Financial planning is a process that integrates the many aspects of an individual’s financial life into a plan that aligns with their financial situation, goals, and risk tolerance. These include things like budgeting, investment planning, insurance coverage, debt management, retirement planning, tax-saving strategies, and estate planning. Needless to say, this process is far from simple.
After all, financial planners have to dedicate a considerable amount of time and expertise to understanding a single client’s unique needs, goals, and situation, while also keeping up with market trends, regulatory changes, new financial products, law changes, and new investment opportunities. Juggling these responsibilities across multiple clients is even harder, which is why paraplanning has become an essential part of the financial planning process.
A financial planner is not the only person helping you achieve your financial goals! Paraplanners take on a supporting role and help financial planners behind the scenes. So what is paraplanning, and how exactly does a financial paraplanner help financial planners and advisors? Let’s answer some questions.
What is Paraplanning?
Let’s start off by understanding What is Paraplanning exactly. The word paraplanning is a combination of two words – the prefix ‘para’, which is Latin for besides or alongside, and ‘planner’, which refers particularly to a financial planner. Paraplanning is thus a component of financial planning, where individuals known as paraplanners work alongside financial planners to help them analyse data, prepare financial plans, conduct research, form investment strategies, and much more. You may have heard of paralegals in the legal field.
Well, a paraplanner in the financial services industry is quite similar to a paralegal! In many ways, a paraplanner is to a financial planner as a paralegal is to a lawyer – They both work behind the scenes and provide support to the main professional. This helps planners and financial advisors to use their limited time efficiently and also enables them to focus on dealing with their clients more effectively.
Why is Paraplanning Important?
A financial paraplanner supports financial advisors and planners by helping them create reports, analyse client data, conduct research, prepare financial plans, and conduct regular reviews. This not only improves the quality of service clients receive but also helps financial planners and advisors manage their precious time efficiently. Paraplanners allow them to dedicate more attention to interacting with clients and focus on creating financial strategies that align with the client’s financial goals and risk tolerance.
It’s also not uncommon for paraplanners to join client meetings with advisors to provide technical support, take notes, clarify complicated financial details, or answer questions related to the planning process. Collaborations like this can help strengthen the relationship between clients and financial advisors. For example, a paraplanner specialising in tax planning can address the specific questions a client may have about tax-saving investments, deductions, or law changes, which also allows the advisor to focus on the overall financial goals.
Key Responsibilities of a Paraplanner
Often, paraplanners are as qualified as financial planners. They may even have specialisations in specific areas of financial planning, such as investment analysis, tax planning, retirement planning, or risk planning. In general, however, paraplanners have a wide range of duties, like:
- To help financial planners and advisors create financial plans for their clients.
- To conduct in-depth research on market conditions and investment products, such as health and life insurance policies, mutual funds schemes, stocks, and ULIPs.
- Paraplanners also often accompany financial advisors to take notes and answer technical queries. This gives advisors more freedom to interact with the client and makes their communication more effective.
- They use tools such as Customer Relationship Management (CRM) software to help keep track of client information. This can include data like the client’s contacts, income, debt, insurance, investments, and more. Paraplanners also use these to schedule meetings with clients for regular reviews.
- They help financial planners prepare detailed plans by analysing client data, identifying risks, assessing investment options, and making sure that the strategies they recommend are aligned with the client’s financial goals, risk tolerance, and time horizon.
- Paraplanners help prepare documentation such as client reports and presentations.
How Paraplanning Supports Financial Advisors
Financial planning is a holistic process, which includes many facets of personal finance, such as budgeting, insurance coverage, debt management, investment planning, tax planning, retirement planning, and estate planning. Financial planners aim to blend all these parts of a client’s financial life into a singular plan that aligns with their financial situation, goals and risk tolerance. This is no easy task, as it requires in-depth research, data analysis, and careful planning. All of these are areas where paraplanners play a crucial role. Here are some ways paraplanners support financial planners:
1. Increase Efficiency and Productivity
Paraplanners take care of most of the administrative tasks behind the scenes, which allows advisors and planners more time to interact with clients.
2. Effective Advice
Paraplanners with specialisations can sometimes accompany finance advisors to client meetings, so they can handle any technical questions related to the financial plan.
3. Reviewing Plans
Paraplanners carry out annual reviews of clients’ financial situations and portfolios and prepare review reports for financial advisors. These reports cover topics like portfolio performance, changes in tax laws, and identifying new investment and tax saving opportunities.
4. Handling Client Records
A financial planner may be working with a number of clients at once, so managing detailed records for each can be a hassle. Paraplanners help advisors by organising and maintaining these records, like contacts, reports, and plan details, and also by scheduling client meetings and annual reviews.
Paraplanning vs Financial Planning
The ultimate goal for financial planners and paraplanners is the same, which is helping their clients realise their financial dreams. However, the main difference between the two lies in how they go about achieving this goal.
| Factor | Paraplanning | Financial Planning |
| Meaning | Paraplanning refers to the part of financial planning in which paraplanners provide administrative support (such as analysing client data, conducting market and financial product research, preparing financial reports and presentations, creating financial plans, and setting up meetings) to financial planners. | Financial planning is the process of understanding a client’s risk tolerance and financial situation and making a holistic plan to help them achieve their financial goals. |
| Deals With | Paraplanners deal with financial planners and advisors, however, specialised paraplanners sometimes accompany advisors to client meetings. | Financial planners deal directly with clients. They understand their financial situation and assess their risk profile to give them personalised advice. |
| Focus On | Paraplanning focuses on the back office affairs like preparing official documents and reports and conducting research and analysis. | Financial planners are the face of the planning process and they focus on maintaining client relationships and providing personalised advice. |
Conclusion
Paraplanning is the part of financial planning that is concerned with providing support to financial planners by handling technical and administrative tasks such as preparing reports and presentations, conducting market research, assessing different financial products, analysing client data, and forming financial plans. Basically, paraplanning is the behind the scenes process that makes sure the entire financial planning runs smoothly and efficiently.
This helps financial planners as they don’t have to focus on time-consuming tasks. In fact, paraplanners allow financial planners to concentrate on helping more clients and building strong relationships with them. Their support improves the quality of service financial planners provide to their clients.
