The PFS POWER Financial Planning Practitioner Panel unveils a new approach for financial planning
As announced at the PFS Festival of Financial Planning in November, the new POWER Planning approach focuses on outcomes, but also the feelings experienced by financial planning clients.
Through this, we aim to measure human outcomes, rather than purely financial ones, with the belief that planning through this lens has the power to improve outcomes for financial planning businesses, the profession as a whole and, most importantly, for consumers.
Furthermore, it also aligns with the new Financial Conduct Authority’s Consumer Duty legislation.
Alasdair Walker, chair of the PFS POWER Financial Planning Practitioner Panel, Chartered financial planner and managing director at HA&W, says: “I am thrilled about this new approach, ratified and supported by the PFS, and believe it has the potential to start the most significant shift in financial planning for decades.
“The current best-practice approach to financial planning was originally conceived by a group of insurance salesmen in Chicago in 1969, who felt a ‘needs-based’ approach to selling their products would further their aims. This was later codified into the ‘Six steps of financial planning’ process and is now overseen by the Financial Planning Standards Board in the US.
“There are very good reasons to adopt a process like this and we are not proposing to replace it,” says Walker.
The co-presenter and lead architect of this practitioner-designed approach, Duncan Parkes, practitioner and compliance director at Old Mill, suggests the term ‘financial planning’ has always meant different things to different people.
“The challenge was how to define financial planning, but with an important caveat that we must not tell people what to do or how to do it,” he says. “As a professional body, the PFS believes that we stifle innovation and creativity by telling advisers what to do or how to do it, which we must avoid doing at all costs.
“People have different ways of presenting financial planning – some might draw pictures, some might use charts or other visual aids, some might be more technically minded than others. None of this is wrong and people must be allowed to play to their strengths. How therefore can we establish exactly what we mean by financial planning without telling people what to do or how to do it?”
This approach suggests that to deliver financial planning, advisers should be working towards five outcomes with all clients:
Clarity – Clarity of personal ambition. Human rather than financial objectives bringing clarity over what the client is trying to achieve, helping align the client and planner behind the same goal. This can be quite a challenge for clients, as many will not have thought about giving purpose to their money.
Comprehension – Resources available to clients to help achieve the plan. The good old fact-finding, information-gathering exercise, bringing comprehension to the client about what they have and where it is. Rather than focusing on what we already know about a client, we can tease out what we don’t know.
Choice – Once we have established what the client is looking to achieve and the resources available, we can model various scenarios. Seeing their future brought to life creates engagement with clients and opens up conversations. It gives them choice and power to significantly enhance their life.
Control – Once a plan is agreed, we improve the client’s chances of success by matching the plan with financial resources. This positions any financial recommendations we believe are needed for the client to maintain control of their plan, knowing what is in the right place and what is not yet.
Confidence – The ongoing client relationship and regular review. Client circumstances and objectives change, and assumptions originally made need to be updated. The long-term relationship we build with clients gives them confidence that they are on track to achieve their ambitions. The review revisits and refreshes the previous four outcomes.
“This approach does not tell the adviser what to do or how to do it,” continues Parkes. “It says that to deliver financial planning, we should work to these five outcomes with all of our clients. It will take time.
“If we can embed these outcomes into our businesses, we will have taken a massive step forward in uniting our profession and in the evolution of financial planning.
It will also provide an approach that aspiring planners and the next generation can adopt to be able to deliver a truly client-focused service.”
Image credit | iStock
Why 'POWER' Planning?
The word ‘power’ came directly from conversations with consumers – clients of financial planning firms. You can find five of these conversations on the PFS POWER website: https://pfspower.org/category/videos/client-videos
“The power that financial planning gives you as a person is massive... It gives you knowledge, and evidence for you to make choices.” Christine
“Thanks to the power of financial planning... I had the freedom to make the decision to stop working full-time.” Yvonne