POWER Planning

A new Consumer Outcomes Focused approach to Financial Planning has the feelings and experiences of financial planning clients at its core

Gather together a large group of financial planning professionals and it is rare to find a common response to the question ‘What is financial planning?’ It means different things and a different process to each individual planner and adviser.

Gather together a group of financial planning clients and they can tell you exactly how financial planning has changed their lives. You will hear phrases like, “The power financial planning gives you as a person is massive”, “Financial planning gives you choice”, “It gives you the ability to make life changing decisions … make what was a pipe dream come true”, “The power to make the decision to stop working full time.”

By focusing on these human outcomes of financial planning, widely recognised by consumers, it’s possible to have a unified approach.

Created by the Personal Finance Society’s Financial Planning Practitioner Panel, POWER Planning encompasses an approach to financial planning focused on the consumer outcomes of: CLARITY, COMPREHENSION, CHOICE, CONTROL and CONFIDENCE.

With the advent of the FCA’s Consumer Duty and the principle ‘A firm must act to deliver good outcomes for retail clients’, we hope this new POWER Planning approach makes complying with this new Consumer Duty legislation a whole lot easier.

Consumer Outcome

CLARITY

“I’m much clearer about my personal ambitions”

Practitioner approach

In order to plan we need something to plan for.

Establishing needs and objectives is nothing new, but under this outcome, objectives must be based on human outcomes rather than financial ones.

Personal to our client and not generic.

Specific, measurable, assignable, realistic and time bound.

Examples could be …

Investing cash to maintain its value against inflation might be something a client wants to do but why? To invest cash to provide a pot of money to bridge a shortfall between pension income and expenditure gives us a ‘smart’ objective when we add numbers and a timeframe.

Or, a client wanting a pension review will simply get a product comparison unless it’s established why they have a pension in the first place.

Establishing a ‘smart’ objective brings CLARITY over what the client is trying to achieve and helps us align client and planner behind the same goal.

This can be quite a challenge for clients as many will not yet have thought about giving purpose to their money.

Practitioner skill

Coaching

Consumer Outcome

COMPREHENSION

“I now understand my current financial position”

Practitioner approach

Once we have CLARITY, something to plan for, we need to know what resources are available to our client to help them achieve their plan.

The good old fact finding exercise but slightly different.

Perhaps focus on what we don’t know yet. This could include:

  • Assets
  • Liabilities
  • Cash
  • Pensions
  • Investments
  • Income and expenditure
  • Wills
  • Power of Attorney
  • Gifts / Trusts
  • Attitude to Risk
  • Future legacies
  • And more …

Obtaining all this information gives us what we need to build a plan. Not only that, it gives us the opportunity to enhance the benefit of planning.

An example could be …

We know the client has a Will and that it reflects their wishes but do we know what is in the Will? If we do, charitable legacies could be brought forward to form part of the plan rather than the Will and the potential benefit realised while the client is still alive.

This type of information gathering can be of significant emotional value to the client. Without the detail this will not form part of the plan.

It also brings COMPREHENSION to the client over the entirety of what they have and where it is.

Practitioner skill

Comprehensive fact finding

Consumer Outcome

CHOICE

“I have evidence to choose what I do next”

Practitioner approach

Once we have established what our client is looking to achieve and the resources they have available to them, we can model various scenarios which will result in us having a plan to work towards.

Cashflow modelling can be a useful tool to obtain information from a client not yet divulged. For some clients, seeing their future brought to life through the modelling of various scenarios creates engagement and opens up conversations.

It gives a clear vision of the future and choice over things such as retirement, standard of living, buckets lists …

It’s also important to challenge your clients about certain scenarios … can things be done better, sooner, can quality of life be improved.

Possible examples …

A client may wish to retire at 60 on an income of £30,000 per annum. Can they retire at 58? If they work until 62, can they retire on £35,000?

A client may have a wish list of experiences they are not sure they can afford. Including these experiences in the model can potentially make them a reality. We know a lot of clients need permission to spend money.

This outcome gives the client CHOICE that can significantly enhance their life.

Practitioner skill

Cashflow and scenario modelling

Consumer Outcome

CONTROL

“I am now in control of achieving my ambitions”

Practitioner approach

Once a plan has been agreed, the next outcome is to improve the client’s chances of success.

If we consider COMPREHENSION above, are all the resources available to the client in a good place to give the client a good chance of achieving their plan? What can we do to help the client improve their chances of success?

This all helps to position the financial advice that we recommend.

An example could be …

If we believe a client should transfer their pension, without a link to a wider plan, we are just providing a product comparison.

If linked to a plan, our advice changes to … ‘in order to improve the client’s chances of success, we recommend they do a, b and c. The link to the plan gives advice meaning.

If we expand the concept of improving a client’s chances of success out to all the resources identified earlier, we give ourselves a list of advice that we believe should be implemented for every client.

This precision also helps the client feel in CONTROL of their plan knowing everything is in the right place.

Practitioner skill

Regulated financial advice

Consumer Outcome

CONFIDENCE

“My plan can evolve with my circumstances”

Practitioner approach

Regularly reviewing the plan is an essential part of advice. It is the long term relationship that we build with our clients that gives them CONFIDENCE that they are on track to achieve their ambitions.

The review re-visits CLARITY, COMPREHENSION, CHOICE and CONTROL. Is the client still on track with the long term plan or has it changed? Does the client still have the same resource to achieve the plan?

Once we know this we can use modelling to further improve the client’s chances of success.

Practitioner skill

Relationship skills to look after a client for life

Register your interest in POWER Planning


The Power Planning approach is an exciting new initiative with a consumer outcomes focus that aligns with FCA’s consumer duty.


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