Finding the Planning in Financial Planning

Abstract

• After four decades, the financial planning profession still lacks an overarching framework for organizing and testing the strategy-making (i.e. "planning") activities of its practitioners.

• An integrating framework is proposed that consists of five modes of strategy-making: planner-driven, data-driven, policy-driven, relationship-driven, and client-driven.

• Each of these five modes represent different relative roles for the planner and client in the planning process. The modes also fall along a parallel dimension of planning versus emergence.

• The proposed model is tested against measures of client trust and relationship commitment and the policy-driven mode is found to be the most powerful predictor of both.

• Client complexity is also analyzed as a predictor of client trust and commitment and it is found that trust and commitment are inversely related to the complexity of a client's circumstances.

• Finally, a factor analysis of planner strategy-making activities shows that planners in independent firms tend to favor data- and policy-driven approaches and those practicing at large financial services firms tend to be more dominant in the planner-driven mode.

Keywords: strategy, planning, financial planning, policies, policy-based financial planning, personal finance, financial advice, financial advisors, client trust, relationship commitment, relationship marketing, marketing

JEL Classification: D00, D11, D12, D18, D31, D83, D91