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Compliance Manual
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Business Continuity Plan
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Wealth Management Binder
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Wealth Management Binder Overview
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Over the nine years that I have been working with clients, I have come to the
realization that a financial plan, as we classically think of it, may not be
the best package to deliver to the client. The classical financial plan usually
consists of six (plus) sections that are often bound in some fashion to
represent a book of sorts that captures where the client is today and what the
client needs to do to reach financial security in life. Of course, the
definition of financial security varies by client, so we'll leave that
undefined.
Having just summarily killed classical financial plans as we know them,
including the fifty or so that I have prepared over the years, I now need to
defend the substitute.
Enter the Wealth Management Binder (WMB). It is actually nothing
esoteric, and I cannot claim to have invented it. I have heard about the
concept of a client binder from time to time at various conferences. It just
has not been discussed much or been written up extensively that I have seen.
Besides our obvious interest in serving our clients well, we are
interested in maximizing productivity and the associated profitability. As I
prepared some fifty "books" (financial plans) during my first six years in
business, I could not help but feel at times that a lot of what I was doing was
more for me than the client. Worse, what I was doing for me I already knew,
meaning that I was wasting my time. There had to be a more productive way to do
these financial plans.
My first realization many years ago was that I was using the wrong
software to prepare the financial planning recommendations. I was using a word
processor to list all of the recommendations. A printed document coming from a
word processor was satisfactory for the moment, but how does one update the
status of each of those twenty recommendations during the next year while the
plan was being implemented? I found myself writing in the margins of the bound
plan document, and then rereading those notes over and over again in ensuing
years. No good I thought. We have to "close" the completed recommendations that
have been implemented, and focus on the recommendations that were not complete.
Drawing a parallel from my nuclear power plant construction days, where
we had some 40,000 incomplete items to complete that were all tracked by a
database, I realized that financial planning recommendations were similar
"incomplete items" that needed to be in a database. ProTracker Advantage was
born out of this realization. ProTracker now has an array of features that
exceeded my wildest imagination.I mention ProTracker because many ProTracker
reports provide much of the appropriate content for the Wealth Management
Binder. There is nothing like using canned reports from a database to update
the current status of clients on their way to financial security - however you
define it. Six hundred users of ProTracker cannot all be wrong.
First, let me describe the binder selection. What's the big deal about
selecting a binder, you ask? The big deal is your company image. The cover
alone says a lot about you, your firm, and the validity of the binder contents.
Take time to plan this image because it is partly marketing. Your clients may
show the binder to other prospects who may want "one of those things that you
did for the Joneses."
The Wealth Management Binder is a three-ring (D-ring) binder with twelve
custom-made tabs. Let me go over the attributes of the binder first. D-ring
binders tend to keep pages flatter, and they close more easily than regular
three-ring binders. They are generally of sturdier construction as well. We use
the Avery Dennison Framed View Binder, which has a
Lever-Lock feature to keep the binder from accidentally opening.
In addition to closing easier, the binder has a "framed view" window on
the front that permits us to insert an 8-1/2" by 11" custom-printed Mackensen
& Company heavyweight stock sheet with the client's name on it. Thus, our
company name, our company logo, and the inscription "Wealth Management for John
& Mary Sample" appear on the cover. Our company motto, "Navigating a clear
course toward your financial security," is imprinted on the stock. Clients are
impressed with our ability to turn an intangible relationship into something
tangible and very personal.
Let me digress on a small detail here…. Standard (cheaper) "clear view"
3-ring binders do not work particularly well because the stock insert has to be
8-1/2" by 11" in order to go through a laser printer to imprint the client's
name(s), yet the cover of the 3-ring binder is much wider than 8-1/2". As a
result, the stock insert in a standard clear view binder is likely to shift
around inside the clear plastic pocket, resulting in a less than professional
image. To counter this problem, we use the Avery Dennison Framed View Binder
cited above. The stock can still shift around, but a small piece of
double-stick tape in back of the stock holds the stock in place while the left
and right edges of the stock are neatly covered by the framed window. For a
picture of the Wealth Management Binder, go to Wealth
Management Binder Pictures.
The tabbed sections in the Wealth Management Binder cover all of the
areas of the classical financial plan and then some. Let me describe them in
sequence.
Notes: The Notes tab contains the Meeting Agenda prepared in
ProTracker. At the end of the client meeting, we print a Task List from
ProTracker that comprises all of the client's "to-do's." Employee action items
remain in the database and are printed by employee name and then acted upon. In
essence, the Task List focuses on the action items that the client has to do,
such as changing beneficiary designations on a 401(k) plan at work, and sending
in a $2,000 deposit for an IRA. We simply can't do that for them.
Two checkboxes on the Notes screen in ProTracker permit the planner to
designate on which report(s) the note should appear: Meeting Agenda, Task List,
or both. We have an 18" LCD monitor and a computer in our conference room so
that we can assign action items in ProTracker with the client right there at
the conference table. Clients like to walk out with their own Task List in
their Wealth Management Binder in order to promote action steps that they must
take to further their wealth.
Family Profile: We print the Client Summary report from
ProTracker, which lists the names of the family members, their dates of birth,
social security numbers, employers, job titles, and other pertinent personal
information. This report helps us identify children whose personal information
is missing. It keeps us mindful of the next generation and the associated
future wealth transfer issues.
Net Worth: We use the term "net worth" rather than "balance
sheet," because clients seem to relate to net worth more easily. Somehow, the
accounting term "balance sheet" does not convey the same clarity.
