Articles

Life planning could be life blood for financial advice industry

Financial advisers struggling to find a post-retail distribution review business model might want to take a look at "life planning", which according to one evangelist could help win new clients for life, writes Joanne Wallen, senior editor at compliance specialist Complinet.

Life planning was developed in the US by the Kinder Institute, which was founded by George Kinder and Richard Wagner. It offers a structured methodology for delving deeper into clients' lives, and trying to establish their goals and passions and what they want to achieve with their lives.

Tina Weeks is a London-based IFA who has recently done Kinder's two-day "Seven Stages of Money Maturity" workshop and its five-day course. She is also now embarking on a six-month "mentoring" period during which Kinder will oversee and discuss all of the life planning she caries out. At the end of all this she will become a registered life planner.

Although Kinder is not new to the UK - the Institute of Financial Planning has been working with George Kinder for several years - interest in life planning has apparently started to soar and as a result Weeks has been appointed the UK representative for Kinder.

She told Complinet that the life planning techniques were very complementary to financial planning but were used well before coming anywhere near to talking about a financial plan or products. Life planning enabled advisers to make financial planning "relevant" to the individual and related to what they wanted in life rather than how big their pension pot would be at a given age, she said.

"With the RDR people are worrying about attracting sufficient business and finding a profitable charging model," Weeks said. She said initially a life plan might not involve selling any products at all. She believes, however, that once a client has a life plan and then a financial plan, "You have them for life". She said having opened up to an adviser and shared their deepest goals and aspirations, the client will almost inevitably come back to keep reviewing their plan and to buy financial services and products when appropriate.

Weeks said everyone was still learning about how to incorporate life planning into their business and there would no doubt be different business models emerging. For her business, she will simply use it as a "tool to enhance the way I deliver financial planning". Clients have a couple of life planning sessions and then some financial planning, looking at what they have and what they would need to achieve for their life plan. They then pay a fee for their financial plan and an ongoing fee for a yearly review.

Weeks recognised that the idea of a US-designed methodology, which among other things purports to help planners "identify the naive messages carried around since childhood", "understand the feelings that impact financial decisions" and "create a life that is financially and spiritually fulfilling and free of the weight of old patters and habits around money", might sound a bit "New Age" to the British.

No hugging

She had thought the same herself before going on the course. It did not, however, involve any "hugging" nor any psycho-babble. The techniques were developed in the US but Weeks would be delivering them with her own "personality" and her "English accent".

Alan Dick, a planner with Forty Two Wealth Management in Glasgow, is definitely no "New Age" convert. He too questioned whether he would find it to be "pop psychology or a revolutionary planning tool". He told Complinet that he actually did the two-day Kinder course in 2005 through the IFP and found it "to be very useful".

"Some of Kinder's techniques, such as meditation, are a bit too Zen for me but the general idea is extremely useful," he said. He said the sort of questions Kinder gets advisers to ask "get clients thinking about what is really important to them".

Weeks said the techniques helped clients build a vision of what they wanted to do and where they wanted to be. Then the adviser would look at their finances and resources to see if those goals were achievable. If not, they would "delve deeper" to see what was really important, she said.

Not growth for growth's sake

The results would be a financial plan that looked at how much a person needed to achieve what they wanted rather than simply achieving "growth for growth's sake". Weeks said the pursuit of growth for its own sake often led people to being encouraged to take unnecessary risk.

As well as working towards her registered life planner qualification, Weeks also hopes to achieve chartered and certified financial planner status within 18 months.

She is convinced that the combination of life planning and financial planning will really help the industry turn itself into a "profession", and one that will be able to attract new graduate blood.

Tick the FSA boxes

Designing a plan to fit the precise life goals of an individual should also tick all of the Financial Services Authority's treating customers fairly and Retail Distribution Review goals.

The Kinder course does not come cheap at present. Weeks will have paid around £6,000 by the time she has finished her six-month mentoring course. The intention, however, is that by "bringing it to the UK" and making it much more accessible to UK advisers, the cost will start to fall significantly.

Financial planners might already think they are doing life planning, Weeks said. She herself did before doing the course. In fact, one well respected female financial planner that Weeks questioned about life planning before doing the course told her, "Don't waste your money, women instinctively do this anyway."

Weeks said she then read the Kinder books and did the two-day course and changed her mind.

"I thought I was doing it before until I learned to do it properly. I then realised I was really only scratching the surface," she said.

Weeks said that she likes to combine life planning with cash-flow forecasting so that people can see exactly when they should have enough money to retire, for example. It is simply not about telling someone how big their pension pot will be, she said.

Dick said: "Life planning is really just financial planning done very well but unfortunately very few people are doing it well at the moment. Applying a proper comprehensive financial planning proposition will definitely serve to improve client relationships now and in the long term."

He said that life planning was "a valuable subset of the financial planning model".

"Therefore, I think the growth of a vibrant life planning movement in the UK can only be good for planners and their clients," he concluded.

*Complinet is one of the most trusted, quality names in compliance and offers tailored packages to suit your business requirements. To find out more go to www.complinet.com

Author: Joanne Wallen
Posted: Monday, August 17, 2009 | 4:30:11 PM