Kitces Research On How To Make Financial Planning More

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Michael E. KitcesMSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL

Head of Planning Strategy. Buckingham Wealth Partners

Publisher. The Kitces Report, www.kitces.com

Blogger. Nerd’s Eye View, www.kitces.com/blog

Twitterer. @MichaelKitces, www.twitter.com/MichaelKitces

Kitces Research onWhat MakesFinancial PlanningMore Efficient10.21.2021 | FPA Northeastern Ohio

Handouts/Additional Materials at: kitces.com/FPANEO21

@michaelkitcesHandouts/Materials: kitces.com/FPANEO21

About Our Research

• 2020 Kitces Research Study on “How Financial Advisors Really Do Financial Planning”

– Almost 800 advisors completed the full-length questionnaire– Average age: 48– 73% held CFP certification– 61% were RIA (39% broker-dealer or insurance)– 77% male– 93% white– More financial planning-inclined (they read Nerd’s Eye View!)

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It’s All About Time…

“Remember that time is money.

He that can earn ten shillings a day by his labour, and goes abroad, or sits idle one half of that day,

though he spends but sixpence during his diversion or idleness, it ought not to be reckoned the only expence;

he hath really spent or thrown away five shillings besides.”

-- Benjamin Franklin


A Week In The Life…

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4

3


The Average Advisor’s Week


Ho

urs

Wo

rke

d

$0-100k $100k-250k $250k-500k $500k-750k $750k-1M $1M38

39

40

41

42

48

47

46

45

44

43

Average time = 43.7 hours


Where Does The Time Go?


Clients & Prospects (70.6%)

Investment (9.4%)

Administrative (6.6%)

Management (6.2%)

Professional Development/Other (7.1%)

70.6%

9.4%

6.6%

6.2%

7.1%

5

6

4


Client & Prospect Time…


Meeting with Existing Clients

Meeting with Prospective Clients

Other Business Development

Meeting Prep for Existing Clients

Client Servicing Tasks

Financial Plan/Analysis Prep

19.90%

12.40%

11.90%

11.90% 7.80%

6.70%


Divvying Up Tasks In An Advisory Firm…


Front Office(Clients & Prospects)

Financial Advisors

Middle Office(Supporting the Front Office)

ParaplannerInvestment Research

Compliance

Back Office(Behind-The-Scenes-Administration)

Client Service AdministratorOperations/Human Resources

Trading

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8

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Where Advisors Spend Their Time…


Clients

Business Development

Middle-Office

Back-Office

Other

19.9%

30.4%14.5%

21.8%

13.3%


What Is An Advisor’s Time Worth?


$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

10th 25th 50th 75th 90th

Solo Solo w/ Support Silo Ensemble

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Creation OfThe Financial Plan


Hours To Create A Financial Plan…

Creating The Financial Plan

[0-5]

250

200

150

100

50

0(5-10] (40-45] (45-50] (50-55] (55-60] (60-65](35-40](30-35](25-30](20-25](15-20](10-15]

Median Plan Creation Time:10 Hours Across All Team Members

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The Four Types Of Financial Plans…


Calculator: Use a plan to calculate needs

and recommend solutions.

Collaborative: Use planning software

collaboratively/interactively live in client

meetings.

Comprehensive: Use plan software

output to bring together a holistic picture

of a client situation.

Customized: Create a custom-written

plan for an individual client’s

circumstances.

32%

49%

15%5%


Time To Produce A Financial Plan…


Calculator

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Collaborative Comprehensive Customized

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10

8

6

4

2

0

13

14

8


Plan Construction Time Follows Plan Payment?

