FINANCIAL PLANNING GAINS MOMENTUM IN BANK PROGRAMS

Feature Article - Spring 2010 | By Gina Lauer

WHAT CAN bank investment programs offer customers that will move them strategically toward their investment goals and help their advisors earn the reputation of 'advisor of choice'?

For some programs, the "game changer" has been to provide financial planning to clients. The process can help cement relationships with customers as well as increase referrals and assets under management.

Norma Hajduk, PNC Investments

Technological strides, particularly over the past 10 years, have increased the efficiency and ease of creating a comprehensive financial plan. Financial planning tools can be accessed through Web-based technology, "so software is much more interactive," says Pareek. It can accommodate multiple users, and "it's very modular," he says.

Web-based software also makes it "a lot easier to integrate and import the data from other sources, so you don't have to manually enter all this information anymore," Pareek says.

In addition, data can be monitored on a continual basis by an advisor as well as clients, who can view their current account information via a secure website link. "The financial plan is changing from a static piece of information that was done once, and becoming much more dynamic because the data is dynamic," says Jeremy Schlarb, director, Business Development at AdviceAmerica.

Once this "massive repository of interesting data" is compiled, advisors and investment programs can generate "all kinds of alerts, reports, notifications, that you couldn't do before," Pareek says.

Has he seen a growing interest among banks and credit unions? "Absolutely," he says. "The way business is done these days is that people are moving away from a product-centric world to an advice-centric world," he says.

Indeed, executives at bank investment programs say that "doing what's right for the customer" has become the key priority of their business.

PNC Investments

"We realized we have to be more important to our clients, so it's critical that we deepen the relationship and move away from the transaction business," says Norma Hajduk, executive vice president at PNC Investments (Pittsburgh, PA).

'If your customer retired tomorrow, would you be the first person they'd think of? That's were you need to be.'

—Norma Hajduk, PNC Investments

PNC Investments started offering financial planning to clients about five years ago, she says. "It's been a slow progression, but it's really taking off and making a difference in our business."

Hajduk says she tells financial advisors that a typical bank customer doesn't come in looking for a plan, but when an advisor is able to deliver that outcome, "it's amazing to them. It's a unique opportunity that hasn't been afforded to them before."

Financial plans aren't offered to all customers, however. "Our financial advisors try to identify specific customers within their book of business who they feel would benefit from the plan," she explains.

It may be a person in his or her 40s who is ready for pre-retirement planning or a person at retirement age who could benefit from retirement-income planning. The process can be educational for clients, too. An asset allocation model may reveal a lack of diversification, for example. "Some people think of diversification as dealing with different people rather than their investments," Hajduk notes.

For some customers, the term "financial planning" sounds scary. They think, "Oh, I don't have that much money," says Hajduk, or they think it will be too much work, or take them somewhere they didn't want to go.

"We try to simplify that process for them," Hajduk says. "We give them a checklist" of information they need to provide for a plan.

PNC uses financial planning software from SunGard (Wayne, PA), which offers a variety of different modules from basic asset allocation to "very comprehensive planning," says Hajduk. All the brokers in PNC's investment legacy market (about 425 brokers) have the planning software on their workstations. The product hasn't been rolled out yet in the National City footprint. "They use a different version," she notes. (PNC Financial Services Group acquired National City Corp. in late 2008.)

PNC advisors can charge a fee (up to $1,200) for a financial plan, but it is not required. "We're not out 'selling' the plan," Hajduk emphasizes. "There are some financial advisors that feel the plan has no value to the client if they haven't charged. I will tell you that we have hardly anybody who charges."

The purpose of the plan is to deepen relationships with clients and capture more wallet share—not to pick up a fee, Hajduk says.

"Within the branch itself, we now provide a different service for the client that wasn't there before—a different capability," Hajduk says. Branch employees can talk about that with customers, too.

Has financial planning produced the results they had hoped for? "It really has," Hajduk says. Although it's difficult to identify the "larger, big picture" numbers such as return on investment, financial advisors have grown their assets under management, captured more wallet share from their competitors, and received more referrals from family and friends of clients.

