8 Reasons Your Clients Should Add Financial Planning to Their Service Packageby
During the busy season, you have a lot of contact with your clients, and you likely spend most of your time helping them file their taxes and plan for next year. However, it's important not to gloss over the other services you can provide, like financial planning. Here's how to make the case for them adding this service.
During the busy season, you have a lot of contact with your clients, and you likely spend most of your time helping them file their taxes and plan for next year. However, it's important not to gloss over the other services you can provide, like financial planning. Maybe you haven't brought this up, or, last time you did, your client just didn't see the need for it. Here's how to make the case for them adding this service.
Why do They Think It’s Not Needed?
Your client brings in more money than they spend. They are pretty good at budgeting, and their credit cards are under control. They fully fund their 401(k)s. Their spouse shares the same admirable traits. “Other people might need help, but we don’t.”
Another logical possibility is the opposite scenario. They haven’t saved for retirement. They make minimum payments on their credit cards and don’t pay their bills on time. They know they are digging a hole. They don’t think they need to pay for someone to tell them they are lousy money managers. Maybe they will do a plan when things turn around and they can see daylight, but not now.
How to Make the Case for Financial Planning
You've probably heard the saying, “We don’t know what we don’t know.” This applies to everyone, both those are good at money management and those who could use some improvement. In both cases, unexpected expenses can derail a person’s finances.
Your strategy should highlight how financial planning can better prepare you for unplanned or unexpected expenses. Many people think of these as abstract or “black swan” events, like stock market declines. They come out of nowhere. However, unexpected expenses cover many areas and are a part of everyday life.
Here are a few areas to highlight:
- $233,610, the Cost of Raising a Child: Curiously, it’s the US Department of Agriculture than crunches these numbers. This is the cumulative cost of bringing a child from birth to age 18, when they are ready for college. That’s actually a low figure, rising to $284, 570 when accounting for inflation. This assumes middle income, two child, two parent families. Does this sound like your client?
- $88,176, the Cost of Getting Married in Manhattan: Your client has children in their 20’s. The previous cost of raising them is past history. It’s likely they will marry sometime. According to valuepenguin.com, the average cost of a wedding in the US is $29,858. They use an ingenious way to arrive at totals, starting with the cost per guest and assuming 140 guests. The website shows costs by state and metro area. Tying the knot in Mississippi is about $12,769.
- $7,698/month, the Cost of Long-Term Care in a Nursing Home: The US Department of Health publishes figures relating to the cost of care. Although at the moment, your healthy, active client might assume they will never need a nursing home, what about their parents? Will they come to live with them?
- 1 Percent a Year, the Suggested Budget for Home Repairs: According to Discovery.com, homeowners should anticipate spending 1 percent of their home’s value for maintenance and unexpected expenses. And this isn't the purchase price; it's the current value. Unexpected occurrences like falling trees and leaking roofs happen all the time and are something any homeowning client should prepare for.
- $ 20,770, the Cost of a Year at a State College: You intend to give your children the best education possible. According to valuepenguin.com, the average cost for a year at a state school is $ 20,770. The average cost for a private university is $ 46,950. Setting up college savings plans is one of the best strategies from a tax standpoint.
- 55 to 80 Percent of Current Income for Retirement: Fidelity.com anticipates the average person will spend 55 – 80 percent of their pre-retirement annual income when they stop working. Provided your client is healthy, they can likely be expected to be retired for at least 15 years or possibly even more. How much are they on track to save?
- 10 Percent of Your Annual Income for Vacations: According to Forbes, that’s what the average American spends annually on vacations. Many overspend, going into debt. Vacations should be a planned, not an impulsive expense.
- $285,000, What You Can Expect to Spend on Health Care in Retirement: Yes, your client is looking forward to being covered by Medicare at age 65. But, as you’ve heard on TV, “Medicare doesn’t cover everything.” Fidelity.com estimates after age 65, the average couple will need $285,000 to cover their health care expenses. Again, your client might feel healthy and see this as a low probability, but, they have parents.
The object isn’t to scare your client into action. The object is to talk about “We don’t know what we don’t know.” Shine a light into those dark corners. Highlight those unexpected and unplanned expenses. Put price tags on them. Make the connection between unplanned expenses and financial planning. Once a problem is identified, it doesn’t go away unless you take action.
Bryce Sanders is president of Perceptive Business Solutions Inc. in New Hope, Pennsylvania. He provides high-net-worth client acquisition training for the financial services industry. His book, Captivating the Wealthy Investor, can be found on Amazon.com.