Given the lack of any universally accepted definition as to what financial planning means and how it should be applied in practice, it is hardly surprising much of our profession questions how best to deliver a planning-led service with the rigour and discipline that scale requires.
There is certainly a strong consensus that planning involves delivering a client-led service based on goals and needs, as opposed to product selection or transactional advice. This requires a clear framework to support the initial client discovery session, which sets the tone for both depth and breadth of any planning a client many require. Ultimately, it is a firm’s culture that puts the client at the heart of the planning process, while supplementary tools act as an enabler to build consistency.
While technology is generally positioned as central to the delivery of a repeatable and robust client experience, it often fails to provide the full picture. In many cases, online planning tools offer an effective context for clients but, arguably, their greatest contribution is to promote better discussions between adviser and client. This is a trend I expect to continue as firms focus on guiding clients rather than allowing technology to dominate the process – a scenario that may have fee implications over time.
It is generally thought desirable that all systems and planning tools should be perfectly integrated and housed in a single desktop. Unfortunately, this is not always possible, as the “best fit” system for delivering a firm’s proposition may not
always facilitate a smooth back office, given the intended process and consequent client outcomes should inform the choice of partner technology, not the other way round.
Over the past few years, much stock has been placed in ensuring the building blocks that underpin an effective planning practice are implemented. In general terms, this has included a risk profiling system, cashflow modelling software and a platform strategy that links to a given number of investment strategies. Further, firms have realised the power of having accurate and comprehensive client data. Indeed, state of the art systems offer little operational leverage without quality inputs that, in turn, deliver reliable client reporting and firm level management information – two critical components of scale.
The use of cashflow modelling has been widely adopted in recent years. This is another example where the impact is determined by how a system is applied and the various scenarios then modelled, rather than its use in isolation. In fact, this has led to a transition from a broad discussion on risk, through to a quantification of achievability of objectives illustrated by multiple scenarios. Skilled practitioners often refer to how they make the cash flow modelling process “come to life”: this is an excellent example of how client engagement techniques can maximise what otherwise could be perceived as static output.
The availability of interactive client portals as a core component of most back office systems has the potential to transform the nature of client engagement – especially when supplemented with data aggregation tools. This is a very exciting area where the interplay between face-to-face discussions (insight) and online reporting (information) will be something progressive firms seek to develop, if they have not already taken steps to do so. Equally, rich functions are not enough – the end user needs to be engaged enough to adopt and repeatedly use them. This is an area there remains some room for improvement, although there are certainly more examples of innovative thinking and clear communication coming to the fore.
An important principle in fusing a compelling proposition with supporting technology is to recognise the digital space is always evolving. Firms need to align the way their technology interacts with communication preferences, coupled with a continual refresh of content.
Looking to the future, data management will be critical for those seeking to build their planning capabilities. I expect the influence of back office systems to become greater as effective integration becomes commonplace, with a view to pushing data onto planning applications and reporting engines. This may have some interesting implications for the technology supply chain and may challenge traditional pricing models.
On the basis that last year’s innovation is this year’s expectation, new ways to engage, educate and serve clients will evolve at an increasingly rapid rate.
John Porteous is head of client proposition at Towry