Personal Financial Planning: One of '84'S Notable Buzzwords

By Gross, Laura | American Banker, December 27, 1984 | Go to article overview

Personal Financial Planning: One of '84'S Notable Buzzwords


Gross, Laura, American Banker


NEW YORK -- As 1984 wanes, the year's financial services buzzwords swarm around a reporter's desk clamoring for mention in the last column of the year.

Nonbank banks, brokered deposits, market segmentation, distribution systems, hubs and satellites, relationship banking, self-service banking, lifeline banking, consumerism, reregulation, deregulation, personal financial planning: which is most worthy?

No one could deny that personal financial planning has been one of 1984's financial services "hot topics." It has surfaced as the subject of discussion at numerous conferences and conventions and has been introduced by various financial services companies, sometimes as a product in its own right and sometimes as a process through which other products are sold.

Whichever alternative they chose -- product or process -- financial institutions throughout the year increasingly have gathered about the personal financial planning maypole.

What is it in 1984's air that caused this twofold concept to become the year's favorite strategic choice of consumer financial services executives?

Seen in a vacuum, personal financial planning -- either process or product -- is a dandy little strategy for keeping close to the customer, an essential practice if you're in a service business, according to the authors of the much heralded "In Search of Excellence."

That could be one reason for the concept's growing popularity this year, a year when everyone who was anyone read that book (and anyone who was no one said he had read it).

But, seen in perspective, financial planning -- the process -- allows financial services to project an image of helpmate and counselor, a guise appropriate to charming often frustrated consumers who feel anything but warmly toward their financial institutions amid deregulation's confusion.

That is certainly another reason for the concept's popularity, especially among commercial bankers. Bankers particularly like financial planning because they think it allows them to distinguish themselves in the consumer's eye from so many other competitors advertising 10.2% and home improvement loans.

Another reason that financial services executives have latched onto personal financial planning is that it has great appeal among affluent individuals. And these executives like having affluent individuals as customers -- and they like keeping their affluent customers happy. Under 30, Earning $40,000

According to a nationwide survey of 3,000 consumers conducted in October for Infoware Corp., Nashville, people who earn $40,000 or more annually are most attracted to financial planning. (Ironically, the study found, so are people under age 30, most of whom don't make that much money. This indicates a definite demand for a different kind of financial planning that is less costly to produce and, hence, less expensive for the public.)

The Infoware study, conducted by Market Facts Inc., Chicago, found that 8% of American consumers would be interested in financial planning offered by a bank or thrift. But among the other 92%, three-fourths said they were not interested because financial planning services were only for people with a lot of money. That is a perception that, possibly, could be changed.

As far as price sensitivity is concerned, Market Facts concluded that "a price of up to $500 for the first year can easily be charged for PFP." Interest is roughly the same, the researchers said, at the $100, $300, and $500 price levels. Clearly they are talking about the product, not the process.

Lewis Mandell, director of the Mandell Institute for financial planning and another expert in this area, claims that "a large segment of the more affluent consumers need and want financial planning but do not regard it as a separate service for which they will pay a great deal. …

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