2022 marks the 50th anniversary of the enrollment of students into the first Certified Financial Planner (CFP) course, and in the years since then, financial planning (and the process of creating a financial plan) has changed extensively. Early on, the ‘financial plan’ was primarily used as a way to demonstrate a prospective client’s ‘gaps’ and needs for products such as mutual funds or life insurance (which the advisor would then be ready to sell to the client). Eventually, as client relationships grew to be more ongoing and less transactional, financial planning grew to encompass other areas of clients’ financial lives, such as taxes and estate planning. Today, the financial plan itself is increasingly becoming not just a ‘value-add’ supporting other services like portfolio management, but rather the whole purpose of (and primary value proposition for) the client relationship to begin with.
In 2018, we released the first Kitces Research study on “How Financial Advisors Actually Do Financial Planning”, which examined how financial planners today are actually executing their financial planning processes, delivering their financial plans, what technology tools they are using, and how they price their services. In 2020, we conducted a second survey to further explore the changing trends in financial planning brought about by improvements in advisor technology, shifts to the advisor business model, and changes in the regulatory environment.
Our 2018 and 2020 studies revealed some surprising insights into how advisors spend their time – namely that for the ‘typical’ financial planner, only about 20% of their working time is actually spent meeting with clients, while over twice that amount (45%) is spent on behind-the-scenes tasks like preparing for client meetings, running financial planning analyses, and managing investments (with the remaining 35% being split between business development and other management/administrative tasks). What’s notable, however, is that the most ‘productive’ (i.e., top-earning) advisors, on average, spent ‘only’ about 10% more of their time on client meetings compared with the least-productive advisors while reducing their back-office work in turn. In other words, by leveraging back-office support, the most-productive advisors added roughly 4 hours per week – totaling around 200 hours per year – on the high-value task of meeting with clients… and nearly doubled their income in the process!
A lot has changed since 2020, though. Most notably, during the COVID-19 pandemic and its aftermath, many advisory firms embraced technology, allowing them to work and meet with clients remotely. Likewise, other developments – such as the implementation of the SEC’s Regulation Best Interest rule and the CFP Board’s updated Financial Planning Practice Standards – have necessitated changes to many advisors’ financial planning processes. And, as always, technology continues to evolve to provide opportunities to streamline the ways advisors provide value (and deepen the value they do provide).
Accordingly, we’re excited to announce the third Kitces Research study, which will once again examine the process that financial advisors go through to create and deliver a financial plan. Following on the themes of the 2018 and 2020 studies, this research will seek to uncover more insights about what distinguishes the most productive advisors from the rest, what factors (such as how they spend their time, what tools they use to support their process, and how they price their services) drive that productivity, and most importantly, what actions other financial advisors can take to improve their own productivity (and consequently, their income and well-being!).
So whether you’re frustrated that your financial planning software doesn’t do what you need it to in order to demonstrate its value, or are simply looking for ideas to refine your financial planning process to be more time-efficient or cost-effective (or valuable and able to command a higher price!), I hope you’ll take a few minutes to participate in this year’s Financial Planning Process survey and help the world better understand what real financial planners actually do!