Journal of Financial Planning: February 2017
Margaret (Peggy) Doviak, Ph.D., CFP®, is founder of D.M. Wealth Management Inc., a financial planning and portfolio management firm in Norman, Oklahoma. She is an associate graduate professor for the College for Financial Planning, a co-host of the FPA Theory in Practice Knowledge Circle, and author of 52 Things a Broker May Not Tell You.
One of the ways financial planning is moving from an industry to a profession is through research conducted by university academics in conjunction with financial planning practitioners. College programs now exist across the country, and best practices are moving from intuition to evidence-based financial planning. This is important news, and we should be sharing it with our clients.
Showing our clients that we base our practices in research and theory is important for many reasons. First, as clients understand that our decisions for them come out of scholarship, they will have an easier time distinguishing the field of financial planning from the larger financial services industry. Although effective marketing from CFP Board suggests that clients should investigate their advisers lest they be disc jockeys, my experience finds that most consumers are still very confused about differences between financial services providers. However, explanations and reports that include third-party, academic research that is grounded in theory sets the financial planning field apart from a typical sales package.
Second, research nicely blunts the impact of the risk of robo-advisers. Robo-advising may well become a tool of financial planning in the future, but today it appears to be mostly limited to some financial calculators and portfolio management. Although some call the ability to use a financial calculator “financial planning,” it doesn’t begin to cover the breadth and depth of what we do. The research-driven, theory-based financial planner who engages with a client on a potentially vast range of personal financial issues has little fear of being replaced by software.
Finally, the commitment to share financial planning research with our clients insures our commitment to staying current in the research ourselves. As financial planning practitioners, our time is stretched thin. Making the commitment to read the Journal and other publications with peer-reviewed research can seem to be a lower priority than preparing for client meetings and running the practice. However, when we make a public com-
mitment to incorporating theory and research into what we do, it automatically becomes a higher priority in our lives.
Strategies to Spur Interest
Of course, making the commitment to sharing theory and research with our clients only addresses half of the potential problem. Sometimes equally problematic is fostering interest in our clients. We do not want to write reports that are dense and difficult to read. We can’t share detailed research that isn’t meaningful to them. And we don’t want to come across as arrogant or that we are condescending to our clients. However, we can implement several strategies that might encourage our clients’ interest in the research that drives our practices.
Most importantly, theory and research in a planning practice needs to be holistic and inclusive.
A great place to start is in your marketing department. Although it seems counterintuitive, research can be an excellent marketing tool for your firm. If your practice maintains a social media presence, posts about theories you are reading and implementing provide a different, refreshing change from the more traditional marketing campaigns. Don’t forget to take pictures of yourself at conferences and post those, as well. The biggest advantage to social media posts is their length. Because they are short, they won’t overwhelm your clients with an excessive level of detail.
If your firm does not maintain a social media presence, take the time to include theory and research posts in your personal accounts. Social media has a wide reach, and the more people are exposed to theory-based financial planning, the more they will come to expect it from their financial professionals.
If your firm writes a newsletter, you could include a column that provides a longer discussion of your current areas of interest. Even if it is a little dense, your clients will be impressed that you are making the effort to increase your knowledge.
Additionally, your firm’s website and brochure should be revised to show clients that the planning process you follow, the assumptions that you make, and the protocols you implement are grounded in theory and research. Provide a brief description of your application and include links where clients could learn more. Your website should also include not just your designations but the scholarship required to obtain and maintain them. The CFP® designation is rigorous, and explaining the effort you took to achieve it will help your clients see more clearly what you can offer.
Finally, include theory and research in the planning documents you give to clients in meetings. Even if you use financial planning software, this doesn’t prevent you from being able to provide documents that offer a theoretical framework or research suggesting the validity of assumptions.
Independent documents could be created (be sure to clear them by your compliance department if needed) and shared as appropriate with clients. Keep these research documents brief and more of an overview than an in-depth analysis. You want your clients to read them; you don’t want to overwhelm them. Write at the level of a summary or abstract. Also, remember to cite the sources that underlie these documents. Just because you share the sources with your clients does not suggest they will look at them. In fact, they probably will not, but you should offer it anyway.
Set Your Practice Apart
Approaching your clients from perspectives that are grounded in theory and research can be a differentiator. Consumers are becoming savvier about all of the products they purchase, and although the financial services world can be confusing and opaque, your clients are looking for you to provide the explanation, clarity, and thoughtful analysis. Sharing research sets you apart and continues to move financial planning from an industry to a profession.
Learn More
Join the next Theory in Practice Knowledge Circle discussion on FPA Connect (www.Connect.OneFPA.org). Phone meetings are held every third Monday, 2 to 3 p.m., Eastern. This groundbreaking forum advances the profession by building bridges between the academic world and financial planning practitioners.