Putting Your Clients First: Personalized Financial Planning Advice
More than ever, people are seeking personalized financial advice to help their overall financial situation. Adults in varying stages of life want bespoke contextual advice relevant to their financial circumstances. Whether they are looking for investment advice, tax planning assistance, or credit card debt management, advisors should provide tailored financial planning services.
Tailored financial advice considers each client’s unique circumstances and financial life. Specializing in personalized financial planning allows advisors to help clients make better decisions from investment management, insurance, tax, and legal perspectives.
Asset-Map serves as a valuable tool for advisors who aim to provide highly personalized financial advice. With Asset-Map’s innovative visualization features, clients can get a sense of the bigger picture. Nothing is as personal as a visualization of the members of a household surrounded by their personal incomes, assets, liabilities, goals, and policies collected over time. The Asset-Map Report is part family tree, balance sheet, income statement, and policy summary.
In this article, we’ll discuss why personalized financial planning is sought after, how to understand your clients’ values, and how to create personalized financial plans using Asset-Map.
The Importance of Personalized Financial Advice
So, why does providing personalized financial advice matter? What are the benefits?
Higher Client Satisfaction
Personalized advice specifically tailored to each client yields higher client satisfaction and loyalty. Taking the time to build good relationships with your clients is key to your success as a financial advisor. Whether you specialize in in-person investment advising or online retirement planning, providers should take the time to create short-term and long-term personalized plans.
For example, J.D. Power’s 2023 study found that advisors who say they have enough time to spend with clients scored, on average, 27 points higher in their Net Promoter Scores® (NPS) surveys than advisors who say they don’t have enough time to spend with clients.
Better Financial Outcomes
Tailored financial advice also helps clients reach their financial goals faster. Suppose clients are receiving generalized financial planning advice that doesn’t take their unique situation into account. In that case, they may still achieve their goals for their financial future, but not nearly as quickly. Financial advisors want their clients to succeed and should utilize personalized insights to build an actionable financial plan and explain how it works.
Risk Mitigation
Additionally, personalized advice assists clients in mitigating risk and avoiding costly mistakes that can prevent them from reaching their goals. Tailored advice helps clients proactively assess and prioritize risks effectively to make progress toward their financial goals.
Understanding Your Client's Goals and Values
An essential part of providing financial planning advice tailored to each client is to fully understand their goals and values. This can be done by asking the right questions, listening to their answers, and identifying priorities in an initial consultation.
Effective Questioning
Personal finance advisors must know how to ask effective open-ended questions to gather insights from clients to better understand their goals. These open-ended questions should touch on clients’ values and which people are relevant to their finances and investment decisions. This can be their dependents (children), co-dependents (parents), and obligations (business partners).
Ask questions about clients’ financial histories, struggle areas, and what they would like to achieve in one year, five years, ten years, etc.
Active Listening
You’ve probably heard the term active listening before and understand that it is important to have conversations with others, especially clients. Empathy and active listening are crucial for building strong client relationships. Clients are more likely to be honest with you if you show compassion and understanding even when they fall short.
Often people’s real motivations lie in what they have already done or accrued over their lifetime. The Asset-Map Report makes it easy for financial advisors to pinpoint what clients value or quickly assess what could be missing. Clients’ financial decisions reflect their values, whether they want to protect, grow, horde, or spend money on luxuries.
Identifying Priorities
Lastly, financial advisors are tasked with identifying clients’ top priorities and aligning their financial goals accordingly. One method of determining priorities is to ask questions about tradeoffs, such as “education vs. retirement” or “security vs. second home.” When presented with the option of preferring X or Y, people are often able to more easily identify their priorities.
Investment professionals and financial planners can identify specific investment types clients are interested in prioritizing. Additionally, by taking your knowledge of their finances, you can guide and recommend goals and priorities for your clients.
