How many new financial plans and clients can a financial planner take care of in a year?

I’ve always had a rather altruistic view concerning the role and purpose of financial planning. In my opinion, a financial plan is a tool to determine the most prudent course of action. Just as a physician orders various tests to assist in the diagnosis, I consider the plan as the instrument which directs my recommendations. Therefore, I rarely render advice before I review the results of the plan.

I would hope that the majority of financial planners share this paradigm. I would also contend that there are several who do not and use the “financial plan” as a tool to increase product sales. The difference depends on the focus of the individual advisor. Either they are sales driven or advice driven. You cannot act in one fashion and profess another, although many do.

The issue becomes capacity. How many new comprehensive financial plans can one advisor generate in a year while still taking care of his existing clients? Remember, the more comprehensive the plan is, the lower the number will be. The general consensus at JP Morgan seems to be somewhere between 20 and 24 per year, according to an article in Investment Advisor magazine, written by Mike Patton. I would personally be hard pressed to do over 3 completely comprehensive financial plans per year and still be able to take proper care of my current clients.

Another relevant question is this. How often will you update a client’s plan? It took me several years to settle this issue, but a few years ago I decided that updating each part of a client’s financial plan every 2 to 3 years, during periodic reviews, works best.  However, this can often get preempted during periods of time like the 2008 market meltdown, when a client’s needs are much different than during good times. I inform clients of this at the beginning of our relationship so they will know what to expect.

Here’s the challenge. As the number of planning clients increase, so do the number of plan updates, after a few years it can become problematic. For example, let’s assume I have 64 clients and gain 3 new planning clients each year over the next three years. In year two you have 70 updates and 3 new plans to prepare. In year three, you have 73 plans to update and 3 new plans to prepare. Each year the task becomes increasingly difficult. I am beginning to sense this so I have been trying to streamline our processes, but at what point does the ability to take new clients or keep smaller less productive clients collide?

An Investment That Is A "Guaranteed" Loser

Why would any investment "opportunity" guarantee a negative return to its investors, who happen to be some of the shrewdest minds in the banking industry? 

This situation actually exists today--and the story is interesting.  The European Central Bank has recently dropped its bank deposit rate to -0.1%.  That means that if European-based lending institutions invest their assets in the Central Bank's money fund, they are guaranteed to receive less money when they take it back out again.  The fund is a guaranteed loser.

The comparable number in the U.S.--the return offered by the U.S. Federal Reserve to banks that want to park their excess capital in an interest-bearing account--is 0.25%.  That isn't very much, but many banks find it preferable to, for example, giving you a 30-year mortgage at around 4% (current rates, in other words) when the Fed's own economists expect the Fed Funds rate to reach 4% sometime in the next year or two.  This explains why $4.34 trillion in bank reserves are sitting on the sidelines at a time when our economy sorely needs an investment boost.  (You can see a graph of total reserve assets here: http://research.stlouisfed.org/fred2/series/WALCL).  And it also explains why people with excellent credit scores are having trouble finding a bank willing to finance their home purchase.

So why has the ECB dropped its own rate below zero?  By making it actually painful to park banking reserves, it wants to shake that sleeping money out of its accounts and back where it belongs: into the European economy.  The strategy appears to be working; the graph shows that reserves have dropped--very suddenly, since the announcement--to their lowest point since 2011.  This may be the only example in history where billions of dollars were invested in an investment "opportunity" that was absolutely, positively guaranteed to lose money.

GDP Good News or Bad News?

July joined January as the only two down months for the U.S. investment markets, and the month’s last week (down 3%) provided yet another exciting lurch of the roller coaster.  But if you put it all in perspective, July’s overall 1.5% decline is relatively small. 

One reason investors seem to be optimistic despite the market downturn is the report by the Bureau of Economic Analysis showing that the U.S. gross domestic product grew by a robust 4% rate in the second quarter this year.  This would represent a pretty large reversal from the 2.1% decline in the first quarter.

