Notwithstanding the horrors of 2020, 2021 ushers in a new breed of hope and concern for all. A new year is a new opportunity to start off on the right foot and improve on everything that you do for your clients, staff and firm.
In our firm, we use each January to update our business and strategic plan, and lay out the tactics that we’d like to implement over the next 12 months. We break our tasks down into 90-day chunks, so nothing feels too overwhelming at any point in time. And as you may expect, the plans made each January provide a general direction with full knowledge that some will change as we execute and improve along the way.
Where to start
The first order of business in 2021 is for your clients. Without them, there would be no business and no need for business planning. In the crowded world of financial services, there is a lot of noise from many sources, and your clients can’t help but listen. My hope for your firm is that your actions define you, and not what your clients hear from media ads, news reports or solicitations from competitors.
To that end, let’s talk about action steps. The first step is to define which clients are your financial planning clients versus those who are not. For example, if you have a client who you’ve helped with an investment account and perhaps a few incidental forecasts of retirement independence, is that a financial planning client? I’d argue not, but it really doesn’t matter what I think. It matters what your client thinks.
Staying with this example, if that client has a problem where their insurance was inadequate and they suffered a material loss, whose problem is that? We can argue that it is the client’s fault, the insurance agent’s fault, and even your fault. But the reality is that everyone is at fault here.
If that client believes that you are their financial planner, then they can easily build a case that it is indeed your fault. One of the core steps of the financial planning process is risk management. If you danced past the risk management section of your client’s life without evaluating the possibility of a material loss, you may have a problem.
Like all parts of the financial plan, you should understand the client’s goals and objectives, assess their current situation, and then make recommendations for improvement that will assist with pursuing their goals. The same level of effort would be required in all elements of their financial plan, including but not limited to cash flow, tax planning, retirement planning, investment planning, estate planning, family governance and whatever else is significant in their personal and financial lives.
It isn’t fair to your client to have them think you are their financial planner unless you are indeed providing a thorough financial planning process. The firm needs to identify which clients are planning clients and which are not. For those who are, make darn sure that you have indeed provided a complete evaluation and that you keep the plan fresh, as situations and circumstances often change.
For those who are clearly not your financial planning clients, make sure that they know you are not providing financial planning. This will help prevent something not covered by your services from blowing up on you and the firm, but it also should identify what else a client may need and provide the opportunity for you to be of greater service.
The rest of the year
Once you’ve defined who are and who are not your firm’s planning clients, take each planning client and lay out your plan of work for the entire year. By the end of the year, you want to be sure that you’ve cycled through all of the moving parts to each client’s plan to be sure that everything is still in good order and working as desired. If things need updating or change, it would be your responsibility to recognize that and make the appropriate recommendation.
Making recommendations is one thing, but seeing that the recommendations are carried out is far better service. Too many firms make the mistake of rendering the same advice year after year, because no one steps up to the plate to be sure that it’s done. That should be you, even if it is merely your persistence at seeing that tactics are implemented. Sometimes these tactics may be beyond your total control, in that we must rely on other professionals to execute their part of the recommendation. Remember this: If your clients’ other advisors aren’t doing the job, accountability for seeing it through will ultimately bounce up to you.
Working with your clients’ other advisors is a part of the job. In the early stages of working with a client, you will be in a position to evaluate their work and develop a sense of their ability and dedication to client service.
Two areas in particular seem to frequently cause gaps in your clients’ plans — their estate plan and their risk management plan.
Too many clients are walking around with outdated, inappropriate or even non-existent estate plan documents. It’s not good enough to tell a client to see their attorney to be sure that the documents are still appropriate and in compliance with current laws and client goals. The competent planner will read the existing documents and review the moving parts with the client to see that things still make sense. In our firm, we have actually created a document where we record all of the moving parts of our clients’ estate plans so that our knowledge of what the plan states is only a click away.
We strongly suggest this level of service even for the client who claims that they’ve just visited with their attorney and updated the documents. Clients often don’t understand the intricacies of an estate plan and simply accept what the attorney says and writes as gospel. With new estate plans, we still see the following gaps in many cases: incorrect ownership structures for assets; future probate issues; weak spendthrift provisions for the next generation; complicated methods to determine if a client is disabled and can act for themselves; no protection from second spouses after the passing of the first one; poor beneficiary elections … this list could be a lot longer, but I’ll spare you all of the details and simply state that you must read the documents, make recommendations for change and see that the recommended plan is being utilized completely.
I feel the same about insurance matters. Too many planners simply pawn the insurance off to the client and tell them to go see their agent to assess their coverages and needs. Similar to the estate plan, I believe the planner should read the clients’ insurance policies, understand the ownership structure for their assets, especially complex assets like businesses, business real estate and joint ventures. You can work directly with the agent to be sure that your client has the coverage that they need and want. In this world of saving 15 percent in 15 minutes, many clients have unintended gaps in their coverage that are masked by saving money on insurance premiums. Most clients would prefer to know that they are adequately covered and that they are paying a fair and reasonable premium for the coverage that they need.
Evaluating their life insurance may be a bit more complicated. The needs analysis and adequacy of coverage part is easy — there are many online calculators simple enough for anyone to use. But a more detailed look is often needed. For term insurance, help your client understand the term and costs, and make sure that the coverage is affordable for the entire term needed. Also assess any conversion rights, ownership and beneficiary concerns, and an evaluation of the insurance company itself. For permanent products like universal life or whole life, the analysis required is a bit more complicated.
For permanent insurance products, you want to make sure that the policy is performing as illustrated when purchased. To do this, you will need to obtain in-force illustrations. A good life agent can be extremely helpful here. When looking at in-force illustrations, you need to understand the assumptions made and possibly ask for several illustrations under the wide variety of possibilities within that specific insurance contract.
Look out for yourself
For your staff and the firm itself, do your own plan. It is really great when your clients can see evidence that you practice what you preach. For staff, find out what they want to accomplish in 2021, and help them create the plan to advance their careers. This may require some letting go on your part, but in a year like 2020 where remote work was rampant and impromptu mentoring wasn’t prevalent, your staff needs more attention in order to grow and prosper in your firm.
For the firm, perhaps one of the best things you can do is to let your clients know about your business plans. You’d be surprised to hear how interested they are about your succession plan. Clients often think, but are afraid to ask, what happens if you don’t wake up for breakfast one day. When you have a great answer, and begin to share that with your clients, you will see the sense of relief and comfort in their eyes.