Financial advisors dedicate most of their time to managing money and creating financial value, but at the end of the day, they often realize that the most valuable thing is time. According to a Kitces Research study, advisors spend no more than half of their time on tasks directly related to client activities and only 20% of their time actually meeting with clients. For an industry whose lifeblood is its clientele, this is concerning.
With advances in financial planning software, you’d think advisors could delegate office tasks, but as the Kitces Research study found, the software does not appear to be the issue or the solution. The adoption of more advanced software didn’t help advisors save time. It did help them create more rigorous plans, but those plans aren’t much good if you don’t have the time to present them in all their glory to your clients.
A better solution may be to expand your team; after all, if the software doesn’t cut it, maybe a human will. Some time-strapped financial planning firms are turning to paraplanners for support. Like paralegals are to a law firm, paraplanners can play key supporting roles in financial planning firms.
What is a Paraplanner?
A paraplanner is typically a junior member of a financial services firm, who deals with the administrative tasks required in the client-advisor relationship. A paraplanner fills a supporting role for a financial services firm, often doing the background work and data analysis to support their advisors. The role is more than an office manager, although the two used to be nearly synonymous.
“A paraplanner can range from entry-level to experienced,” says Alex Hopkin, founder and CEO of Simply Paraplanner. “They can have their CFP, be a CFP candidate or choose not to have a designation. They can be a W-2 employee or have their own paraplanning business working with multiple advisors. They can be a part of a firm on a part-time or full-time basis. And they are typically back or middle office, with strong technical financial planning knowledge.”
A paraplanner’s duties will vary depending on their level of experience. Entry-level paraplanners may focus on data entry, accounting paperwork, reviewing financial documents and other service-oriented tasks. Meanwhile, a more experienced paraplanner could do all the above plus create actual financial plans, onboard clients and even present financial plans to clients.
At UBS, paraplanners, called wealth planning associates, “provide professional expertise and consultancy to create and deliver financial plans, propose wealth management opportunities and deliver advice to clients,” says Sean Howe, a senior vice president of wealth management and portfolio manager with UBS Financial Services in the District of Columbia. “They serve as financial planning advocates and experts, with the goal of building relationships with advisors as a trusted partner.”
The paraplanner at Capital Asset Management Group is the first the company hired. She started as an intern last summer and did such a good job, they made her an offer at the end of her internship. She now supports the service and associate advisors.
“(She) serves as the eyes and ears for the planning team,” says Samuel Boyd, a CFP and senior vice president of Capital Asset Management Group. “Her attendance in all meetings allows for a large amount of client-facing, in-meeting experience in an effort to accelerate her professional development while serving in a supporting and quality assurance capacity.”
When Should Advisors Hire a Paraplanner?
“Paraplanners can be vital to a firm that is focused on comprehensive financial planning for its clients,” says Ken Van Leeuwen, managing director and founder of Van Leeuwen and Company in New Jersey. “They work with all the data, bank statements, tax returns, income statements and other data to create the ‘plan document.’ This allows the advisor or financial planner to focus their time on meeting with clients and making those plans come to life.”
By taking care of the data entry work that goes into creating a financial plan, paraplanners enable advisors to spend more of their time working face to face with clients, or as Van Leeuwen puts it: bringing those financial plans to life.
“An advisor should consider hiring a paraplanner when they feel that there is not enough time in the day to get the tasks done, when they want to scale their business but can’t seem to make that happen or when they want to become more profitable,” Hopkin says.
That said, if all you need is a data entry clerk, a paraplanner may not be worthwhile. The fact that the role is a skilled position that requires education and experience makes paraplanners too valuable to be used only for busywork. In Howe’s opinion, a qualified paraplanner should be hired directly with clients.
Van Leeuwen agrees that “hiring a paraplanner to do administrative functions might be a waste of talent and money. The paraplanner position requires a skill set that some people may not possess, so hiring the right paraplanner for your practice is imperative.”
How to Hire a Paraplanner
“The most important aspect of hiring anyone on your team is compatibility and culture fit,” Hopkin says. “Sure, skills, designations, knowledge and experience are all important, but if you don’t get along with your team, it will be hard to work towards the same goals and objectives.”
At Simply Paraplanner, every applicant and hiring advisor completes a Kolbe Index Assessment, a means of measuring a person’s cognitive strengths or method of operation and a personality questionnaire to determine compatibility.
Beyond personal compatibility, Hopkin says to outline what you’re looking for in the role so applicants know what would be expected of them. Be clear on elements, such as if the role will be full- or part-time, back-office or client-facing, entry-level or experienced.
Howe believes working with a paraplanner who is a CFP is important. “The rigorous education requirement, ethical standards and continuing education are fundamental to being a well-rounded practitioner,” he says. “The curriculum also provides a wealth of knowledge as they are building experience working with clients.”
He also suggests having a defined career development path for the paraplanner. “We have found this role attracts driven, organized and growth-minded individuals,” he says. “Thus, providing a natural segue into becoming a financial advisor for the younger population, which addresses the issue we face in our aging profession.”
But not all paraplanners need to be aspiring financial advisors. Van Leeuwen describes two types of paraplanners: the future financial advisor and the career paraplanner. Paraplanners who hope to climb the ranks to become financial advisors can be beneficial to firms trying to grow their practice. “This is a great way to test someone out and see if they are a good fit in the firm before having client interactions,” Van Leeuwen says.
Career paraplanners who have no intention of moving up the ladder can also be great assets to a firm. Since they’ll be in the same role throughout their careers, they “would presumably become an expert on the firm’s clients and planning philosophy,” Van Leeuwen says.
The point is not that one type of paraplanner is better than the other. It’s that advisors should be clear on which type of paraplanner they’re looking for before seeking applicants.
If you’re new to the paraplanner field, as Boyd and his team at Capital Asset Management Group were, you might take a page from their playbook and start with an internship. This will ensure you develop a repeatable hiring process that can be developed and finessed over time.
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