Many Advisors Say They Do Comprehensive Planning. The Facts Suggest Otherwise.

The research suggests that 57% of advisors fit into the category of “case-based planners,” meaning they provide modular issue-based planning with most clients.

Such advisors may still emphasize asset management as part of their value proposition, but they make some attempt at making the financial plan an important part of their deliverable. This is the biggest cohort of advisors identified by the research, and they control about 50% of the market with an average AUM level of $210 million.

Next comes the group that Cerulli labels as “comprehensive financial planners,” making up about 26% of all advisors overseeing 23% of total advised asset. This group has an average AUM of $230 million, according to Cerulli, and it provides complete financial plans with nearly all clients based on an extensive analysis of their goals, assets and liabilities.]

The final group in the report, dubbed “private wealth managers,” goes even further in the development and delivery of the financial plan.

This group represents about 10% of all advisors, but 18% of all advised assets, thanks to an average AUM level of $882 million. Such advisors deliver the standard planning capabilities complemented by specialty investment services, charitable giving, stock option planning, and complex trust and estate planning.

Are Advisors Overconfident?

Among the most striking elements of the report is Exhibit 5, which shows big differences between the perceived type of practice that advisors say they are running compared with an objective analysis of their practice type conducted by the researchers.

For example, while just 5% of polled advisors assessed their business model as being in the “case-based planner” category, the figure in the surveyed sample of advisors was 61%. Likewise, while 60% of advisors said they work in a “compressive financial planner” style practice, this was true for only 25%, based on Cerulli’s assessment.

Just as striking, 28% of polled advisors said they worked for a “private wealth manager” style practice, but just 6% of them actually do so.

Evolving the Service Offering

Advisors told Cerulli that the greatest challenges associated with adopting a more comprehensive service model are the time and the range of subject matter expertise required to provide these services.

“This is particularly true when comparing these services to investment management, which requires far less customization and thus can be implemented with relatively high levels of efficiency,” the authors point out.

Many practices choose to add specialized staff as part of moving from an issue-based planning approach to a more comprehensive planning model. This is one reason why comprehensive financial planner and private wealth manager practice types employ specialized staff with far greater frequency than investment-oriented practice types.

In particular, specialists operating in the advice realm — including para-planners and investment specialists — can remove a significant portion of the workload from a financial advisor’s plate, freeing up the advisor’s time to focus on delivering advice.

“For many advisors, including those affiliated with a broker-dealer, these specialists don’t need to be insourced,” the authors explain. “Many home offices provide a range of financial-planning-oriented support services that can be of significant value to smaller practices without the scale necessary to hire a full-time employee, and these resources can often help practices bridge the gap.”