Follow-up to…

“What is Real Financial Planning?”

 

A few months ago, I wrote an article for the IARFC Register… “What is Real Financial Planning?” And, I’m happy to say it has created a lot of good discussion on many of the financial planning and advisor forums. In the article, we discussed what Loren Dunton, the founder of financial planning, believed that financial planning should be about… "Helping average people to learn how to spend, save, invest, insure and plan wisely for the future, to achieve financial independence."  

 

Most people got the main point of the article, and they agreed that financial planning is supposed to be about ‘Serving Middle Income Families’ and not just the ‘Wealthy!’ However, they seemed to have missed many of the underlying issues. Most of their discussion revolved around whether or not to offer a written financial plan, charge a fee for the plan, or just be commission based.

 

Some of the Advisors felt that a financial planner couldn’t make money serving Middle Income Families. I strongly disagree! Serving Middle Income Families is where you’ll make the most money, if you specialize in solving their problems. There is not a question that the average sale for Middle Income Families will be somewhat smaller than if you are working in the affluent market. However, you’ll have the opportunity to close many more cases working with Middle Income Families, because there are many more people to work with, more products that they need, and much less competition in the Middle Income Family Market!

 

Consider; if you get an affluent client to invest $500,000 dollars, you’ll make between $5,000 and $10,000, whether you charge a fee and/or earn a commission. But, there are fewer people to work with (less than 1% of the population) and much more competition. So, most planners will generally open only 10 to 20 cases per year! And, you’ll earn $50,000-$200,000 per year.

 

Working with Middle Income Families you’ll only collect $10,000 to $20,000 in investments and premiums per family. (For annuities, investments and the sale of life insurance, disability insurance, etc.) And, you’ll earn an average commission per family of $3,000 to $8,000.  However, because there are more people to work with, (60% of the population) and much less competition, you’ll have the opportunity to close 50 to 100 sales per year. And, you’ll generally earn $150,000-$800,000 per year.

 

Note: I’m not counting the residual income you’ll earn annually from investment trailers, or planning fees in the affluent market. In ten years, if you have 100 clients and you are managing a $20,000,000 portfolio, you’ll generally earn an additional $200,000.  And, I’m not counting the renewal commissions for life insurance, disability insurance, etc., in the Middle Income Family market, which in ten years should generally average around the same $200,000.

 

Some Advisors felt that because Middle Income Families have a different attitude towards money, they are more difficult to work with. I agree! The main problem is a difference in philosophy. Many financial planners want their clients to put most, or all of their money into the stock market to gain the highest investment returns. However, most Middle Income Families feel they can’t afford to take chances with their limited resources. They are not willing to jeopardize their primary ‘Psychological and Safety Needs’… a roof over their head, food on the table, etc. Middle Income Families are more concerned about the return of their money, than they are about the returns they can get on their money.

 

If you want to succeed in the Middle Income Family market, you’ll have to change your philosophy and your attitude towards money. You’ll need to stop focusing on investment returns and transferring wealth. And, you’ll need instead to focus on helping these Middle Income Families to solve their primary needs and concerns.

 

Should Middle Income Families have 100% of their savings invested in the stock market? No!  The affluent families, (the top 1%) live in a different world. They have already made their fortunes. They have enough money so they can wait out the ups and downs of the stock market. They are not concerned about qualifying for college financial aid, so their children can afford to go to college. They are not concerned about eliminating debt to improve their cash flow, so they can afford health insurance or put braces on Mary's teeth. They have enough money saved, so don't have to worry about whether there will be food on the table, or a roof over their family’s heads, if something happens to them. 

 

Most Middle Income Families, whether they are earning 50,000 or $150,000 per year, are struggling just to make ends meet each month. They need ‘Safe’ money… They are not going to jeopardize their primary ‘Psychological and Safety Needs’… a roof over their head, food on the table, etc., just to make a little higher return on their money.

 

Most financial planners are not addressing the real concerns and problems that most Middle Income Families face today! Consumer debt is out of control. Most Middle Income Families have very little money saved for emergencies, for their children’s education, and for their retirement. Why! Is it because we, as financial planners, are not educating them and selling them on the importance of how to “spend, save, invest, insure and plan wisely for the future, to achieve financial independence?”  

 

In most cases it’s not the financial planners fault!!! The problem is that many of the companies we write for; the professional associations we belong to; and the marketing and sales articles we read, are all telling us that we can become Millionaire Dollar Producers ‘Over Night’ by servicing the wealthy. They want us to believe serving the wealthy is the easier sale!

 

As I stated in my original article, we must make a concerted effort to change… “It all starts with each of us refocusing our efforts and learning how to truly service Middle Income Families. It’s taking an hour or more each day to learn (or relearn) basic marketing and sales skills. It’s reading everything we can about marketing and sales. It’s taking industry courses (Such as the LUTC courses) and attending industry-training events. It’s finding training and support organizations that promote working with Middle Income Families such as the IARFC, LEAP, Circle of Wealth, Kinder Brothers and our Insurance Pro Shop.”

 

Is it going to be easy to make these changes? NO! There is going to be a lot of pressure from your Broker/Dealer not to change! Why! Are they only concerned about making their profits? Isn’t the name of the game for them ‘Assets Under Management?’ What is the real reason they are telling you that you can’t offer your prospects Equity Indexed Products, or you can only offer those Equity Indexed Products through them?

 

Why do we have so many compliance issues? Why won’t most B/D compliance departments approve good, ethical, marketing that addresses the real concerns of your clients? Why won’t they let you use marketing materials that have been approved by the NASD? Why do so many of them force you to only use their in-house marketing materials? Is it because they truly believe they’re a problem, or is it to stop you from selling anything but what they offer?

 

If our Broker/Dealers are so concerned about being sued, then why aren’t they promoting industry training, professional associations, and professional designations? It doesn’t cost them any money to promote these organizations! 

 

We have some serious financial problems in the United States and they are not going to be solved if we, as financial planners, do not do our jobs. We need to start… "Helping average people to learn how to spend, save, invest, insure and plan wisely for the future, to achieve financial independence."

 

By Lew Nason

‘The Nine Out Of Ten Guy”

 

© 2007 by Lew Nason, RFC, FMM, LUTC Graduate - All rights reserved
Lew Nason, with his sons Jeremy Nason and Will Nason are the founders of the Insurance Pro Shop ^® and the creators of the… Found Money Management™ Advanced Life Insurance Sales System… The most endorsed and successful Life Insurance prospecting and sales system available for today’s insurance professional! Lew has been helping agents and advisors to achieve long-term success in financial services industry for over two decades. His unique perspective, on how to truly help clients, has enabled scores of agents and advisors reach the top levels of their profession. Visit his web site at www.insuranceproshop.com or call him toll free @ 877-297-4608.

 

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