Journal of Financial Planning: January 2020
Ryan S. Galiotto, CFP®, is the succeeding adviser of Fields Financial Services in Hopwood, Penn. He specializes in helping next generation clients manage their student loan debt and authors the blog YourBestFinancialLife.com. He holds an MBA from Waynesburg University.
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A common problem that many financial planning firms are struggling with today is how to best bring in the next generation of clients. Most firms fail at bringing in younger clients for one simple reason: they’re not focusing on the biggest financial concern in young people’s lives.
According to the U.S. Department of Education, as of the third quarter of 2019, a total of 42 million student loan borrowers had amassed a grand total of $1.48 trillion in federal debt, up from $657 billion just 10 years prior. Of those 42 million borrowers, 29 million are between the ages of 25 and 49.1
With the amount of education debt growing so quickly within the very demographic most firms are trying to reach, student loan planning is arguably essential for the longevity of financial planning firms. If your firm isn’t offering solutions to help these younger clients eliminate and/or manage their debt today, you’ll likely miss the opportunity to build long-term relationships with your clients of tomorrow.
Fortunately, planners—and their firms—have many things they can start doing today to gain expertise in student loan planning and begin cultivating the conversations that lead to better relationships with current clients’ children and/or lead to working with new, younger clients. And, most planners can do this without much disruption to current service models.
Understand How Student Loans Impact the Financial Plan
The starting point of effectively advising clients on college debt is understanding the different elements of student loans, how they can impact your client’s financial plans, and how you can identify and find solutions to help your clients best manage that debt.
While student loans are quite the in-depth topic, planners should have a basic knowledge of the different types of loans (federal loans versus private loans), the difference between federal Direct loans and federal Family Education Loans (FFEL), the different income-driven repayment plans associated with federal loans, the different forgiveness programs available, and how student loan refinancing and consolidation can have a positive or negative impact on a student’s debt management options.
If you’re unfamiliar with any of these items, the best starting place I’ve found to learn more is the U.S. Department of Education’s federal student aid website, www.studentloans.gov. This website, produced directly by the Department of Education, is full of videos, articles, and a helpful glossary of terms to build your basic knowledge of student loans.
Once you have a fundamental knowledge of student loans, you can start “bolting on” student loan planning services to your practice. I have found the two best ways to do this are to create a value-add service for your current clients, and/or create a standalone service for new or existing clients.
Create a Value-Add Service for Current Clients
Your best advisory clients have one asset they cherish more than their money: their children. Watching their children struggle with debt is likely keeping them awake just as much, if not more, than their own children.
Generational relationships are a key factor in the longevity of your firm. By offering to help your client’s children create a pathway to debt elimination, you’ll not only create a generational relationship within the family, but you’ll also build a high level of rapport with the family because you’re the professional adviser helping them sleep better at night. This is an important piece some financial planners overlook.
You can add student loan planning as a “value-add” service for current clients by offering to create a student loan debt management plan for their children. In a marketplace dominated by the 1 percent advisory fee, this is another way to stand out against other planners and advisers in your area and help you do more meaningful, and impactful, work for your clients. Keep in mind that your current clients may have Parent PLUS loans that are impacting their retirement and other financial decisions.
While this solution may not lead to an immediate financial gain on your firm’s top or bottom line, you can almost ensure that when mom and dad eventually transfer assets to their children, you’ll still be the family’s financial planner.
Create a New Standalone Service
While your current clients’ children are a great way to bring in student loan planning clients, they’re likely not going to be the only source of student loan clients you’ll meet. You shouldn’t discount the possibility of working with younger individuals who aren’t currently affiliated with your firm.
Many advisory firms, including my own, are creating a standalone service for those young people who just need to build a pathway to debt elimination. Unlike the previously mentioned solution, creating a standalone service can have an immediate financial impact on your firm by providing the service for a flat or hourly fee.
At my firm, we charge a flat fee of $350 for simple cases and $500 for more complex cases. This is a one-time fee that includes a one-hour initial consultation and fact-finding session, a one-hour presentation meeting explaining the solutions we’ve come up with, and an annual email drip campaign to check up on the client’s progress. For clients pursuing Public Service Loan Forgiveness, we also reach out to them annually to remind them to re-certify their income or submit new employment certification forms. We also provide unlimited email support.
A standalone service like this can be an entry point to your firm for future high net worth clients who are currently impacted by large student loan balances. Some of the professions impacted most by student loan debt include doctors, nurses, psychologists, and teachers. These may be professions that your firm is targeting already, so why not use student loan planning to grab the next generation of your target clients?
Let Younger Planners Lead the Charge
Your firm needs more than just younger clients to ensure its longevity; it also needs younger planners. You likely already have one young professional, or a maybe few, in your office who plan to succeed you one day. If learning about student loans seems like a daunting task given your current client load and work schedule, why not offload that responsibility to the next generation? This seems to be the solution many established planning firms are utilizing.
Younger planners are typically looking for two things: more client interactions and more revenue. Student loan planning accomplishes both of these tasks while effectively positioning the younger planners in your firm as your client’s next financial quarterback once you retire.
Your current advisory clients will appreciate knowing that their family’s financial needs will continue to be serviced by someone who understands them once the firm’s founders have retired, and they’ll appreciate that your firm is creating a team to help service them today.
