Kitces Research On How To Make Financial Planning More ...
Transcript of Kitces Research On How To Make Financial Planning More ...
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Michael E. KitcesMSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL
Head of Planning Strategy. Buckingham Wealth Partners
Publisher. The Kitces Report, www.kitces.com
Blogger. Nerd’s Eye View, www.kitces.com/blog
Twitterer. @MichaelKitces, www.twitter.com/MichaelKitces
Kitces Research onWhat MakesFinancial PlanningMore Efficient10.21.2021 | FPA Northeastern Ohio
Handouts/Additional Materials at: kitces.com/FPANEO21
@michaelkitcesHandouts/Materials: kitces.com/FPANEO21
About Our Research
• 2020 Kitces Research Study on “How Financial Advisors Really Do Financial Planning”
– Almost 800 advisors completed the full-length questionnaire– Average age: 48– 73% held CFP certification– 61% were RIA (39% broker-dealer or insurance)– 77% male– 93% white– More financial planning-inclined (they read Nerd’s Eye View!)
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It’s All About Time…
“Remember that time is money.
He that can earn ten shillings a day by his labour, and goes abroad, or sits idle one half of that day,
though he spends but sixpence during his diversion or idleness, it ought not to be reckoned the only expence;
he hath really spent or thrown away five shillings besides.”
-- Benjamin Franklin
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A Week In The Life…
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The Average Advisor’s Week
A Week In The Life…
Ho
urs
Wo
rke
d
$0-100k $100k-250k $250k-500k $500k-750k $750k-1M $1M38
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Average time = 43.7 hours
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Where Does The Time Go?
A Week In The Life…
Clients & Prospects (70.6%)
Investment (9.4%)
Administrative (6.6%)
Management (6.2%)
Professional Development/Other (7.1%)
70.6%
9.4%
6.6%
6.2%
7.1%
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Client & Prospect Time…
A Week In The Life…
Meeting with Existing Clients
Meeting with Prospective Clients
Other Business Development
Meeting Prep for Existing Clients
Client Servicing Tasks
Financial Plan/Analysis Prep
19.90%
12.40%
11.90%
11.90% 7.80%
6.70%
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Divvying Up Tasks In An Advisory Firm…
A Week In The Life…
Front Office(Clients & Prospects)
Financial Advisors
Middle Office(Supporting the Front Office)
ParaplannerInvestment Research
Compliance
Back Office(Behind-The-Scenes-Administration)
Client Service AdministratorOperations/Human Resources
Trading
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Where Advisors Spend Their Time…
A Week In The Life…
Clients
Business Development
Middle-Office
Back-Office
Other
19.9%
30.4%14.5%
21.8%
13.3%
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What Is An Advisor’s Time Worth?
A Week In The Life…
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
10th 25th 50th 75th 90th
Solo Solo w/ Support Silo Ensemble
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Creation OfThe Financial Plan
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Hours To Create A Financial Plan…
Creating The Financial Plan
[0-5]
250
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150
100
50
0(5-10] (40-45] (45-50] (50-55] (55-60] (60-65](35-40](30-35](25-30](20-25](15-20](10-15]
Median Plan Creation Time:10 Hours Across All Team Members
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The Four Types Of Financial Plans…
Creating The Financial Plan
Calculator: Use a plan to calculate needs
and recommend solutions.
Collaborative: Use planning software
collaboratively/interactively live in client
meetings.
Comprehensive: Use plan software
output to bring together a holistic picture
of a client situation.
Customized: Create a custom-written
plan for an individual client’s
circumstances.
32%
49%
15%5%
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Time To Produce A Financial Plan…
Creating The Financial Plan
Calculator
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Collaborative Comprehensive Customized
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0
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Plan Construction Time Follows Plan Payment?
