Left to their own devices, many clients find it difficult to follow through on the objectives set out in a financial plan.Illustration by Melanie Lambrick
For many Canadians, taking the initiative to seek advice or create a financial plan is a key step on the way to achieving their goals. But following through on that advice may be another matter.
A recent survey conducted by Royal Bank of Canada showed that while 75 per cent of participants said they have good financial habits, more than one-third said they struggle to make those good habits stick.
The FP Canada Research Foundation outlined potential causes for the “implementation gap” in a 2020 report. These include client procrastination, lack of a strong relationship between advisor and client, differing expectations, and overly complex plans.
Although clients are usually keen to get started with financial planning, some are overwhelmed with the breadth of a financial plan, leading to problems with follow-through, says Janet Gray, certified financial planner (CFP) and money coach with Money Coaches Canada Inc. in Ottawa. Others may be satisfied with just having a financial plan in place.
“If you say, ‘I’m going to prepare a financial plan,’ then they think it’s one-and-done,” she note, and some clients think they have “the magic capsule.”
“‘It’s all in there. I don’t know how to do it, but I know it’s all in the report.’”
Instead, Ms. Gray says it’s important to ensure at the outset that clients understand the financial plan is only part of the process and that financial planning is an evolving, active relationship.
“It helps people to understand that it’s not something I can do for them,” she adds. “It’s something we will do together over time.”
Another approach is to present financial plans in “bite sizes,” she says, in which larger priorities are addressed first and less urgent goals and adjustments are implemented later.
Connecting goals to action
A disconnect between client goals and recommendations is another factor that can lead individuals not to act on their financial plans, says Aaron Theilade, senior manager with MD Signature Financial Planning in the Victoria area.
For his team, deep discovery to uncover the client’s priorities is crucial to improving follow-through. That becomes critical later on, when the team is “making recommendations and tying that back to what’s most important to the client,” he says.
Another key is to involve the client when prioritizing the action steps in the financial plan: to discuss timelines, order of priorities and how the client sees those items fitting into their life. Doing so makes the plan “really theirs and not just something we’ve created for them,” he says.
Being a partner
Left to their own devices, many individuals find it difficult to take the lead on revisiting the financial plan or sticking to its objectives, says Tony Maiorino, vice-president, director and head of the Family Office Services team at RBC Wealth Management in Toronto.
The 2020 FP Canada Research Foundation report found that 68 per cent of clients said it was valuable to have the support of their financial planners in implementing the recommendations in their financial plans. But less than 20 per cent agreed or strongly agreed that following through on recommendations requires substantial work on their end.
Mr. Maiorino says it’s an advisor’s role to keep priority areas on track and hold clients accountable.
“We fundamentally believe that the plan, without the support of the advisor to help a client execute it, is not even worth the paper it’s written on. It is paramount for us, as a firm, that we work with the families entrusting their wealth to us – that we’re helping them see through what is being recommended,” he says.
Digital tools can help with follow-through. RBC Wealth Management advisors use a proprietary planning tool called myGPS (for goals, priorities and solutions) that creates interactive graphs and charts and allows for projections to be created and updated quickly, providing a complete view of a family’s financial picture.
“If you can show them how the behaviour that they’re following and the ideas that have been put in place are leading to fruitful outcomes, they’re more likely to want to continue to replicate those behaviours,” says Mr. Maiorino.
Behavioural finance education
For FP Canada, the implementation gap is still very much on the radar, says Alexandra Macqueen, vice-president, learning, development and professional practice at FP Canada and head of the FP Canada Institute.
The organization has focused on helping planners build emotional connections with clients and incorporated more human behaviour elements – critical thinking, interpersonal and communication skills – into its educational programs for the certified financial planner and qualified associate financial planner designations in recent years.
These programs train individuals to build a “therapeutic alliance,” delivering practical skills that financial planners can return to when they’re helping clients overcome implementation obstacles.
That means “building this bridge between where the client is now, their desired future state, and all the emotional stuff that goes into getting from place A to place B,” Ms. Macqueen says.
“Having that foundation of emotional connection to another human being is what will close the gap,” she adds.