Conducting a Comprehensive Financial Assessment
Once you fully grasp your clients’ goals and values, you will conduct a financial assessment to help you develop a tailored plan. Conducting a comprehensive financial assessment can be simplified into the following steps:
Data Collection
Gathering detailed and complete financial information from your clients is often a barrier to starting financial planning. Collecting all the data you need to formulate a personalized plan can be challenging, from what’s in their savings account to whether they have any life insurance and use mutual funds. This is where Asset-Map comes in.
The Asset-Map Discovery tool takes less than 15 to start the data collection process and build an Asset-Map Report on any household. This streamlines the process for both clients and advisors and serves as a baseline for planning efforts.
Data Analysis
Now, it’s time to analyze the financial data gathered from clients to identify opportunities and areas for improvement. This typically occurs in two stages. First, examine the high-level financial information, such as who, what, and where. Asset-Map can help visualize this data. Second, explore the progress towards the clients’ financial goals by identifying progress on funding goals, pinpointing both gaps and opportunities, and live-tracking progress towards the aforementioned goals.
Risk Assessment
Clients will have different risk tolerance levels depending on age, current standing, and financial goals. Assessing potential risks like market volatility using time horizon tools is a good place to start. However, often financial advisors miss calamity planning for risks of premature death or disability. Also, long-term care exposure is a significant risk to consider. In fact, in the United States, 48% of individuals who live past 65 receive paid care at some point in their remaining years.
Developing a Personalized Financial Plan
After the assessment stage, certified financial planners (CFPs) and financial advisors will develop tailored financial plans for their clients. To effectively create a personalized plan, financial advisors should provide:
Tailored Recommendations
Develop personalized financial recommendations based on your clients’ household members, goals, values, and risk tolerance. These recommendations should maximize your clients’ potential to reach their goals. They’ll vary based on each client's needs, from obtaining certain insurance coverage to refinancing a mortgage or adjusting the asset allocation of their investments.
Regular Planning Reviews
Don’t forget to regularly review and update your clients’ financial plans to ensure they are still aligned with their goals and expectations. Life happens, and sometimes, clients will need to change course to account for unexpected events. The interval at which you’ll conduct reviews will depend on the client, their specific goals, and your recommendations.
Communication and Education
Clear communication and education are essential to helping clients understand their financial plans and how to follow them. The 2024 P-Fin Index, which measures personal finance knowledge, reports that U.S. citizens’ financial literacy has hovered around 50% for the last eight years. In 2024, it actually dropped two points to 48%.
This shows that the everyday financial advisory client may know less than you assume. Be sure to help clients educate themselves by explaining complex topics, answering their questions, and providing resources on retirement planning, investment strategies, estate planning, etc.
Addressing Common Challenges in Providing Tailored Advice
Common challenges in providing tailored advice to clients include:
Overcoming Client Resistance. Some clients will inevitably be resistant to change or slow to trust your recommendations. To overcome client resistance, show empathy and understanding that changing financial habits is difficult. Offer resources to help clients further educate themselves on your suggestions or advice.
Dealing with Emotional Biases: Another common challenge is that clients struggle with emotional biases that may influence their financial decision-making. Addressing these biases can be as simple as educating clients on the types of biases, such as ego, emotion, conservatism, and attention. Additionally, remind clients to take a long-term perspective to counteract impulsiveness.
Managing Complexity: Lastly, clients may feel overwhelmed with the complexity of managing personal or business-related finances. As their advisor, it’s your job to provide advice in a clear and concise way, ensuring they properly understand your reasoning. Manage complexity by encouraging clients to ask questions to help them better understand your tailored plan.
Provide Exceptional Advice with Asset-Map
Tailored financial advice yields better results for clients, fosters long-term loyalty and mitigates risk. Wealth management and other financial advisory professionals should conduct a financial assessment before devising and presenting a personalized financial plan for clients.
Asset-Map is an innovative tool used by thousands of financial advisors to help engage clients in financial planning conversations. With the Asset-Map Report and other planning-related features, you can empower your clients to make better decisions. Our advanced visualization ensures that clients get on the same page as you to promote increased collaboration and better results. Explore the features of our software and schedule a demo today!