Another Business Model to Consider

Abraham Lincoln reputedly said that anyone who represents himself in court has a fool for a client.  As long as courts are adversarial, that will remain true. One cannot carry out an effective legal battle without a paladin.

Sadly advocates are very expensive and many people decide to represent themselves in court.  The number appears to be upwards of 40% and rising in civil cases.

High priced legal help on one side and do it yourself on the other seem to be the only two service models.  That dichotomy is similar to the financial planning model. What if there were to be a middle version?

Could lawyers and financial planners unbundle their services effectively?

I cannot speak for lawyers, but financial planners who want to hold all the information, design all the implementable steps, supervise implementation, and sometimes even design the strategy, are not helping everyone that comes along.  Some people can and would do part of the work.

Advisors need more information than people typically provide.  They can use that search as a teaching exercise.  Clients will do better if they know what matters.  The first step in a good plan.

Clients benefit if they design the strategy and the advisor checks it for completeness and conflicts.  That may involve helping them understand how their wants, needs, time and resources work together.  Taxes matter. Implied obligations like children matter.  Developing skills to fit a changing world matters.  Health matters.  Objectivity and reasonable expectations matter. More knowledge and awareness improves outcomes.

Some clients would be able to input their own data to a program that summarizes and builds a financial plan. If no program exists now, there will be one before long. 

How hard would it be to create priorities, a dynamic net worth statement, an annual budget, and a longer term projection.  Once done, a client should be able to see the effect of decisions like mortgage size, term and rate, investment returns, education costs, and future income disruptions.  People tend to pay attention to and believe what they do themselves.

Like most financial situations, data capture is the time consuming part.  The programs could summarize the information and the advisor could help the client to interpret what is found.  Like a comptroller in a business.

Implementation matters.  Would a client lower their costs by investing on their own.  Maybe fees would be lower, but selection matters too.  Recall that all trades are two-decision situations.  Getting in is often easier than out.  Sometimes emotions get in the way.  Advisors can help with that.

Insurance matters because risk matters.  It is difficult for a non-professional. Too many options and definitions and tax treatments and integration choices to make it easy.  Given wants, resources, and priorities the client needs to know enough to make a choice among reasonable alternatives.

Record, review and revise is a key element of any plan.  The client could do it if they knew what to look after.  Maybe the program would demand certain things.  The advisor then appears only to answer questions, draw attention to particular details, recommend changes, and provide additional education.  Avoid too much detail.

The advisor becomes a guide rather than a mapmaker.  Guides tend to be more useful as they are more involved.  Mapmakers become remote.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario.  In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  866-285-7772


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