Life planning has been a topic of continuing interest for financial planners, but many have wondered whether their clients would respond to it and whether it was profitable. Carol Anderson and Deanna L. Sharpe, CFP® co-authored the recently released white paper "Research: Communication Issues in Life Planning: Defining Key Factors in Developing Successful Planner-Client Relationships," which answers this question by exploring the difference life planning techniques make in client retention, cooperation with financial planning recommendations, openness in disclosing information, and providing referrals. The white paper, published by FPA Press, is now available.
Anderson is the founder and president of Money Quotient. Sharpe is an associate professor in the personal financial planning department at the University of Missouri-Columbia. Their white paper details the findings of a research project ("Survey of Specific Elements of Communications that Affect Trust and Commitment in the Financial Planning Process") conducted in 2006 by members of the Life Planning Consortium.
FPA recently spoke with the co-authors to learn more about their ground-breaking research:
FPA: What is the goal of your research?
Anderson: Our goal in designing this study was to identify and statistically validate specific communication topics, tasks, and skills that contribute to building client trust and commitment in the context of a professional financial planning relationship. In particular, we explored elements of communication that are associated with a life planning approach to service delivery. We also examined the influence of selected communication variables on important indicators of successful planner-client relationships including client retention, satisfaction, cooperation, openness, and referrals.
FPA: What is your inspiration for conducting this research? Why conduct this research, and why now?
Sharpe: This research started as conversations with financial planning professionals about the need to empirically validate our best practices. Why is this important and why now? Through experience and conversations with other professionals, financial planners have discovered what works in developing relationships with clients. But, for the profession to grow, especially as an academic program of study at the university level, it is important to use scientific methods to understand why one approach works better than another. This type of discovery can move the profession beyond simple rules of thumb to evidence-based best practice. In particular, in this study, we wanted to identify the specific communication topics, tasks, and skills that encouraged client trust and commitment in a professional financial planning relationship.
FPA: Tell us about the Life Planning Consortium and how other Consortium members contributed to your research.
Anderson: In addition to Deanna and myself, the Life Planning Consortium included Andrea White, MCC, president of Financial Conversations®; Susan Galvan, president of Galvanic Communications; and Martin Siesta, CFP®, CLU, senior financial planner, Compass Wealth Management, LLC. This ad hoc committee was the brain child of Andrea. She had heard that the CFP Board provided small grants for research and would likely be interested in a study that looked at the efficacy of "life planning" in developing planner-client relationships. She asked the rest of us if we would be interested in collaborating on a research proposal and, if approved, conduct the study. We all readily agreed.
Each member of the consortium was instrumental in developing the conceptual framework for the study and designing the survey items. Andrea also served as the project manager and used her expertise in Web-based survey methodology to convert the survey instruments to an electronic format and to create a data collection process. Deanna and I conducted the analyses, interpreted the results, and reported the findings.
FPA: You write in the introduction of the white paper that within the financial planning community, there is a growing interest in a holistic, client-centered, values-based approach to developing successful client relationships. Why do you think that is? What's driving that interest?
Anderson: I believe this trend is actually the evolution of financial services and advice from a transaction orientation to a more consultative approach. In addition, financial professionals have become increasingly aware of the central role of effective interpersonal communications in developing successful, long-term relationships with their clients. Without argument, it is the financial planner's quantitative skills and knowledge that form the foundation of a successful practice. However, as this core service is commoditized, the industry matures, and consumer expectations change, it will be the qualitative dimensions of a planner-client relationship that define competitive advantage.
Sharpe: I agree with Carol. I would also add that today's clients tend to demand more from the financial planning process than financial information and a packaged plan. The Internet has made it possible for clients to obtain a tremendous amount of financial information quickly and easily—one aspect of the commoditization of core service. Clients turn to financial planners to find what technology cannot give—an empathetic understanding of their values, needs, goals, and desires and the ability to integrate financial products and plans in ways that satisfy those values needs, goals, and desires.
FPA: In your opinion, what is the most important finding of your research?
Anderson: In one portion of the study, we examined the effectiveness of communication tasks outlined in selected practice standards as defined by the Certified Financial Planner Board of Standards Inc. (CFP Board). I was particularly interested in the analyses of variables based on Practice Standard 200-1, which addresses the need for qualitative data gathering such as "exploring the client's values, attitudes, expectations and time horizons" and "facilitating the goal-setting process in order to clarify, with the client, goals and objectives." These variables overwhelmingly demonstrated statistically significant correlations—from the perspectives of both planners and clients—to higher levels of client trust and client commitment. In addition, they demonstrated statistically significant correlations to higher levels of all "business case variables" including client retention, satisfaction, cooperation, openness, and referrals.
