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Interactive Financial Planning


Last week I got a call from Kevin, a financial advisor who told me that he presented retirement projections to his clients in real-time which was apparently a huge success. I appreciated the update and got back to work.

It wasn’t until I received several other very similar calls that I started paying closer attention. I realized that this wasn’t just a fad – it was a trend. When I looked back at the last 12 months, I realized the most successful advisors all follow a particular pattern.

Instead of doing retirement planning the traditional way, they adopted a new way to converse with clients by showing them their retirement projections interactively. This new trend is a true game changer in the client-advisor relationship. The best part is that it takes almost no preparation to implement in your practice.

We call this new trend interactive financial planning because it’s based on a real-time client-advisor interaction.

Why does showing projections to your clients interactively matter?

The standard approach in the financial planning industry is as follows. You gather the client’s data, develop a plan, print a 50-page report and walk the client through the report during the meeting.

This approach doesn’t work for most people any more.

Here’s what is wrong with this approach:

  • It doesn’t motivate clients to enter into a relationship with you. Instead, it forces them to do a lot of work up front without seeing the immediate reward. Often just looking at the financial planning questionnaire is enough to scare prospects away.
  • It focuses on the numbers. Sure the math matters, but financial planning is not an exact science. Your perfectly selected asset mix will change tomorrow, and your projections will be off. What matters more is the client’s understanding what it takes to make better financial decisions. They need to understand what you do for them and why it is important, so they can value your work and their relationship with you.
  • It neglects educating clients on the impact of their decisions. Clients don’t understand 50-page reports. Have you seen their eyes glaze over? They’re not trained to consume complex financial reports – that’s your job. They need something simple that contains just a right level of detail, it’s not overwhelming and makes sense to them. And, they need a proper explanation to go along with it.
  • It’s not interactive, so it’s not engaging. Printed reports are static. You can’t modify your client’s spending by $5,000 a year in the printed report or have them purchase a new vehicle every 5 years to show them the difference it makes. Low engagement reduces their ability to understand what drives their projections, which leads to issues. Customer satisfaction suffers.

The top advisors have figured out how to do retirement planning in a way that completely engages the client.

Here’s what they do:

  • Before asking clients to share their own financial information, they show a sample set of projections. They point out the tradeoffs between contributing to an RRSP vs. a TFSA vs. non-registered assets, discuss taking CPP early or deferring it, and show the OAS clawback and discuss how to avoid it. They point out their estate taxes in each year and inquire if the client has any insurance in place to cover a potential tax liability. Finally, they discuss the estate numbers at the end of the projections and point out the common estate planning issues. At this point, the clients can’t wait to see the projections with their own numbers. They actually want to come back, and your closure rate is 99%.
  • Once the baseline projections are complete, they walk clients through their numbers. They confirm income, assets and debt, making sure all the numbers are correct. This helps to reduce mistakes and clarify omissions.
  • Then they show the projections – but they don’t stop there. They modify the numbers, re-run projections and show the clients the difference in real time. This is the moment when client engagement goes through the roof.
  • Showing clients different options interactively focuses them more on their financial goals. It also turns the conversation away from the different funds (or stocks if you are a discretionary portfolio manager) selected in their portfolio, which is useful because we can’t control the market, and focuses the conversation on what they can control, like spending and saving.

Overall, this new approach does wonders for the client-advisor relationship. The client satisfaction immediately goes up, so it’s no wonder that client retention, and not to mention referrals, increase as well.

Still not convinced?

You may want to read Diane’s story.

In less than 10 months, Diane managed to increase her client retention by 100% and boost referrals by 10%, all while saving a ton of time. She used the exact approach I talk about here. Diane is a veteran of the industry. She has developed over 8,000 plans in her career and she knows what works well. Here’s a link to her story.