Primarily AUM
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Primarily Commission Primarily Retainer Primarily Hourly
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0
Creating The Financial Plan
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The First (Full) YearPlanning Process
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The 7-Step CGADPIM ProcessNew Rules
C
G
A
D
P
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Pre-Engagement:Agreement of Terms & Scope of Engagement
Process Step Practice Standards
Understand Client’s Personal andFinancial Circumstances
Identify and Select Goals
Analyze Current Course andPotential Recommendations
Develop Financial Planning Recommendations
Present the Financial PlanningRecommendations
Implement Financial Planning Recommendations (optional)
Monitor Progress and Update (optional)
1) Obtain Qualitative and Quantitative Information2) Analyze Information3) Address Incomplete Information
1) Identify Goals2) Select Goals
1) Analyze Current Course of Action2) Analyze Potential Recommendations
1) Develop Financial Planning Recommendations
1) Present Recommendations
1) Address Implementation Responsibilities2) Identify, Analyze, and Select Actions, Products, and Services3) Recommend Actions, Projects, and Services for Implementation4) Select and Implement Actions, Products, and Services
1) Address Monitoring and Updating Responsibilities2) Monitor Client’s Progress3) Obtain Current Qualitative and Quantitative Information4) Update Goals, Recommendations, or Implementation Decisions
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How Many Meetings Does It Take…
First Full Year Of Planning
1-2 Meetings0%
RIA B/D
10%
20%
30%
40%
50%
60%
3-4 Meetings 5+ Meetings
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How Much Time Does It Take…
First Full Year Of Planning
To
tal H
ou
rs S
pe
nt
On
1st
Ye
ar
Pro
cess
Establish0
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Gather Analyze Develop Present Implement Monitor
Cu
mu
lative
To
tal H
ou
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tO
n 1 stY
ea
r Pro
cess
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Total Hours Spent On First Year Process
Cumulative Total Hours Spent On First Year Process
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Third-Party Planning Software…
First Full Year Of Planning
Third-Party0
Analyze Develop
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Firm-Developed Excel Only
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Software = Better, Not Faster?
First Full Year Of Planning
Establish0
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Gather Analyze Develop Present Implement Monitor
Able to be made moreEfficient with technology
In-person activities not conduciveTo technology efficiencies
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Planning Software Lets Advisors Go Deeper?
Financial Planning Software
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eMoney MoneyGuidePro MoneyTree NaviPlan
Doesn’t Use Uses Agg
RightCaptial
Ave
rag
e H
ou
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ath
eri
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Da
ta
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How CFP Certification Impacts Efficiency
First Full Year Of Planning
Establish0
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Gather Analyze Develop
CFP Non-CFP
Present Implement Monitor
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The Full-Year Experience-Expertise Gap
First Full Year Of Planning
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Experienced CFP CFP Non-CFP Experienced Non-CFP
Establish Gather Analyze Develop Present Implement Monitor
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The Full-Year Experience-Expertise Gap
First Full Year Of Planning
Experienced CFP
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26CFP Non-CFP Experienced Non-CFP
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ExperienceGap
ExpertiseGap
ExperienceGap
28.6
29.1
31.5
32.4
1.9% Improvementfor Experience
& Expertise
7.4% EfficiencyImprovement
-3% Loss in Efficiencyfor Experience
Without Expertise
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Tools Used In The Financial Planning
Process
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Financial Planning Software Use
Financial Planning Software
Third-Party0%
10%
20%
30%
40%
50%
60%
70%
80%
100%
Excel Word Firm-Developed
RIA B/D
Specialized
Insurance
90%
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Third-Party Financial Planning Software
Financial Planning Software
MoneyGuidePro0%
10%
20%
30%
40%
eMoney RightCapital Naviplan MoneyTree
5%
15%
25%
35%
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Third-Party Financial Planning Software
Financial Planning Software
6.8
7.0
7.2
7.4
7.6
8.2
Current Market Share
7.8
8.0
MoneyTree NaviPlan RightCapital MoneyGuidePro
0%
Use