Primarily AUM

20

Primarily Commission Primarily Retainer Primarily Hourly

18

16

14

12

10

8

6

4

2

0



The First (Full) YearPlanning Process

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The 7-Step CGADPIM ProcessNew Rules

C

G

A

D

P

I

M

Pre-Engagement:Agreement of Terms & Scope of Engagement

Process Step Practice Standards

Understand Client’s Personal andFinancial Circumstances

Identify and Select Goals

Analyze Current Course andPotential Recommendations

Develop Financial Planning Recommendations

Present the Financial PlanningRecommendations

Implement Financial Planning Recommendations (optional)

Monitor Progress and Update (optional)

1) Obtain Qualitative and Quantitative Information2) Analyze Information3) Address Incomplete Information

1) Identify Goals2) Select Goals

1) Analyze Current Course of Action2) Analyze Potential Recommendations

1) Develop Financial Planning Recommendations

1) Present Recommendations

1) Address Implementation Responsibilities2) Identify, Analyze, and Select Actions, Products, and Services3) Recommend Actions, Projects, and Services for Implementation4) Select and Implement Actions, Products, and Services

1) Address Monitoring and Updating Responsibilities2) Monitor Client’s Progress3) Obtain Current Qualitative and Quantitative Information4) Update Goals, Recommendations, or Implementation Decisions


How Many Meetings Does It Take…

First Full Year Of Planning

1-2 Meetings0%

RIA B/D

10%

20%

30%

40%

50%

60%

3-4 Meetings 5+ Meetings

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How Much Time Does It Take…


To

tal H

ou

rs S

pe

nt

On

1st

Ye

ar

Pro

cess

Establish0

1

2

3

4

5

6

Gather Analyze Develop Present Implement Monitor

Cu

mu

lative

To

tal H

ou

rs Sp

en

tO

n 1 stY

ea

r Pro

cess

0

5

10

15

20

25

35

30

Total Hours Spent On First Year Process

Cumulative Total Hours Spent On First Year Process


Third-Party Planning Software…


Third-Party0

Analyze Develop

2

4

6

8

10

12

Firm-Developed Excel Only

19

20

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Software = Better, Not Faster?


Establish0

1

2

3

4

5

6

Gather Analyze Develop Present Implement Monitor

Able to be made moreEfficient with technology

In-person activities not conduciveTo technology efficiencies


Planning Software Lets Advisors Go Deeper?

Financial Planning Software

0

1

2

3

4

5

6

7

eMoney MoneyGuidePro MoneyTree NaviPlan

Doesn’t Use Uses Agg

RightCaptial

Ave

rag

e H

ou

rs G

ath

eri

ng

Da

ta

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How CFP Certification Impacts Efficiency


Establish0

1

2

3

4

5

6

7

8

9

Gather Analyze Develop

CFP Non-CFP

Present Implement Monitor


The Full-Year Experience-Expertise Gap


1

2

3

4

5

6

7

Experienced CFP CFP Non-CFP Experienced Non-CFP

Establish Gather Analyze Develop Present Implement Monitor

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The Full-Year Experience-Expertise Gap


Experienced CFP

33

26CFP Non-CFP Experienced Non-CFP

27

28

29

30

31

32

ExperienceGap

ExpertiseGap

ExperienceGap

28.6

29.1

31.5

32.4

1.9% Improvementfor Experience

& Expertise

7.4% EfficiencyImprovement

-3% Loss in Efficiencyfor Experience

Without Expertise


Tools Used In The Financial Planning

Process

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Financial Planning Software Use


