A Roadmap for a Value-Driven Financial Plan [Episode 13]

The Perfect RIA

Key Links

• Episode 5: Always Take the High Road

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Financial Planning Software is scrutinized in this episode. But right away, Matt and Micah are sure to remind listeners that they aren’t completely condemning the technology, just encouraging less of a reliance on the tool.

It is certainly true that a lot of planners are required to use some sort of financial software for compliance requirements or for the more detailed reports that clients may ask for. Yet, Matt and Micah still usually don’t put a lot of stock in the software’s potential to bring value for clients; they both feel that value can be better drawn from the wellspring of positive client interactions over the by-the-numbers approach only received well by those with an affinity to complicated formulae and diagrams (i.e. engineers or financially-minded clients). On average though, the detailed and bulky reports that FP software spits out is too involved for the ordinary client. Eyes will grow glassy and yawns will be stifled.

Instead, simplification is needed. Matt states that forcing mechanisms like one-page executive summaries and up-front fees to determine the value you are bringing to the table is much more important than beating your client over the head with a dense collection of Monte Carlo Simulations. Instead, Matthew states that he only has four key things he goes over with clients: retirement income, risk management, income taxes, and their investment portfolio. Long term goals are always discussed as well, but that is a given regarding the nature of the business.

This leads to the biggest take-home message of the episode: tailor your financial plan to the client. If they want a more involved financial plan then give it to them. Determine how you can bring the most value to your client, first and foremost. Most likely they will want the succinct, one-page summary over any other alternative.

And, like all of the episodes, Matt and Micah preach the merits of taking advice and spurring it into action. They provide three key action points to take: go through your financial plan and seek to minimize the noise e.g. the extraneous noise, learn to effectively communicate your financial planning process in 45 seconds or less, and shorten your financial plan into an executive summary.