r R
ati
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20% 25% 30% 35% 40%5% 10% 15%
eMoney
2018
2020
2018
20202018
2020 20202018
2020 2018
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Time To Use Financial Planning Software
Financial Planning Software
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Analyze Develop
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eMoney MoneyGuidePro NaviPlan RightCapital MoneyTree
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Specialized Planning Software Tools
Financial Planning Software
SocialSecurity
25%
20%
10%
5%
0%Tax
PlanningSpecializedRetirement
Planning
EstatePlanning
Mindmapping StudentLoans
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Specialized Planning Software Tools
Financial Planning Software
SSAnalyzer0%
1%
2%
3%
4%
5%
6%
7%
8%
10%
Maximize MySocial Security
Social SecurityTiming
SS Pro Other
9%
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Specialized Planning Software Tools
Financial Planning Software
HolistiPlan
7%
6%
4%
2%
0%BNA Income
TaxCFS Tax
ToolsTax Clarity Planner CS Lacerte
5%
3%
1%
Other
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Best Practices OfTop Advisors
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Advisor Earnings By Business Leverage
Best Practices For Advisors
Solo
$300,000
$200,000
$100,000
$0
$250,000
$150,000
$50,000
EnsembleSolo w/SupportSilos
2018 2020
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How Top-Earning Advisors Spend Time
Best Practices For Advisors
0%
5%
10%
15%
20%
35%
25%
Clients BusinessDevelopment
Middle-Office Back-Office
Bottom 25% Top 25%
Other
30%
+10% x 44/week hours =+200 client meetings/year!
Delegating middle- andback-office tasks createsmore client-facing time!
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It’s All About Leveraging Your Time…
Best Practices For Advisors
Clients & Prospects
Investment
Administrative
Management
Professional Development/Other
Meeting w/Existing Clients
Meeting w/Prospective Clients
Other Business Development
Meeting Prep for Existing Clients
Financial Plan/Analysis Prep
Client Servicing Tasks
ExperiencedSolo Advisor
72 Clients
ExperiencedSolo Advisorw/Support
120 Clients
Servicing 64%more clients!
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It’s All About Leveraging Your Time…
Best Practices For Advisors
Advisor: $200/hr
Advisor: $200/hr
Paraplanner: $50/hr
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CFP Certification Really Does Matter
Best Practices For Advisors
$250,000
$100,000
$0CFP Non-CFP
$200,000
$150,000
$50,000
2018 2020
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CFP Certification Really Does Matter
Best Practices For Advisors
Experienced CFP
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26CFP Non-CFP Experienced Non-CFP
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ExperienceGap
ExpertiseGap
ExperienceGap
28.6
29.1
31.5
32.4
2% Improvementfor Experience
& Expertise
8% EfficiencyImprovement
-3% Loss in Efficiencyfor Experience
Without Expertise
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Key Takeaways
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Key Takeaways
• Delegation really matters– 1st hire is typically client service manager
– 2nd hire is typically paraplanner
– Getting over the first-hire-hump is the hardest• Staff headcount ‘doubles’!
– But ‘optimal’ time management is a game of inches• Freeing 10% of your time = +200 client meetings/year!?
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Key Takeaways
• Virtual Outsourcing makes incremental delegation easier – Virtual Client Service/Admin Support
• www.ConsiderItDoneCompany.com• www.VirtualOutsourceSolutions.com• www.OutsourceThisOnline.com• www.NiftyAdvisorSupport.com• TotalOffice.cc
– Virtual Paraplanner Support• www.DelegatedPlanning.com• www.OutsourcedPlanning.com• www.SimplyParaplanner.com
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Key Takeaways
• Financial Planning Software Doesn’t Save Time!– It helps advisors plan better and deeper
• The time savings is in the rest of the (meetings) process!
• What does save time?– Collaborative planning
• Less report preparation (and more client engagement!)– Experience + Expertise
• CFP certification (and post-CFP designations?)– Systematized planning
• Consistent clientele receiving (firm-created) deliverables
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Key Takeaways
• In the end, efficiency is all about time management– Do you really need to have so many meetings?
– Do you really need to produce so many deliverables?
– Do you really need to be doing that much of the back-office and middle-office work yourself?
– Can you focus who you work with to make your expertise more (easily) repeatable?
@michaelkitces
Questions?Handouts & additional materials:
www.kitces.com/FPANEO21
Contact: [email protected]
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