A new report from Aite Group LLC identifies five types of advisors based on their focus on and adoption of financial planning.
Based on an Aite Group survey of close to 400 advisors completed in Q4 2009, the report identifies these groups distinguishing characteristics and compares their demographics, business models, practices and technology environments.
The practice of financial planning has been suffering from an identity crisis lately, and industry observers have varied opinions about what financial planning should include. Does financial planning have to focus on multiple goals and solution types? Are advisors who are registered as investment advisors the only ones able to deliver true financial planning?
While the answers differ by firm and, in many cases, for each advisor, most agree that planning is an ongoing process that advisors and clients embark on together to define and accomplish clients short- and long-term financial goals. Because this framework lends itself to a consultative sales process, most advisors have adopted financial planning to some extent, resulting in diverse manifestations of financial planning. What is clear is that financial planning can be an effective tool for advisors to increase their business. In fact, 76 percent of planning-driven advisors recognize it as an effective client acquisition tool.
Planning-challenged advisors may find it challenging to move from a transaction-focused business model to an advisory one, said Sophie Schmitt, a senior analyst with Aite Group and author of the report. They have amassed large books consisting of clients who are more likely to have engaged in one-off transactions with their advisor than in ongoing financial planning discussions. Firms must help these advisors select a more successful model and should support them with intuitive planning tools and ongoing skill development.
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