To serve middle class, expand your offerings

In his Aug. 9 letter to the editor, “Rally the troops to help middle-income people,” Kevin Condon, executive vice president of adviser services at Myfinancialadvice Inc., did a wonderful job of illuminating the important issue of providing financial planning advice to middle-income people. I submit that financial planners already have all the tools and techniques they need to serve middle-class America successfully. The challenge lies in the gap between what consumers want in a financial plan and what they believe is actually offered by financial planners. In a March 2008 consumer survey, First Command Financial Services Inc. asked more than 1,100 consumers with annual household income of between $50,000 and $200,000 to identify the financial products and services they believed should be components of a financial plan, as well as those they believed were actually offered by financial planners. While traditional investment vehicles were highly ranked answers to both questions, we found a sizable expectations gap for insurance and banking offerings. While planners associated with financial services institutions can help clients purchase or set up many services, the survey respondents didn't associate planners with the wider array of products available because of their affiliations. For example, 57% of the respondents believed a savings account should be a component of a financial plan, but just 17% believed that a planner could help them open one. We also identified significant gaps for checking accounts (52% versus 15%), homeowners' insurance (38% versus 10%) and auto insurance (40% versus 7%). For middle-income consumers, financial planning is about a lot more than wealth accumulation. Consumers need a financial coach in all aspects of financial security. They need a foundation of risk management, emergency funds, debt management, investing and retirement income distribution, as well as help with estate planning. Middle-income Americans prefer and expect a one-stop resource for all of their financial needs. These findings suggest that there are significant opportunities for advisers who want to build a practice that successfully serves middle-income consumers. Financial advisers who already offer the breadth of services consumers want should evaluate their marketing messages to ensure that consumer perceptions match reality. Alternatively, advisers who do not offer this full breadth of services need to consider expanding their working definitions of “financial plan” and “financial planning” to include the full range of investment, insurance and banking vehicles consumers perceive to be important to achieving their goals.

IDEAL TIME

They can offer more services and products to their existing high-income clients (a move that may well result in an increase in average revenue per client) and expand into the larger market of the middle-class consumer. This difficult economic period is an ideal time to reach out to middle-income America.  Rather than waiting for someone to “rally the troops,” advisers who want to serve the middle-income market should begin now by offering the type of holistic financial planning and value-based solutions needed by these consumers. In many cases, this may require advisers to establish new and creative means by which to deliver the associated products and services. They may also need to secure expanded credentials, such as the certified financial planner and chartered financial consultant designations, and create new outside business relationships. Advisers need to provide a full range of financial solutions that will increase the strength and stability of their respective businesses while remaining true to a commitment to offer clients face-to-face holistic financial planning in the local markets where they live and work. Terri Kallsen, a certified financial planner, is executive vice president of strategic development at First Command Financial Services Inc.