, but, at the end, offer a predictable and often a "canned" solution which does not create tangible value for the customer. Liquidating all one's assets and investing them in your mutual funds isn't a strong value proposition from the customer's perspective; nor is approximating the S&P 500 (Vanguard does it cheaper). Yet I've seen such pat answers repeatedly, further shrouded in more hedges than Citibank has on its books. Converting financial talk to customer value is a transition that doesn't always occur, but without it customers won't be willing to pay for the plan, nor will they see it as a service. They will consider it simply another predictable pitch.

I believe that financial planning hasn't been as successful as it could be in many banks because it is considered a stand-alone product, an enhancement of an existing product line, rather than a cultural evolution. Like so many other products, most notably credit-life insurance, it's a belief issue. If your executives do not believe that financial planning creates tangible value for customers and for shareholders, it will continue to be marginalized regardless to periodic resurgence efforts. If the culture change starts at the top and goes to the roots, it will take hold.

Further, I notice that many banks aren't crystal clear about the role of financial planning in their product line, or how it is going to be produced and delivered. This ambiguity and lack of goaling contributes to the product's inconsistent performance, as some Wealth Management professionals embrace the service and use it successfully while others ignore it.

Where financial planning does work, the following elements typically are present:

1. Clarity of purpose
2. Clarity of expectations and goals (both leading and lagging indicators)
3. Clarity of who does what
4. Clarity of expected results and frequent reporting of progress
5. Rank order of the bankers who are involved in the process
6. Active marketing of other sales forces within the bank similar to centers-of-influence marketing
7. "Open book" sharing of specific customers and prospects with other line of business sales forces
8. Structured collaboration process (by "structure" I don't mean paperwork but expectations of team participants (who will be on the team: lender, cash management, insurance, financial planner etc.) interaction frequency (how often will we meet ), interaction content (what do we do; how many "names" will each participant bring; what type of discussion will ensue), and joint calls (how many each week)
9. Clarity of regulatory compliance issues (for example, ensuring that, should a broker deliver financial plans, they know when they have their fiduciary hat on, and when they have their suitability hat on)
10. Use of reliable and quality software vendors (vendors such as AdviceAmerica, EMoney or MoneyTree offer plan production with other bells and whistles that might enhance your product offering)
11. Clarity of flexibility in individual delivery (I find that expecting 100% consistency could stifle effective individualized customer interaction)
12. Leadership from the Wealth Management executive and senior management