Hajduk says that 80 percent of the financial advisors in the PNC legacy footprint are using planning to grow their business. "I don't know what percentage of our customers have done a plan. We don't track it quite that way," she notes.

In the first quarter of 2010, First Tennessee planners put together 700 plans. 'We track revenue per plan and that's up 30 percent over last year,' says Aur.

Training is critical

Training is often mentioned as a critical component of the financial planning practice. Technology providers usually train advisors or planners on how to use the software, but additional assistance on data-gathering, formulating plans, uncovering outside assets, and encouraging referrals often is needed from internal and/or outside trainers or coaches.

PNC uses the services of Greene Consulting Associates (Atlanta, GA) to help teach advisors how to incorporate planning into their day-to-day business. For example, Hajduk says: "How do you ask doubt-raising questions that would make a customer realize they need to sit down and do a plan?"

Hajduk relates the story of an advisor who was talking with customers in the teller line and encountered a woman who said she was not happy with her current advisor—she had lost $400,000 in assets. The bank advisor asked: "What have you done to ensure that won't happen again in the future?"

'We're actually marketing to our customers saying, "If you have a plan that was done before June of 2008, you really don't have a plan anymore."

—Rhomes Aur, First Tennessee Bank

That question stopped the woman "dead in her tracks." The advisor got the customer to sit down with him and ended up winning her business, says Hajduk.

Financial advisors all go through a two-day session called financial transitions. One manager and three "planning wholesalers" were also hired to work one-on-one with financial advisors in the field, sometimes sitting in on an initial meeting with a client or at a meeting when the plan is delivered. (Three additional "wholesalers" are expected to be hired.)

"What they're doing is helping financial advisors transition their business and get comfortable with planning as a way of growing their business."

Two internal paraplanners help with data entry and in the evaluation of completed financial plans to make sure advisors have reached the correct assumptions, Hajduk says.

First Tennessee Bank

First Tennessee Bank, a subsidiary of First Horizon National Corp. (Memphis, TN), has a fairly long history of providing financial planning to customers: 10 years. According to Rhomes Aur, executive vice president of Wealth Management, the program has a dozen Certified Financial Planners (CFPs) who put together financial plans for customers. "We require all of our planners to have the CFP designation," Aur says.

PNC Investments started offering financial planning to clients about five years ago. 'Its been a slow progression, but it's really taking off and making a difference.'

"We also don't allow our planners to sell; they're advisory only." The job of the planners, who are salaried, is to prepare the plan, make recommendations, and participate in the implementation process. There is no charge for the plan, he says.

The financial planning program was subsidized initially with funds from the marketing budget "because we thought that was the best marketing program we could put in place at the time," Aur says. In the early years of implementation (2000 to 2002), financial planning was offered to all clients. But because of economic conditions and the need for further efficiency, the number of planners was scaled back (there were 50 a few years ago), and the focus is now on affluent clients.

The economic downturn has also given the bank a compelling reason to motion customers back in for financial check-ups. "We're actually marketing to our customers saying, 'If you have a plan that was done before June of 2008, you really don't have a plan anymore.'"

Aur says planners can often uncover additional assets because the customer sees them "as non-sales and really looking out for their best interests."

Over the 10 years, Aur says they've used two or three different software providers. They currently use planning software from eMoney Advisor (Conshohocken, PA). "The reason we use eMoney is because it's got an account aggregation feature that we provide to our affluent customers," he says.

Customers can view a variety of account information in real time. "They can see their balance sheet, their assets, their liabilities, frequent flyer miles—whatever they want to put there." In addition, customers are provided with an online document vault where they can store scanned documents such as wills and passports.

How many plans are being created annually? In the first quarter of 2010, planners put together 700 plans. That would equate to close to 3,000 plans for the year. "We track revenue per plan and that's up 30 percent over last year," Aur says. Granted, last year was a tough market.

Aur acknowledges that as many as 10,000 plans were done when the staff included 50 planners, but "what we're seeing [now] is better quality because we're focusing on the affluent customers."

First Tennessee does annual reviews with customers, and as those customers become more comfortable with the process and gain confidence in the advisor, they continue to implement recommendations.

"So we see typically a two-, three-year sales cycle out of a financial plan," Aur says.

