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How Firms are Boosting the Impact of Financial Planning Tools

June 10, 2023 Harry Bartle By Harry Bartle

Financial planning describes developing and implementing a comprehensive plan to help an individual or a couple achieve their financial goals. It involves analyzing their financial status, setting short-term and long-term objectives, assessing risks and opportunities, and creating strategies to achieve objectives. From there, advisors and their clients monitor progress and adjust plans dynamically as needed.

Technology plays a vital role in financial planning. It allows advisors to deliver more comprehensive and personalized advice considering all the variables in a client’s unique situation. It allows them to take the 10,000-foot view of a household’s accounts, resources, and opportunities in what’s often referred to as the unified managed household.

Moreover, technology will enable advisors to do comprehensive financial planning across their book of business (and not just for select clients or those who ask for it). Creating and implementing a personalized plan for each client or client household is only possible with technology.

What’s the best financial planning process?

Each advisor may have a slightly different process for gathering client information, unifying it in their technology platform, and presenting the holistic plan to the client. The plan typically includes a confidence level for its efficacy over a client’s lifetime.

But what good is a financial plan if it can’t be implemented? How effective can a financial plan be if it doesn’t carry through a client’s earning years into their decumulation phase?

Spoiler: not very.

The most valuable financial plans can be implemented now and provide touchstones in the future for revisiting plans and making adjustments to keep progress toward goals on track and on time.

The right technology is essential to accomplishing this. Firms like Franklin Templeton, AdvisorEngine, Envestnet | MoneyGuide, Morgan Stanley, and JP Morgan are all moving this way – creating platforms that make financial plans real and not just projections to put on the shelf to gather dust.

When it comes time to meet with clients, the output from the technology becomes critically important. Reports need to be easy to read and understand. They need to be both informative and prescriptive. They need to be simultaneously visual and descriptive. But in the end, it’s up to the advisor to explain all this in a way that makes sense and has an impact.

How do clients’ financial goals play into the financial plan?

Financial goals are the outcomes clients want to achieve and should be directly tied to personal objectives. Common goals include saving for retirement, education, home purchases, or other life events. Realistic goals are specific, measurable, achievable, relevant, and time-bound. Unrealistic goals are vague and difficult to achieve in the time frame or require resources the client does not have today and cannot expect to have in the future.

The advisor’s role is to help the client set realistic goals and develop an actionable financial plan. By starting with the client’s goals and working backward, the advisor can determine what needs to be done to construct a portfolio of taxable and tax-advantaged savings and investment accounts. From those client meetings, the advisor will know what’s possible based on the client’s salary, expenses, and opportunities for saving.

Technology plays a key role here, too, by helping advisors organize goals, calculate projections, and track progress in an efficient and scalable way. With the right goals and planning, clients have a much better chance of achieving their objectives and securing their financial futures.

Are retirement planning and financial planning different?

Short answer: yes. Here’s how.

Financial planning is the process of analyzing an individual’s current financial situation, setting goals, and creating a plan to achieve those goals. Retirement planning takes this one step further by focusing specifically on personal retirement objectives and developing solutions to help reach them. It also considers variables like Social Security benefits, taxes, investment returns, and inflation that can all affect a client’s retirement plan.

Financial planning that doesn’t consider the realities of retirement could be ineffective at best and detrimental to a person’s long-term financial security at worst. That’s why advisors must create comprehensive plans that carry through the earning years and into the decumulation phase. With the right technology and some finesse, advisors can develop plans that include all the nuances of retirement planning and give their clients confidence in their financial futures.

A comprehensive financial plan starts with a deep dive into an individual’s financial situation. The most prestigious wealth management firms are all working on advisor technology platforms that extend planning through retirement. This includes anything from income to spending patterns, investments, taxes, and insurance – all of which should be raised during planning and factored into the financial plan.

This is where the rubber meets the road. Retirement planning takes the information from the financial plan and creates a structured decumulation plan that ensures the client remains on track to meet their retirement goals. The right technology can provide advisors with the means to make this entire process easier for themselves and their clients.

Advisors will tell people that it’s never too late to start saving. It’s also never too early to start planning. Creating an accurate financial plan that can extend through retirement will pay off in the end.

Ultimately, financial and retirement planning require two distinct approaches, each essential to a sound financial security strategy. But they must be connected in every way. Financial plans provide clear guidance on maximizing income during working years, while retirement plans help ensure the money will last for the remainder of clients’ lives.

Working together, these two essential elements form a strong foundation for financial security in retirement. By harnessing technology to develop comprehensive strategies that extend through retirement, advisors can give their clients the best chance of success and peace of mind as they approach their golden years.

The true goal of a financial plan

… is to give confidence to the client that you are the right partner for them as they move through their financial journey. A good financial plan keeps the most money possible always invested, increasing the client’s runway and bequests. A good financial plan ensures that clients can continue maintaining their quality of life up to and during their retirement years. It provides the foundation for financial security and peace of mind by considering all elements of a person’s financial situation and crafting personalized strategies specific to each individual’s needs.

Financial advisors and advanced technology solutions are essential in this process. They help collect data on a client’s circumstances, run simulations to test their approach and create confidence in the plan’s efficacy. All this builds and strengthens trust and engagement with clients. By developing comprehensive financial plans that extend through retirement stages, advisors can ensure their clients’ futures remain secure for years to come, and their assets remain under management as long as possible.

How LifeYield advances financial planning

Technology leaders and teams at many financial services firms use LifeYield application programming interfaces (APIs) for reducing tax drag and creating tax efficiency in the many activities, over years, that follow financial planning.

We also work with many of the major financial planning tools on the market so a firm can customize its tech stack to meet the needs of its advisors and their clients.  Book a demo and I’d be happy to walk you through it.

Harry is the EVP of Enterprise Sales at LifeYield, where he’s responsible for developing relationships with the largest financial services firms in the world. He has 20+ years’ experience driving revenue for many innovative companies across our industry. Prior to LifeYield, at Financial Engines, Harry pioneered the sale of online advice and managed accounts. At Linedata, he sold front, back and middle office products, including back-end plumbing, compliance software, rebalancing, and all the mathematics behind the technology. Now at LifeYield, Harry has helped sign up 12+ enterprise customers with the goal of building complete household wealth management platforms. Because of Harry’s wealth of experience, he’s able to be a reliable resource for firms developing complex wealth technology platforms – helping to shape the next generation of financial technology.