The benefit for many firm owners is that the firm can offer these services without a huge time commitment on the founder’s part. Identify an up-and-coming planner in your office who is interested in solving clients’ student loan questions and concerns, and designate him or her the firm’s “student loan expert.” Make sure all your clients know this person is the student loan expert on your team.
This is the strategy my firm employed when we decided to start offering student loan planning to clients almost two years ago. The older advisers in my office tasked me with building a deep knowledge of student loans and then advertised me to clients as our office’s student loan expert. When questions regarding student loans come up, I am called into the meetings for further assistance.
Several great resources are available to help build you or your team’s expertise in student loans. One resource I’ve used is the Student Loan Practice Workshop offered by Heather Jarvis (AskHeatherJarvis.com). She does a great job providing an in-depth look at student loans.
For planners looking to build their knowledge of student loans while learning the best practices for integrating these services into your current practice, TheStudentLoanPractice.com is a great tool. (In full disclosure, this is a course I put together; however, this course was built by a financial adviser, for financial advisers.)
Lastly, the CSLA Board of Standards (cslainstitute.org) offers the Certified Student Loan Professional (CSLP®) designation for planners and advisers looking to offer student loan planning and consulting. I do not have this designation personally, but it has been growing in popularity with younger planners and advisers.
Spread the Message
Younger clients impacted by student loans are likely searching for debt management help in the manner that best fits their schedule and lifestyle—the internet. In order to reach these clients, you should hone your marketing efforts to platforms such as blogging, social media, and podcasts.
Blogging and social media are extremely effective tools to help you not only place your message and services online, but also to demonstrate your knowledge on specific topics before you even meet with potential clients.
Many younger clients value time more than money. They’ve grown up in an era where the answers to their questions are just a Google search away. This means that when they set out to find a trusted professional, they want to make sure they find the right fit for them quickly.
If you don’t believe me, scour social media and you’ll find young people asking their trusted social networks for recommendations on things such as restaurants, dog groomers, real estate agents, doctors, and more. This is where you need to quickly demonstrate you’re the best in your field at helping them eliminate their debt.
Blogging, social media, and podcasts are all excellent ways to demonstrate your knowledge of student loans while also targeting young people. Be sure to create targeted content around valuable student loan information and publish this content frequently to make sure these young professionals see you actively participating in this space.
Target a Specific Niche, then Expand
Student loan planning isn’t a one-size-fits-all program. Different professions require different types of planning and consulting. This creates an opportunity to further establish yourself as the go-to professional for very specific student loan planning.
The most successful firms in this arena avoid targeting everyone with student loan debt, and instead target specific professions. This allows those firms to learn the ins and outs of the specific student loan planning needs of these individuals to maximize the benefit they can provide.
For instance, many federal student loan borrowers working in the non-profit sector are eligible for the Public Service Loan Forgiveness (PSLF) program. You may think this is a great opportunity to attract non-profit workers, but the truth is, this is still too broad a range to target.
Did you know there are specific forgiveness programs for nurses, teachers, medical professionals, and active duty military members? You could miss those opportunities to connect with clients in meaningful ways if your focus is too broad.
Find a profession that you enjoy working with and learn everything there is to know about managing student loan debt in that arena. Establish yourself as the expert student loan planner for those specific individuals, then create online content (think blogging, social media, and podcasts) targeted just to them.
Robert Lopez, CFP®, founder of FP Guidance in Phoenix, Arizona, was able to successfully grow his firm by leveraging his wife’s career network of psychologists and health care professionals. After helping his wife, a psychologist, with her student loan needs, Robert found that many of her colleagues in the profession also needed guidance with their student loans.
By gaining an understanding of the unique student loan needs of psychologists and other health care professionals, Robert established himself as the student loan expert for those professionals. Today, he markets his service exclusively to those professionals. As a result, he has created a pipeline of psychologist and health care referrals and has been able to quickly scale up his young practice.
Grow Your Following
Financial planning is largely a profession driven by referrals, as we all know. Fortunately, those individuals who are impacted by student loan debt are likely friends with a lot of other individuals also impacted by this type of debt, as we saw in the case of Robert Lopez and his wife’s network of psychologists.
To ensure that your message is spread to as many targeted student loan prospects as possible, make sure you’re asking the clients you work with, or even the companies that employ your target student loan prospect, for referrals.
For example, in my area, the two largest employers are non-profit hospital networks. Therefore, I was able to reach out to the recruiters of these hospitals and offer to help their new recruits with their student loan needs, specifically those who may be looking to take advantage of the PSLF program.
These employers were very receptive to having me speak to their employees and, in fact, have offered to let me speak to employees in other departments as well. This has placed me in front of many of my target prospects, while allowing the hospital to provide a small perk for employees.
Don’t Give Up
Establishing yourself or your firm as a student loan expert won’t happen overnight; it will take a lot of time and energy to build. Expect this process to roll out over the course of months or even years.
If you get frustrated with how slowly clients are coming in the door, remind yourself why you started offering this service in the first place. Millions of clients out there need your help—you just need to build rapport with them. Once you do, the prospecting end of the business will come more easily.
Speaking from personal experience, it took roughly 24 months to establish myself as an expert in his area. However, more recently, the amount of referrals have begun to accelerate rapidly. It just takes time.
Endnote
- See these and other stats at ifap.ed.gov/eannouncements/080719FSAPostsNewReportsToFSADataCenter.html and studentaid.ed.gov/sa/about/data-center/student/portfolio.