The Net Worth Statement is produced by ProTracker. Portfolio values are
imported electronically from Centerpiece and other portfolio management
systems, thereby avoiding the potential transcription errors and formula errors
associated with spreadsheets. You simply cannot afford to take the time to
manually transcribe numbers from a brokerage statement into a spreadsheet to
produce a net worth statement - not when it can be done en masse electronically
from a portfolio management system.
Goals & Objectives: Having established whom the client is
(Family Profile) and noted where they are today financially (Net Worth
Statement), it is time to understand their goals and objectives. Goals and
objectives are recorded in ProTracker so that they can be weighted and assessed
as to their stage of completeness. The Goals & Objectives report from
ProTracker forms the content for this tab.
The product of the weight assigned to a goal and the percentage
completion for the goal provides a progress score for that goal. The summation
of all of the client's progress scores provides a measure of financial progress
for the client. This concept is well documented in Ross Levin's book, The
Wealth Management Index, which is must reading for all financial advisors.
Cash Flow: Now that the goals and objectives have been
documented, we need to assess the current cash flow situation to bring some
money to bear on the goals. A cash flow worksheet in ProTracker facilitates
preparing a quick cash flow statement for the client.
Much of the client's cash flow items are already known through their tax
returns, insurance policies and asset descriptions. Our goal is to complete a
cash flow statement in thirty minutes or less prior to the client meeting, and
then let the client fill in the remaining holes during the meeting.
During our interactive meeting with the client, we can update the cash
flow items in ProTracker to obtain a balanced budget. This usually happens by
adjusting the savings and investment components, or by getting the client to
rein in some slushy areas that smack of overspending. There is nothing like the
hard, cold, cruel numbers on a computer screen right there in the conference
room. The 18" LCD monitor makes them very visible. Rather than sending the
client out the door to complete a cash flow form, the cash flow statement gets
completed on the spot with decisions made to allocate dollars to various
savings or expense categories. The clients like this participative and
interactive effort. The final cash flow statement is printed from ProTracker
and placed into the Wealth Management Binder.
Insurance: We enter all insurance policies into ProTracker and
then produce reports that summarize the important provisions of these policies
for the binder. Capital needs analyses are also placed behind this tab.
Taxes: We copy page one and two of the client's Form 1040 so that
they have a quick reference copy in the binder. The sheer bulk of many client
tax returns with associated W-2s and 1099s prohibit putting the complete tax
return in the binder. Besides, the marginal tax bracket for the client during
the last year is documented on the Client Summary report filed behind the
Family Profile tab discussed earlier.
Investments: The Investments tab contains the investment policy
statement, printouts from Morningstar, and custom portfolios created using
Principia Plus. This tab also gives the client a place to store quarterly
performance reports from us.
Retirement Planning: The Retirement Planning tab creates a home
for the retirement projections that we prepare for the client. We use the EISI
NaviPlan Extended software (www.naviplan.com)
to develop our retirement projections. Again, the 18"
LCD monitor on the conference table is useful in the retirement
planning effort.
We enter as much data as we can into NaviPlan prior to the client
meeting. We base our assumptions on prior information that the client has
provided, including the goals and objectives that they have expressed. During
the actual client meeting, we let the client modify the assumptions (within
reason) in NaviPlan and let them see first-hand that they simply cannot retire
at 50 like they thought! After setting a more realistic retirement date and
adjusting for other exigencies, the final most plausible scenario is then
printed in color and inserted into the Wealth Management Binder. We retain a
copy for our files.
Estate Planning: We review each client's estate plan carefully
and then enter the salient facts into ProTracker. There are screens for wills,
trusts, durable powers of attorney, health care proxies and final arrangements.
A summary report from ProTracker is placed behind the Estate Planning
tab to keep the client apprised of their current estate plans. From time to
time, we review these estate planning provisions with the client to be sure
they continue to reflect their desires. We also print three additional
ProTracker reports that provide details on beneficiary designations for the
client's insurance policies, tax-deferred accounts and trusts. This reports act
as a red flag to highlight missing or out-of-date beneficiaries.
Newsletters: The Newsletters tab gives the client a place to
store the quarterly newsletter that we publish.
Education Planning: The last tab provides a home for the
educational funding projections. We consider children who have money in their
own names in UTMA accounts as separate clients, since the money is not part of
the client's estate. We place the child's Net Worth Statement behind the
Education Planning tab so that it may be coupled with the funding projection.
During the development of the Wealth Management Binder concept, we had
to decide whether or not we wanted to maintain a parallel binder in our office
that was identical to what the client had in their binder. Because so much of
the information was already in ProTracker, we ultimately decided to save a few
trees and not maintain a parallel binder. So far, this decision has been a good
one. The instant retrievability of up-to-date client information from a
database is more beneficial than running down the hall to get a hardcopy client
binder on a shelf while the client is on hold on the phone.
What are the overall benefits of the Wealth Management Binder? There are
many. The first is recognition that a classical financial plan is a
transactional activity. The client pays a certain sum for a certain
deliverable. As we know, financial planning is a continuing process. The Wealth
Management Binder supports the constantly changing nature of the client's life,
and involves the client in the ongoing process. We ask each client to bring
their Wealth Management Binder with them to each client meeting. It is not the
end of the world if they do not, because they still walk out with a 3-hole
punched Task List that keeps them on the hook for their action items.
The second benefit for us as planners is the discipline that the Wealth
Management Binder requires on our side of the table. A client conference
requires advanced preparation and a thorough review. We are better planners as
a result of the effort.
Thirdly, since much of the data is printed from ProTracker, the reviews
are easier to do and more likely to be completed within a short time period.
This promotes better productivity, which naturally leads to better
profitability. Need I say more?
Warren J. Mackensen, CFP
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