Client Relationships Should Be the Focus in the Financial Planner's Changing World of Compensation

Spatafore, Anthony R.
August 1998
Journal of Financial Planning;Aug1998, Vol. 11 Issue 4, p113
Academic Journal
This article presents the author's opinion on the importance of client-relationship building to financial planners. The concept of personal financial planning was developed entirely to further client relationships. When a financial planner understands the client's goals, objectives and financial situation, the planner can communicate, analyze and recommend a pathway for the client. From the client's perspective, he or she will make more informed decisions because the financial planner has outlined the tax, estate, cash-flow, risk and investment alternatives and the interaction of such. In my mind, something is awry when an 80-page comprehensive financial plan billed at $2,250, which required 15 hours of data gathering, analysis and presentation, is compensated far less than completing a two-page variable annuity application and receiving a $10,000 commission. In a transaction-based business environment, compensation is based on assets moving from one place to another. As the amount of dollars involved in mutual fund transactions increased significantly, the cost or commissions to execute transactions decreased for financial planners. Consumer receptiveness toward fee-based asset management is gaining momentum. Television advertising and the Internet have accelerated this process. The third force influencing financial planners to change their compensation methods is within the profession.


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