Aren't we all fee-based planners?
By Rodney Ballance
The Financial Leadership Academy
The fact remains that anyone who assists another person with designing or implementing a portion of that person’s financial strategy is operating in the capacity of a planner. My personal belief is that the planning should be left to a professional who understands all aspects of personal finance and knows when that advisor needs to call in specialized help to reach that client’s goals.
I know, that’s a far stretch from the way the financial services industry has trained us over the years, especially when it comes to placing life insurance products. Here’s a key reason why I say this though. Last week, I had a working lunch with a potential new client. This particular gentleman is a doctor who owns his own clinic. The doctor’s wife and their CPA joined us.
We discussed issues from personal budgeting to estate planning and succession planning of his practice. We talked about college planning for their two kids, and how to take care of his aging mother. His CPA questioned me on various issues, and the doctor and his wife asked numerous times for my opinions.
One big question the CPA asked was, "Are you a fee-based planner, or do you work off commissions?" My answer made the CPA sit up straight in his chair, and the doctor lean forward expressing his firm level of understanding and agreement. This one statement caused this prospect to choose me for their financial planner over other highly trained and expensive advisors.
I answered him this way: “Doctor, do you allow insurance companies to pay you for your services, or do you charge patients just one large fee up front?”
Of course he told me he accepts all forms of insurance payments, because most people can’t pay the fees out of their pocket.
Aren’t most middle class families in the same boat with their financial planning? If more American families looked at hiring us the same way they hire their doctor, would more people have a plan and a better understanding of how their money actually works?
My view on this contested issue within our industry today is this: If a doctor accepts money from an insurance company for services, why can’t I? People are used to being charged co-pays when they go see a doctor, knowing that the remainder of the charges will be taken care of by an insurance company. Doctors know that if patients had to pay the full amount of the fee for services, they would probably never darken the office door.
That’s one reason I believe a small segment of our industry is fighting to prevent other highly trained professionals from offering “financial planning." Let’s face it, when a car salesman sits down with a prospective buyer and tells them what the monthly payment for their new car is, that salesman is participating in a form of financial planning. Naturally, I suggest my clients call me before they consider such a purchase to make sure it fits within their overall financial plan. The fact remains that anyone who assists another person with designing or implementing a portion of that person’s financial strategy is operating in the capacity of a planner. My personal belief is that the planning should be left to a professional who understands all aspects of personal finance and knows when that advisor needs to call in specialized help to reach that client’s goals.
The most important understanding though, is that the advisor be part of a professional network of trusted providers for specific needs that would offer individual guidance for that client. I believe that someone who possesses a valid life insurance license can be just as effective in guiding a client to a successful portfolio as a high-priced planner, if that agent has a strong network around him and uses it effectively.
The way I explained it to my new doctor client is this: I’m part of a financial preferred provider organization (PPO).
If you look at me as your primary care physician from the financial point of view, I will quarterback every move you will ever need to make, and serve as that one point of contact that will make your financial life successful. More importantly, you don’t have to worry about learning every aspect of personal finance. All you need is my phone number. I already have the numbers for every specialist you’ll ever need.
I’m sure this article will cause some excitement in our industry, but which is more important, helping all Americans build a better financial future, or helping a few financial pros get a bigger paycheck? While you ponder this I’ll continue offering guidance to my clients, and referring business to all the members of my professional network.