Sharpe: As Carol notes, I believe our most important finding was establishing that there is scientific evidence for the efficacy of the Certified Financial Planner Board of Standards practice standards related to communication. In recent years, the Certified Financial Planner Board of Standards has recognized the importance of developing communication skills, explicitly listing communication as an area to emphasize in continuing education. Findings of our work affirm that this is an important step for the industry to take.
FPA: How will your research affect the average practitioner? Are there practical applications from this research, or does it just confirm what we believe to be true from experience?
Anderson: Yes, there are definitely practical applications here because this study expands our understanding of what specific aspects of communication contribute to the development of great planner-client relationships. For example, our study was the first to categorize components of communication as topics, tasks, and skills. In addition, we focused on testing and verifying the benefits of a holistic, client-centered, values-based approach that most call "life planning." By reviewing our white paper, a planner can easily identify areas where his or her communication practices are likely meeting client expectations and where they are not. Those who are interested in nurturing meaningful relationships with their clients will definitely gain insight and knowledge from the results of this study.
Sharpe: For the average practioner (though I doubt any financial planner would claim to be average), our work affirms the importance of communication in the planning process. We broke down the components of communication and separately examined the influence of communication topics, tasks, and skills on client trust and commitment. Thus, in this report, we were able to give some specific recommendations about the content of conversations, the things that a planner needs to do and the abilities that a planner needs to develop in order to improve client relationships.
FPA: Did any of your research findings surprise you? Why?
Anderson: Yes, there were some surprises. Because we surveyed both planners and clients, we could compare the perspectives of both groups. In most cases, there was agreement on what elements of communication contributed to successful planner-client relationships, but there were exceptions too. For example, client responses indicated statistically significant relationships between a planner gathering data about a client's 1) personality types/traits, and 2) family history and values. However, planner responses indicated no relationship between these variables. These findings indicate that planners don't recognize the value to clients of exploration in these areas, and likely view this type of inquiry as an attempt to get to know and understand them in a deeper and more personal way.
Sharpe: Like Carol, I found some of the differences between planner and client perceptions fascinating. I found it interesting to discover that planners tended to over estimate the value of some communication skills such as verbal and nonverbal pacing, but underestimated the value of being comfortable with and skillful in dealing with client's strong emotions. Clearly, there's opportunity to build some different kinds of bridges across the planning table—using some communication tools that may be relatively new to some planners.
FPA: What do you think is the future of the life planning movement?
Anderson: My hope is that "life planning" will cease to be viewed as a separate process from financial planning. Certainly, the findings of our study confirm that planners and clients recognize the benefits of a more holistic, values-based approach. In addition, the 2004 CFP® Practitioner Job Analysis survey identified many tasks performed by a CFP certificant that require interpersonal and communication skills in fulfillment of the six-step financial planning process. Whether financial planners choose to use the term "life planning" or not is irrelevant, but I believe growing numbers will recognize the value of addressing the qualitative aspects of their clients' financial lives.
Sharpe: I've never thought of life planning as a "movement"—rather, I have always viewed it as a common sense approach to providing financial planning services. Life planning recognizes that the main purpose of a financial plan is not necessarily to maximize material wealth, but rather to maximize ability to live a meaningful and productive life.
Many aspects of science use a "systems approach." This approach explicitly recognizes that many parts must interact effectively for the system to be healthy, whole, and productive. This effective interaction depends on the relationships among the parts. We all know that financial planning is like that as well. For example, a client's value system will affect the courses of action deemed acceptable. When making an education plan for a client's children, we must also consider how that plan affects their ability to save for retirement or take that longed-for dream vacation. A change in one part of a financial plan affects the whole. Like Carol, I too hope that "life planning" ceases to be viewed as something separate from the financial planning process and is recognized as an integral part of meeting client needs.
FPA. Where will you go from here? Is there more research you're planning in this area, or are there natural areas of your report that suggest additional research?
Sharpe: A practical next step for this research would be development of training programs based on our results. Regarding future research, it would be interesting to conduct similar research with planners having different characteristics than our sample. For example, would we get similar results for financial planners and clients in countries other than the United States? Our sample was predominately male and most planner participants had been in practice for some time. Less than two percent of our sample had completed their CFP® education requirement through a college major or minor in Personal Financial Planning. Would our results differ or have even stronger confirmation if we were able to survey more female financial planners? How will members of the "Next Generation" of financial planners who have a degree in Personal Financial Planning integrate communication skills into their financial planning practice? These are some of the next investigations that we could make.
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