But planning is just like banking, isn’t it? I cannot tell you how many times I have heard this. the first time was in the early 1970s as the profession of personal financial planning was just emerging. A landmark study by the Stanford Research Institute had indicated that prospective planning customers had a lot of confidence in the security and probity of banks. This encouraged many banks to attempt to enter the field. Most did it initially through their trust departments, while others through the retail platform.

It was a failure in most cases. However, sometimes it was successful. one Midwestern bank realized that the loan officers who dealt with small to medium sized business owners were really close to their customers. they had seen a few financial plans that were brought in by customers when applying for loan increases. It was obvious that the loan customer whose personal financial house was in order would be a much safer lending opportunity.

A good loan officer can nominate prospects for financial planning, and might participate in the implementation of a plan, but writing the plans is not a skill they possess or want to acquire. However, they are an excellent entre to logical planning customers.

Rather than grow a planning department some banks partnered with an experienced planning firm. Client meetings were conducted in the bank, introductions having been made by the astute loan officers, each of which received additional compensation as an incentive. Most plans recommend the use of trusts and various bank “products” such as Certificates and loans are routinely placed.

It is customary for a highly qualified financial planner to charge is a fee for the preparation of a plan. the data collection and the preparation of the plan are very time intensive. the best planners have always known that planning is not price sensitive, it is quality sensitive. but banks have often taken the position that the plan should be given away free — as an inducement to secure other financial relationships — the sale of products, the lending of money and the provision of trust and estate services.

This is not surprising, since plans have often been treated as a service that should be delivered free, as way of capturing more business. This started with the life insurance industry. the companies had consistently indoctrinated their sales force, “You do all the analysis, the retirement, disability, estate and survivorship planning for free, and then you will have earned the insurance sale and will be well paid.”

Likewise, many securities firms offered “off the shelf” plans with no individualization at ridiculously low fees — some even under $200. their only pay-off was an account to be actively traded.

But the most desirable clients require an extensive amount of effort. These are small and medium business owners, well established farmers, professionals, and corporate executives and especially pre-retirees. A lot of work has to be done: extensive fact finding, preparation of personal balance sheets and schedules, needs analysis, research on tax issues and alternative methods of addressing their problems. When, and if, they finally buy insurance, annuities, investments and other bank products, someone still must go through all of the disclosure and service of the purchase. These clients will ask, “What do I owe you for all this planning?”

It wasn’t long before insurance agents were leaving those captive life insurance companies and forming independent financial planning firms. the same was taking place among the major wire houses. they charged fees, developed plans and took over the management of over $1 trillion.

One substantial agri-business owner said, “Your tax advice alone has saved me many thousands. the fee of $5,000 is far exceeded by the value of the planning service.” He still bought a lot of insurance and offered six referrals. It is obvious — the clients expect to pay.

Closing the fee-based client engagement is not difficult from inside the structure of a well-run and respected bank. yes, the interview must be carefully structured, but that is easy. the physical environment inside a bank is a superb setting.

The focus of financial planning cannot be that of a marketing tool. It is a professional service. However the closing ratio for the policies and investments recommended will approach 90 percent and gradually all the business will be brought inside. A bank wishing to offer financial planning must adopt a posture — no free analysis. If the prospect will not agree to pay a fee, then move on to someone else. there is no free lunch.

Some senior officials may admit they don’t comprehend the plan reports and the advisory philosophy. the institutions certainly have to change their attitudes regarding compensation. Good planners gradually have a substantial and rising income. This must be considered aside from the general compensation structure of the bank. they must be treated more like an outside attorney hired to represent the institution in a potentially big-ticket law suit.

Personal financial planning can be easily offered as a corporate perquisite — a benefit for executives, senior managers and board members. there is little price resistance. the public now accepts financial planners. the occupation of “financial advisor” is now ranked consistently among the leading five most satisfying careers by Jobs Almanac. the position has prestige and respect. However years of financial planning have made clear twelve things:

You must have a good sample plan to help the prospect understand what he will be getting for the fee, and why the work is so extensive as to justify a fee.

You must make a formal presentation of your services. Initially this featured slides, now it is done in PowerPoint. but the entire first session must be thoroughly scripted with many items added to counter in advance the logical objections and any reluctance to paying a fee.

You must have a planning process chart that describes how you gather information, assemble your plan and provide service. Clients are comforted to know that you are following established and professional procedures.

But planning is just like banking, isn't it? – Intl. Assoc. of …