First Tennessee has an internal full-time employee who helps with training, coaching, and sharing best practices. "She was a planner and investment officer, and she's worked with the affluent sector her entire career."

Harris Investor Services

Harris Investor Services, the broker/dealer-RIA subsidiary of Harris Financial Corp., has been offering financial planning for the past three to three and a half years, says Michael Miroballi, president and chief operating officer. However, financial planning has been offered at Harris Bank—mainly within the private bank—for about 15 years. "We really drove it into our market (the mass affluent segment) more recently."

Miroballi says improved technology has made financial planning "more scalable" so it could be driven down-market to serve customers that don't fall into the high net worth category.

He, too, considers the financial planning process to be "more advice-based or advisory and planning-centric" as well as a differentiator in the client experience.

The fact that Harris conducts a lot of investment advisory business also lends itself to a planning-oriented discussion. "When you're held to a fiduciary standard, in my view, you have to deliver that comprehensive, holistic discussion and experience to the client."

'Over the last 15 months is when we've really seen the number of plans pick up.' Assets under management have grown as well.

—Michael Miroballi, Harris Investor Services

Plans are put together "by and large" by the advisor, although some senior advisors may have help from an assistant. And as with most programs, not every customer is a candidate for a financial plan.

"Our guiding principal is really that all encounters or engagement with clients and prospects be planning discussions," Miroballi says. "But not every single planning discussion will lead to a plan."

Advisors use NaviPlan software from EISI (Carlsbad, CA). As with many other planning tools, it is modular based. If clients prefer to do only one module, such as retirement planning or college funding, that can be done. There is no charge for the plan.

Miroballi has several advisors with CFP designations, and "the firm has supported our advisors getting their CFP designation."

What kind of benefits has he seen from the financial planning process? "Over the last 15 months we've really seen the number of plans pick up." He sees the process being incorporated into many advisors' practice. Assets under management have grown as well. Although improved markets over the past six or seven months have helped, Miroballi says financial planning has definitely been a factor in that growth.

Another indicator that the program is working has been that "we're seeing more relationships with multiple accounts being opened," he adds.

But there is still more to do. The number of plans produced per month averages about two to three per advisor, he says. He would like to see that number closer to six per month. "But we've made steady progress toward that … Many of our advisors do produce four to five a month."

Like other program executives, Miroballi says the important factor in financial planning is having a fulsome discussion with clients and prospects: creating a client relationship built on a genuine understanding and trust.

And he emphasizes that as the boomer generation begins to enter the retirement years, financial planning is a necessity when advising those clients on a retirement distribution strategy. "There's no other credible way to arrive at a set of solutions that will meet retirement income needs," he says.

Succeeding in financial planning

What are some words of advice for bank programs interested in taking a financial planning approach?

Aur says the planning process works best "when you've got a team approach" with everyone involved in a customer's plan. "They have to all sit down together. They've got to meet and work through the process continuously." Aur says compensation must be aligned so that one person doesn't stand to gain by something they do or recommend.

You have to "manage the process and measure customer feedback continuously," he says.

Miroballi says: "Never underestimate the need to train and get your advisor comfortable having planning discussions." That includes gathering the information, presenting the plan and reviewing the plan. To get advisors to embrace financial planning, they have to be comfortable with the process, "and the only way to do that is through training."

Miroballi has a product group that does dedicated training to "drive the process." He suggests leveraging vendor partners, too, because many have of them have "great training materials."

There is widespread agreement that getting into the financial planning process takes time and dedication. "You have to reinforce it. You have to make it part of your speaking. You have to inspect it," says PNC's Hajduk.

'People are moving away from a product-centric world to an advice-centric world.'

—Purna Parkeek, AdviceAmerica

The success of financial planning ultimately comes down to earning customer loyalty and becoming a customer's advisor of choice. "If your customer retired tomorrow, would you be the first person they'd think of? That's where you need to be." Hajduk says.

Miroballi says that delivering a planning experience takes more work and leads to a longer sales process. "But in my view the benefits to the client, the advisor, and the firm are well worth the investment of time, energy, and money.

Gina Lauer is a contributing editor of Bank Insurance & Securities Marketing. She can be reached at glauer@bisanet.org