Does the Plan Make Cents?

By Ed Morrow

After reviewing over a thousand personal financial plans, I am amazed at how few of them attempt to relate the time, trouble and fees of the plan with the ultimate benefits that are achieved.

Suppose the client paid a fee of $1,000 and we do not include all the time gathering facts, determining objectives and reviewing the Plan documentation. If the recommendations achieve an improvement of $10,000 in ten years, we might say the present value of that is $5,000. If a client pays $1,000 and receives a benefit of $5,000 then we have an improvement of $5 for every $1. That 5 to 1.
Pretty good, I’d say. (Some plans achieve far more.)

If a planner delivers a benefit to cost ratio of 5 to 1, doesn’t he or she deserve referrals?

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