A lot more people need financial support – according to a 2020 survey by FP Canada, only 57% of Canadians said they were confident of achieving their financial goals (down 10 points from the previous survey in 2018), 71% do not work with a professional financial planner.
“A lot of people don’t know what financial planning is. They just know they have a lot of questions that aren’t answered, ”said David O’Leary, founder of Kind Wealth, a Toronto-based paid planning company. “They assume it’s nobody’s job to help them.”
Those with insufficient net worth to attract a counselor’s interest may be right. But “lighting design” – a term that has grown in popularity with the rise of robo-advisors – could be a solution.
Light planning “is not product-oriented; It’s planning-driven, but not that important to either the advisor or the client, “said Preet Banerjee, founder of MoneyGaps in Toronto, lightweight financial planning software for advisors. (AltruWisdom, based in Calgary, is another software that provides lightweight financial planning, but directly for consumers.)
Instead of a comprehensive plan, MoneyGaps conducts a “gap analysis,” which assigns customer letter grades based on their performance in eight financial categories, including debt analysis, life insurance and cash flow.
“A lot of people don’t want a comprehensive plan until they come to an important money moment in their life,” said Banerjee. “Until then, they just want to get on with their lives and keep doing the right things so that they are in a place where they can benefit from more extensive planning.”
O’Leary also has clients with this profile. While about half of Kind Wealth’s clients have a high level of commitment to the company, the other half have situations simple enough to warrant what he calls a “quick start plan”.
A typical quick start, prepared over three to four weeks, includes recording and reviewing meetings and analyzing all of the customer’s planning problems. “But we’re not going to solve these problems over time. We’re not going to help get it all done or answer questions later, ”said O’Leary. “We point them in the right direction and then the commitment is over.” Typically, these plans cost around $ 1,500.
Banerjee said he saw consultants do light planning for children of existing clients. potential interested parties who do not yet meet their minimum requirements; and customers on a lighting design retainer, especially.
He added that lighting design can also work for customers who “don’t even know what their life will be like in five years, no matter 40.” For these types of customers, spending a lot of time looking at theirs makes limited sense Optimize plan, said Banerjee. Consultants often tell him: “I have to get to the human component. Let me deal with the things that matter to you and I will focus on what hopefully prepares you for more [comprehensive] Planning options. “
Darryl Brown, founder and investment planner at You & Yours Financial, a Toronto-based fee-only company, said he valued the philosophy of lighting design but cautioned advisors should refuse simplistic reviews.
“Lots of customers want us to wave our magic wand,” said Brown, giving a simple answer to a classic planning question like, “TFSA or RRSP?” Brown usually replies by saying, “We can’t answer certain questions in isolation because your financial profile is interconnected across these different areas.”
Brown said that a comprehensive financial planning process has “a tremendous amount of value” – putting a consultant on his back and putting all these documents together and painting the picture “- even if a client doesn’t fully execute the resulting plan.
“We obviously want [full] Implementation for the plan, but if it is not, it does not make a commitment to a financial plan unsuccessful. I think it’s valuable to have an unbiased view, ”said Brown. “The challenge we have as a profession is communicating to clients that there is a lot of value in creating a comprehensive financial plan, but not necessarily for everyone and at any particular time in their life.”
Banerjee emphasized that lighting design should not be interpreted as an excuse for cutting corners – but even if there is, there can still be benefits.
“There are so many people who don’t plan, period. They don’t get full planning, they don’t get light planning – they just get product sales, ”said Banerjee. “There are far more people who would benefit from moving from no planning to easy planning than from situations in which a consultant has the opportunity to evade responsibility.”