Planificación Modular o Global

From Planipedia

Thanks to PlanPlus and WEA for sharing their material for this Best Practices Guide.

Modular Planning vs. Comprehensive Planning

Advisors approach financial planning from different directions. An advisor who has a background in the life insurance industry may initially provide risk management services to their clients but wish to expand their services into other areas. An advisor with an investment background may come in through the investment-planning door but also wish to expand to a broader range of services. Whatever door the initial entry is through, the transition to other services can be accommodated via either modular or comprehensive planning. Let’s look at the meaning of each of these.

Comprehensive Planning – Financial planning covers many aspects of a client’s life. The primary components are noted below.

When doing comprehensive planning, you would deal with all matters that are pertinent to your client’s situation. The comprehensive plan would co-ordinate each of these areas into a holistic review of the client’s complete financial picture. For some clients that might include all of the above areas while for others, you might only need to cover 2 or 3 areas given their stage in life and their needs.

Comprehensive planning is the most efficient and effective way for both the Advisor and the client. Let’s examine why.

Advisor: The most time consuming aspect of providing client services is the face-to-face meeting time spent with clients. Comprehensive planning should mean meeting with your client once to collect all the facts. There is a second meeting to present the plan and, perhaps, subsequent meetings to implement the recommendations. Compare this with modular planning where you can have multiple fact gathering meetings, multiple meetings to present your reports and then subsequent implementation meetings that can be stretched out over a much longer period of time due to the piecemeal approach taken. Thus doing the whole job at once is the most time efficient.

From an accuracy perspective, comprehensive planning is also more effective. All of a client’s financial affairs are inextricably linked. Thus any decision made in one area will have an impact on other aspects of the client’s life. Approaching the client’s situation on a strategic basis using a comprehensive planning approach often leads to more appropriate recommendations since the impact to all areas of the client’s life is seen more clearly.

Client: The comprehensive planning process is also more efficient for the client relative to the time commitment required. More can be accomplished with less time required. The resulting end product also is more strategic and focused because it was created recognizing all of the client’s financial circumstances.

Modular Planning – With modular planning, the work that needs to be done is consistent with comprehensive planning. However, the service delivery is more gradual, where you transition the client from one area of service (perhaps the one you are most comfortable with) to other services one or two at a time. What follows are some typical examples.

1) Initial service provided:	RRSP contribution
Client overview:	Single client with no dependants. Main priority is to make his RRSP contribution before the deadline next week. Seems to be focused on paying down his mortgage and other debts.
Opportunities:	An RRSP contribution in absence of an Investment Policy Statement indicates that the client is a candidate for investment planning services. He also would benefit from some cash and tax planning advice to help him pay down debt in the most effective manner possible. Given the fact that he is disciplined enough to do regular RRSP contributions suggest he would be a candidate for retirement planning. While the client doesn’t recognize the need, you see that needs on disability planning for the contingency of disability is important given that the client is totally reliant on his earned income.

In this example, once the client’s investment planning has been taken care of through the creation of an Investment Policy Statement, their next priority is to do some cash and tax planning. This will help the client pay down debt and start saving more for their long-term objectives. The next topic on the agenda is retirement planning and then finally ensuring they have sufficient protection in the event of disability.

NB: In this scenario, needs on death, estate planning and several other areas are not addressed because they are not immediately relevant. As the situation evolves, other aspects of a comprehensive plan might become important, but for now, just focusing on these four areas is what’s needed.

2) Initial service provided:	Investment planning
Client overview:	Married couple with two young children. Concern about providing for the family in the event of death or disability. Want to ensure their children’s post-secondary education is provided for.
Opportunities:	Concern for the family indicates that needs on death or disability planning is required. Doing education planning also is required given their concern in this area. There is a need for some cash and tax planning to help them make their resources go far enough to deal with all of their issues. While they are young, retirement planning is the next logical step. This is especially the case given they are doing some investment planning already Basic estate planning to ensure that their affairs are in order is important. While their asset base may be modest, the importance of having wills with guardianship clauses is important given their young children.

In this example the process has followed the planning areas that are most important for the client. Please note that the client may not have asked for or even been aware that certain services would be of benefit to them. It’s only through your efforts of educating your client on their needs that they will benefit from the services that you can offer.

3) Initial service provided:	Risk management
Client overview:	Married client with two children. Risk management services were provided. There is a recognized need for investment management services because saving for short- and long-term objectives is a priority.
Opportunities:	Given the client’s recognized need for investment planning assistance, this is the next step in the process. While retirement planning wasn’t specifically mentioned, the fact that the client is able to start saving for the future makes them an ideal candidate. The same is true for education planning. Cash and tax planning is a logical extension of the other services being recommended. Though estate planning was not on the client’s mind, recommending this service at a basic level is important given the young family.

As can be seen from the above examples, the order in which these services are provided is somewhat irrelevant. The key is to make a transition from the initial service offering to additional services in a logical and reasonable manner.

Transition from Modular to Comprehensive – While we have illustrated how various components of the planning process can be addressed on a modular basis, remember that there can also be a transition to a more comprehensive approach at any time in the process. For example, after completing initial service for the client you could recommend that all the remaining areas be covered together. In other words, just because you start out on a modular basis doesn’t mean you have to stay with that approach. Migration to a comprehensive approach sooner rather than later is the most efficient practice.

Transition to Additional Modular Services

You Are Not “Selling” Product – You’re influencing Action —Advisors frequently say that one of the most difficult things to do is to make the transition from one offering to additional services without it appearing that they are just trying to sell the client something else.

Win-Win is Best—The most important way to prevent this feeling is to have the best interests of your client at heart. While additional services may indeed mean the placement of additional financial products, the bottom line is the desire to provide your client with services that meet their needs.

Making a Smooth Transition—Let’s look at one very effective way of transitioning a client to additional services. In this example, let’s assume you are working with a client in the area of risk management. You have prepared some type of report outlining your recommendations relative to risk management needs. Including an action plan is a very effective implementation tool. But more importantly perhaps, it is also an excellent transition tool. Let’s look at an example of an action plan for a risk management plan.

In this action plan, you’ll note that there are 3 distinct transition statements to move the client along in the planning process (please see black arrows in the above chart). These transition recommendations are in a context that is not perceived as “selling” but rather a natural progression through a logical planning process.