Third-Party0%

10%

20%

30%

40%

50%

60%

70%

80%

100%

Excel Word Firm-Developed

RIA B/D

Specialized

Insurance

90%


Third-Party Financial Planning Software


MoneyGuidePro0%

10%

20%

30%

40%

eMoney RightCapital Naviplan MoneyTree

5%

15%

25%

35%

27

28

15


Third-Party Financial Planning Software


6.8

7.0

7.2

7.4

7.6

8.2

Current Market Share

7.8

8.0

MoneyTree NaviPlan RightCapital MoneyGuidePro

0%

Use

r R

ati

ng

20% 25% 30% 35% 40%5% 10% 15%

eMoney

2018

2020

2018

20202018

2020 20202018

2020 2018


Time To Use Financial Planning Software


0

Analyze Develop

2

4

6

8

12

16

14

10

eMoney MoneyGuidePro NaviPlan RightCapital MoneyTree

29

30

16


Specialized Planning Software Tools


SocialSecurity

25%

20%

10%

5%

0%Tax

PlanningSpecializedRetirement

Planning

EstatePlanning

Mindmapping StudentLoans




SSAnalyzer0%

1%

2%

3%

4%

5%

6%

7%

8%

10%

Maximize MySocial Security

Social SecurityTiming

SS Pro Other

9%

31

32

17




HolistiPlan

7%

6%

4%

2%

0%BNA Income

TaxCFS Tax

ToolsTax Clarity Planner CS Lacerte

5%

3%

1%

Other


Best Practices OfTop Advisors

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Advisor Earnings By Business Leverage

Best Practices For Advisors

Solo

$300,000

$200,000

$100,000

$0

$250,000

$150,000

$50,000

EnsembleSolo w/SupportSilos

2018 2020


How Top-Earning Advisors Spend Time


0%

5%

10%

15%

20%

35%

25%

Clients BusinessDevelopment

Middle-Office Back-Office

Bottom 25% Top 25%

Other

30%

+10% x 44/week hours =+200 client meetings/year!

Delegating middle- andback-office tasks createsmore client-facing time!

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It’s All About Leveraging Your Time…


Clients & Prospects

Investment

Administrative

Management

Professional Development/Other

Meeting w/Existing Clients

Meeting w/Prospective Clients

Other Business Development

Meeting Prep for Existing Clients

Financial Plan/Analysis Prep

Client Servicing Tasks

ExperiencedSolo Advisor

72 Clients

ExperiencedSolo Advisorw/Support

120 Clients

Servicing 64%more clients!


It’s All About Leveraging Your Time…


Advisor: $200/hr

Advisor: $200/hr

Paraplanner: $50/hr

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CFP Certification Really Does Matter


$250,000

$100,000

$0CFP Non-CFP

$200,000

$150,000

$50,000

2018 2020


CFP Certification Really Does Matter


Experienced CFP

33

26CFP Non-CFP Experienced Non-CFP

27

28

29

30

31

32

ExperienceGap

ExpertiseGap

ExperienceGap

28.6

29.1

31.5

32.4

2% Improvementfor Experience

& Expertise

8% EfficiencyImprovement

-3% Loss in Efficiencyfor Experience

Without Expertise

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Key Takeaways


Key Takeaways

• Delegation really matters– 1st hire is typically client service manager

– 2nd hire is typically paraplanner

– Getting over the first-hire-hump is the hardest• Staff headcount ‘doubles’!

– But ‘optimal’ time management is a game of inches• Freeing 10% of your time = +200 client meetings/year!?

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Key Takeaways

• Virtual Outsourcing makes incremental delegation easier – Virtual Client Service/Admin Support

• www.ConsiderItDoneCompany.com• www.VirtualOutsourceSolutions.com• www.OutsourceThisOnline.com• www.NiftyAdvisorSupport.com• TotalOffice.cc

– Virtual Paraplanner Support• www.DelegatedPlanning.com• www.OutsourcedPlanning.com• www.SimplyParaplanner.com


Key Takeaways

• Financial Planning Software Doesn’t Save Time!– It helps advisors plan better and deeper

• The time savings is in the rest of the (meetings) process!

• What does save time?– Collaborative planning

• Less report preparation (and more client engagement!)– Experience + Expertise

• CFP certification (and post-CFP designations?)– Systematized planning

• Consistent clientele receiving (firm-created) deliverables

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Key Takeaways

• In the end, efficiency is all about time management– Do you really need to have so many meetings?

– Do you really need to produce so many deliverables?

– Do you really need to be doing that much of the back-office and middle-office work yourself?

– Can you focus who you work with to make your expertise more (easily) repeatable?

@michaelkitces

Questions?Handouts & additional materials:

www.kitces.com/FPANEO21

Contact: [email protected]

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Documents

Kitces Research On How To Make Financial Planning More