Think2Perform

Using The DOL Fiduciary Standard Ruling As An Opportunity to Transform Your Client Value Proposition.

On June 16, 2016, think2peform CEO, Doug Lennick and Bill Moran CFP® hosted a webinar that featured important steps financial advisors can implement to make their financial planning practice more valuable to clients under the new Department of Labor Fiduciary Standard Rule.

Instead of just “bolting-on” new compliance-focused policies and procedures, Lennick and Moran recommend using the new regulation as an opportunity to transform your business model into a holistic, advice-based fee approach.

Outlined below are two primary components for moving to an advice-based fees approach. The archived webinar, which further details these elements, is available here.

Transforming Your Financial Planning Business Model

1. Create and articulate your value proposition

Describe your services

• Define and develop a description of your services that aligns with your professional values and goals.

• Keep it simple and written in a way to appeals to clients and prospects. How do they benefit? What’s in it for them? For an example of this, view the webinar.

• Consider running a draft by your client advisory board, if you have one, or request feedback from your best clients.

Define the scope of your service offering

• Keep the service scope flexible to accommodate adjustment as client needs change. 

• Ensure your agreement explicitly conveys that your services and fees are based on a current understanding of the financial situation, and the complexity of current goals and needs.

• Be explicit about when, how and with what frequency meetings will be conducted, and any regular communications such as newsletters.

Set your pricing

Understand there are two components to pricing: method and model.

• Method – An annual retainer is preferred, but you can also consider a monthly or quarterly subscription if client touchpoints can be guaranteed to be greater than one per year. Try to avoid fixed fee levels differentiated by topics – this makes it too easy for prospects to opt for the lowest price.

• Model – Your services should not be a loss leader. Studies show that clients place a higher value on services that encompass their entire financial life.

To achieve a consistent profit margin, each practice could set a “practice pricing schedule” on a blended, base hourly rate of all advisors and staff, and accounts for geographic and competitive factors.

Develop a firm worksheet to establish price quotes by estimating annual effort in hours and multiplying by the blended rate. The worksheet would include factors such as client age(s), family composition, what’s to be achieved/avoided answers, assets and liabilities, annual income and sources. Also take into account if the client is a wrap client. A more complete explanation is provided on the webinar.

2. Implement the Financial Planning Process

A helpful mnemonic devise is the word mirage, backward.

Engage

Connect with prospects, present your value proposition and determine their values and goals – what they want to achieve and/or avoid.

Gather

Collect and write down client data and information, you’ll want a full financial picture to help formulate recommendations, including annual income, years to retirement, current savings, etc.

Analyze

Evaluate all the data and formulate calculations. This will determine ways to help the client achieve their goals, behaviors that may need to be adopted, or modifications that may need to be made to initial goals.

Recommend

Present your recommendations to the client and discuss thoroughly, helping them understand and prepare for the certainty of uncertainty

Implement

Implement the agreed upon plan and work with the client to ensure they possess the discipline and desire to follow through with the accepted strategy.

Monitor

Monitor the plan, rebalance and adjust as necessary to address changes to financial situation and goals.

The Department of Labor Fiduciary Standard Rule will require changes to your financial planning practice, at think2perform, we see this as opportunity to enhance the profitability of your practice. “You want to systemize the predictable so you can humanize the exceptional,” says Moran. By transforming your business model to elevate the value of your advice to clients, you open the door to serving them in exceptional ways.

A recorded version of the full webinar is available here.

A copy of the presentation is available here.

Disclaimer: The information included here is for informational purposes only. It is not intended to constitute legal advice, and if you need legal advice you should consult your own attorney.

Doug Lennick