Creating a thriving financial planning business

KOBUS BARNARD CEO, Allegiance Consulting

The world is changing, and the change is accelerating…

The financial services world is experiencing change at a breakneck pace. Traditional business models are under pressure in a world of greater complexity, transparency and accountability. The changing landscape will highlight the absence of value for advisers who operate on a product focus and who find their legitimacy in picking funds.

As everyone is coming to grips with change and is pushed off balance for a moment, this creates opportunities for the brave.

A fresh start can be a good thing

According to Dalbar (2016), in Dalbar Quantitative Analysis of Investor Behaviour, the 20-year annualised equity return was 8.19%, while the 20- year annualised equity return for the average mutual fund investor return was only 4.67%. A gap of 3.52% per year. That gap is not trivial.

According to Dalbar, the gap is directly attributable to:

• bad investor behaviour, and

• cost.

Goal-based financial planning will address some of the inefficiencies relating to investor behaviour.

Why goal-based financial planning matters

According to David Blanchett, Head of Retirement Research, Morningstar Investment Management, goal-based planning can lead to a 15% increase in utility-adjusted wealth when compared to a traditional approach to financial planning.

So what is goal-based financial planning really?

Goal-based financial planning is a deeply personal experience for the client. It talks to their goals and dreams. It talks to what is important to them. It facilitates meaningful discussions with the client. Goal-based planning is a financial planning method to help clients:

• prioritise their financial goals

• find an optimal plan to fund them, and

• find the optimal plan to protect the achievement of those goals in the context of the client’s current financial landscape.

Financial planning is the design for the bridge between a client and his/her goals, and the product is the building blocks of the bridge. A client may wish to focus on saving for education, a big purchase, understanding the implications of his/her debt, and retirement. Goalbased financial planning requires a contextual understanding of the sequence and impact of the needs of a client to ensure the optimal allocation of resources for each specific goal in the context of their available resources.

Enabling goal-based financial planning with a system that understands you

As with clients, your financial planning system can either enable goal-based financial planning or make it impossible to build a goal-based financial planning practice. The system should:

• provide a holistic view of the client’s goals and needs

• be flexible enough to facilitate co-creation of the client’s plan

• provide a user experience that enables meaningful discussions with the client

• be extremely sophisticated in its ability to model the client’s financial future, and

• be intuitive and simple to use.

Change your system – change your life

We know that change can be scary. Pick a system that helps you elevate your business. Pop in for a cup of coffee or email us at avalon@allegiance.co.za to see something special.