Any time the economy grows at a 4% rate, it’s an indication that we’re living in a terrific business climate.  But there is reason to wonder about that number and whether it reflects what many people seem to think it does.  For one thing, the final GDP figure will be revised at least twice between now and September.  These revisions can be significant.  The first quarter estimates initially came in at 0.1% growth, then were revised to a 1% drop, then a much larger 2.9% drop before the BEA revised it back to -2.1%. 

For another, the second quarter may have picked up some of the growth that was suppressed in the first quarter by the well-publicized weather anomalies.  Indeed, a big part of the final GDP number came in the form of replenishing inventories and stockpiles, not real spending, which grew by just 2.3% for the quarter.  (Of course, that, too, is subject to heavy revision.)

Job growth has been rising but the housing recovery, so robust last year, has stalled.  People are saving more and spending less.  Gas prices remain about where they were before the ISIS advance through Syria and Iraq.  Add it all up, and we are likely looking at another year of below-historical-average growth, rather than the long-anticipated economic takeoff which was originally projected for 2015 or, perhaps, later.  If the stock markets were buoyed by the comforting feeling that good times are here again, they may experience disappointment when the final numbers come in.

But, ironically, that may actually be good news for the markets in the longer term.  Fed Chairperson Janet Yellen is watching the economy closely for signs of overheating--for, in other words, signs of 4% or greater economic growth.  If the second quarter number is revised downward, and the rest of the year shows steady moderate growth, the Fed is likely to keep interest rates low, stimulating both the economy and the stock market, for the foreseeable future.

Where the Best Jobs Are Today

What are the best college majors for students who want a lucrative career and low unemployment in their field?  Recently, the Kiplinger magazine ranked the top ten (you can find the slideshow here: http://www.kiplinger.com/slideshow/business/T012-S001-10-best-college-majors-for-a-lucrative-career/index.html), starting with “Pharmacy and “Pharmaceutical Sciences,” where starting salaries average $42,100 and mid-career salaries average $120,000.  Unemployment rates for these graduates are 2.5%, and job growth is projected at 36.4% a year.  This degree leads to a career as a pharmacist or researcher in the pharmaceutical industry (designing and developing drugs).

Second on the list is “Computer Science,” with a starting salary averaging $58,400, mid-career: $100,000.  Job growth is projected at 18.7% a year, and the unemployment rate for these graduates is 4.7%.  Students are advised to master computer languages C++ and Java, and be prepared to work in artificial intelligence, computer system organization and digital system design.

Third?  “Civil Engineering” ($53,800; $88,800, 19.4% job growth and 4% unemployment rate).  These are the people who design and supervise large construction projects--like airports, sewer systems and tunnels.

Numbers four through ten are “Information Systems Management” (which marries computer courses with project management skills); “Nursing;” “Information Systems” (implementing technology within a company or organization, often best supplemented with a minor in business); “Finance” (requiring economics, statistics and calculus, plus accounting and financial markets courses); “Mathematics” (mastering number theory and real analysis for work with government and scientific research teams); “Information Science” (database management and programming, plus study of human-computer interaction); and “Construction: (requires a solid foundation of math and science courses, including the physics of building a structure and the accounting to build the budget for it).

The magazine also ranked the worst careers: the list included “Human Services and Community Organization” ($32,900; $41,100; 8.1% unemployment rate); “Fine Arts” ($31,800; $53,700; 7.3%); “Social Work” ($33,100; $45,300; 6.5% unemployment rate); “Early Childhood Education ($29,200; $37,600; 5.5% unemployment rate); “Art History” ($36,400; $54,000; 8.3%); “Interdisciplinary Studies” (majors you design yourself; $37,500; $51,000; 8.5%); “Studio Arts” ($35,700; $53,200; 7.3%); “Mass Media” ($34,400; $59,800; 7.9%); “Humanities” ($35,600; $60,100; 9.8%); and “Family Consumer Sciences” (aka Home Economics; $34,700; $47,800; 5.6%).