The Future of Financial Planning

Hi Sandy,

That's a great point.... I think there is a probably a big "hungry crowd" among many baby-boomers....

I believe it is never too late to get things going and working, and this holds for the group you mention too, Sandy.

One of the best things they could do is to hang out with the right people -- people who ARE doing things right. Just by spending time with such people, they'll find themselves starting to think the same way, and start to move towards having the same kind of success....

Most highly successful people are generous with their advice, I've found, as long the person asking shows them that they really do value and appreciate their advice and knowhow.

- Dien Rice

Mitch,

I think the future of financial planning is in providing complete overall solutions for your clients' needs. By this, I mean a financial planner should have an excellent knowledge of budgeting, the various investment vehicles and financial theory, as well as some tax knowledge.

For example, it would be good if your financial planner could look at your situation, help you work out a budget, a savings plan, assist you in allocating your investments if you wanted the assistance, as well as offer advice on paying off the home loan and borrowing to purchase investments, in order to make the interest costs deductible.

Another choice is who you want to deal with. If you want to deal with high net worth clientele, then no doubt you'd look more at trusts, income splitting, perhaps issues with buying businesses, and the like, whereas most middle-income clients would probably have less complicated situations.

I'm not sure of your current experience, but if you're looking to work as a financial planner, then essentially there are 2 options presented -- working for an established firm, or setting up your own practice, and each has advantages and disadvantages.

If you work for an established firm, then your income will be regular, you'll gain experience, and if your knowledge isn't that great in some areas or you lack experience, there are usually others around you can ask.

Setting up your own practice has the benefits of higher potential rewards in terms of profits (and probably satisfaction), but brings with it the risk that it could not work out, plus probably an initial capital investment. In addition to higher potential earnings from growing the business, you'd also be able to structure your affairs better to reduce your tax bill and claim more expenses. If you're unsure of certain areas, though, this particular avenue can cause problems unless you have some good contacts or want to spend a lot of time reading and learning to find the correct answers.

So what's better? Well, in my opinion, in the long term the second option is definately better. And in the short term? Well, it really depends on your experience, financial situation, and ability.

If you don't have much experience, and wouldn't know where to start practicing on your own, then by all means you should get the experience. But if you've been in the industry for a while, and you know your stuff pretty well, then I'd suggest seriously considering your own practice. Or possibly partnering with other able financial planners you know.

On to the specifics of a financial process which provides the knowledge but leaves the individual alone, if he wishes...

Well, to be honest, I don't know how most financial planners work. Is the majority of their income derived from commissions on products that are sold? If so, and you don't want to do that, some alternatives you could look into are:

- Charging set amounts for certain services, such as assistance in preparing a budget, or reviewing a client's investment portfolio, or advising on tax minimisation strategies; or
- Charging an hourly rate, and billing your clients for the time on the phone, the time they come in, and the time you work on their particular projects when they want things done.

I'm not sure how possible or workable those options are, but they leave room for independent advice where client's know that your main interest is providing them with good service, rather than receiving commission income.

Apart from that, my only other suggestion would be to (if you haven't already) master the areas of tax planning, portfolio allocation, and investment analysis.

I'm not really sure if what I said is relevant to your question, but I hope something helped!

- Thomas Rice.

> This question is aimed at Dien but anyone
> can jump in. There seems to be a lot of
> interest in investing on this sight recently
> and with the ups and downs of the market,
> new technologies coming out daily,
> information at your finger tips, etc., I was
> wondering where everyone felt the future of
> financial planning was heading. You see I am
> very close to obtaining my CFP Certified
> Financial Planner designation and was
> exploring what direction I should head in
> for developing a financial planning
> business. There are tons of so called
> advisors, representatives, consultants,
> brokers, etc. who are just selling their hot
> product of the moments just looking for the
> transaction to make a buck. Then you have
> the fee based planners who are only looking
> for individuals with $500,000 minimum to
> play with. What are some thoughts on a
> financial process which provides the
> knowledge but leaves the individual alone,
> if he wishes, to invest without all the fees
> and expenses? What are your thoughts on how
> this should be done?

> Mitch Austin