Goals-based planning takes flight

The movement toward holistic financial plans touches all advice channels

Apr 6, 2014 @ 12:01 am

By Darla Mercado

A confluence of changing client demographics and challenging investment environments has forced many advisers to shift their focus from being stock jockeys to holistic planners — and this evolution is bleeding into all of the advice channels.

The movement toward goals-based planning — devising a wealth management strategy that's focused on helping clients reach specific goals, such as retirement — has picked up steam to the point that wirehouses are embracing the model.

For instance, last fall, Bank of America Merrill Lynch introduced its Merrill Lynch One technology platform, which aims to track performance related to client goals. It's part of a longer-term plan that will embrace the softer side of financial advice: investment personality assessments based on behavioral finance and the use of simpler language.

Though the seemingly universal movement toward holistic planning is new, practitioners mostly on the fee-only side assert that the concept dates back decades.

“I would contend that [holistic planning] is inherent to the concept of financial planning,” said Richard B. Wagner, founder and principal of WorthLiving. He pointed to notable milestones over the years, including his article “To Think ... Like a CFP” published in the January 1990 issue of the Journal of Financial Planning, and the 1994 establishment of the Nazrudin Project, a financial planning think tank he founded with George Kinder.

“Wirehouses have been losing business to the [certified financial planner] and fee-only communities for years,” said Mr. Kinder, founder of the Kinder Institute of Life Planning. “The early adopters [of holistic planning] have been entrepreneurs in the financial planning community.


“To compete with this movement toward fiduciary service, wirehouses have to find every way they can to improve their value proposition,” he added. “Now they're having meaningful conversations with their clients.”

Beyond wirehouses, the increased focus on goals-based planning is affecting advisers of all stripes, regardless of their compensation model.

“So far, what we're talking about is changing our mindset from providing a product or solution to thinking of human beings, and not just people made of balance sheets,” said Sheryl Garrett, founder of the Garrett Planning Network Inc., a group of fee-only planners. “Clients' human capital, their fears, their passions. That doesn't get reported on a balance sheet.”

Many advisers and industry observers credit the stock market downturns in the early 2000s and 2008 with bringing greater focus to clients' goals. Even with the market recovering significantly since the Great Recession, advisers are still grappling with the issue of low interest rates.

As returns slid, clients found themselves questioning the value of their relationship with their adviser. Those advisers who don't want to lose clients have rethought the value they bring to the table.

“Historically, these advisers were selling returns because the market did so well,” said Kevin Fox, vice president of financial planning at LPL Financial. “That's how they justified themselves: "I can give you a better return than that other guy.'”

Enter firms' revamped approach: changing the conversation of financial planning through software and a new focus. Don't talk about how your stock-picking prowess led you to beat your benchmarks. Rather, talk about how that performance fits in line with the bigger goals ahead.

“We found from a lot of advisers who adopted the planning software that the conversation is now, "Let's look at your plan and your retirement analysis, and let's see how it has affected the overall timing of your retirement,'” Mr. Fox said.

“You have to add more value to address the challenges clients are facing,” said Patrick O'Connor, senior vice president for wealth, retirement and portfolio solutions at Raymond James Financial Inc.

In 2012, the firm launched its Goal Planning and Monitoring software, powered by MoneyGuidePro. The program not only aimed to cut down the paper-heavy process of compiling spreadsheets and questionnaires from clients, it also sought to place investors' data within the context of planning decisions.


Integrating holistic planning has also become a way for advisers to make themselves more competitive, particularly as retiring clients seek expertise on income distribution strategies, Social Security and health care in retirement — not just big returns.

“Going forward, one trend we'll see is that advisers need to continue to improve their competency in things that their key clients will spend on,” said Mr. O'Connor. “This isn't just saving and investing. This is how to help with health care decisions vis-ŗ-vis financial planning, as well as housing decisions.”

Put into practice, advisers who are making holistic planning part of their everyday work are finding they've had to ramp up their expertise in a range of areas: Effective planning means fitting together product and investment know-how to help clients achieve goals.

For instance, Peg Moore, managing director for investments at Wells Fargo Advisors, obtained her certified private wealth advisor certification, plus Wells Fargo's accredited domestic partnership advisor designation. Over the course of her 20 years in the industry, she's also had to broaden her expertise and professional network to help clients understand the best pools of money to tap for income and the optimal estate- planning tools.

The change in focus has made Ms. Moore a better-rounded adviser.

“My job as an adviser is to understand what that client's life is about: What are they trying to do and what has meaning for them,” Ms. Moore noted. “The role has evolved so that not only do I understand what the portfolio has to do, but I understand what I have to do to keep the client on track when there are things going on that they can't control.”


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