Study: Financial Planning Brings in More Revenue

Holistic financial planning has been hailed by many industry studies as the way the advisory industry is moving—and new research suggests it could also be more lucrative.

Advisers who approach client relationships with a long-term planning focus reported higher revenues, according to research of financial professionals from the Partnership for Retirement Education and Planning (PREP). The survey conducted among members of National Association of Insurance and Financial Advisors (NAIFA); the Society of Financial Services Professionals (FSP); and Million Dollar Round Table (MDRT), an international, non-profit association of more than 39,000 financial service professionals.

PREP said surveyed advisers who identified themselves as “planning experts” reported their typical client had twice the total assets as advisers who were more focused on individual product sales. The “planning experts” were not significantly different than “non-planners” in years of experience, size of firm, job function or type of products they offer. But, “planning experts” who approach client relationships with a longer-term planning focus had three times the assets under management and reported 40% higher annual revenue than the “non-planners,” according to a press release of the results.

Planning Boom?

The financial downturn has particularly led Baby Boomers to seek out more financial planning, the research found.

More than three-fourths (77%) of the surveyed financial professionals indicated the current economic downturn has had a significantly greater impact on their Boomer generation clients than any other generation, according to the results. Close to the same number (73%) said the downturn made their Boomer clients more focused on financial planning (also more than any other generation).

Boomers have neglected planning because they don’t fully understand the value (a reason cited by 78% of respondents), and they are embarrassed that they haven’t accumulated more assets (mentioned by 70%), according to the results.

Advisers are usually the ones who instigate the planning: Nearly half (49%) of surveyed financial advisers said at least 75% of the impetus for a successful financial plan comes from them rather than the client.

“If there is a silver lining in this dark cloud, perhaps this is a wake-up call for Boomers to get busy managing their financial well-being,” said Philip Harriman, past president of the MDRT).

PREP is a coalition of 11 non-profit organizations representing more than 200,000 financial advisers “working to provide retirement education to Boomers and younger generations.”

Among the 600 surveyed advisers, approximately one-third of survey respondents operated under a combination of fees and commission, while nearly two-thirds were commission only. Only 4% of respondents ran a fee-only business model.