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Greater trust pays off for life planners

Kinder Institute for Life Planning founder George Kinder says a greater level of trust between clients and life planners makes their businesses more profitable than transaction-based firms.

Kinder, who chaired the inaugural global life planning conference in London last month, argues clients are more likely to want their life planners to manage all, rather than some, of their investments.

He says: “In my opinion, life planning is the most profitable way by far to do financial planning. What happens is that the consumer feels so connected with the adviser they refer more business to them.

“Clients bring across much more of their assets in the life planning relationship, often 100 per cent rather than 30 or 40 per cent, because they have that greater trust.”

Kinder believes as a result of the deeper life planning relationship, advisers reach decisions quicker and are more likely to retain clients during a recession.

He also cites research from the US suggesting fee-only businesses tend to be valued up to four times higher than firms that base their income on transactions.

The research, carried out by Mark Tibergien for the US Journal of Financial Planning, compared firms that were transaction-based, firms that were taking income from commission and fees and firms that were charging on a fee-only basis.

Tibergien found that the fee-only firms were selling for three or four times as much as the transaction-based firms, and suggested the value of the firm directly correlates with the degree of trust that clients have in the adviser.

Kinder says: “Life planners have these rich conversations about the client’s life and what they really want to achieve. We really shift the focus to what the client wants and then deliver on that and that is what wins the trust.”

Yellowtail Financial Planning managing director Dennis Hall says: “The issue that advisers have when they are coming into life planning is to think of it as a separate service that you can charge for. Then the difficulty comes in justifying the additional cost.

“In reality, life planning becomes the way you work, and that is where people get the most success, rather than making it a bolt-on service.”



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