5 Planning Conversations to Incorporate Banking and Lending

IN THIS ARTICLE

• How will clients fund their next tax payment?
• What will retirement income look like for clients?
• Do clients have a plan for their cash?
• How should major purchases fit into the financial plan?
• What liquidity needs could arise?

Some of the most important financial decisions clients make involve banking and lending, not investments alone. For example:

• A tax bill may come due before an expected bonus
• Retirement may require turning accumulated assets into dependable monthly income
• A home purchase, tuition payment, or business opportunity may create an immediate need for cash

While these events often fall outside the investment portfolio, they can have significant impact on a client’s broader financial picture — including taxes, debt, cash flow and long-term wealth goals.

Advisors are increasingly expected to help clients navigate these types of financial decisions that extend well beyond investing. One of the keys to helping clients manage their dollars holistically is integrating banking and lending into your business. In fact, LPL Financial advisors who use banking and lending offerings at LPL, grown their AUM 39%¹ faster over the last two years² and grown their client base 28% faster over the same period.³

Broader planning conversations centered on key challenges clients face are not only an easy way to introduce banking and lending, but they can ultimately strengthen your relationships, uncover new opportunities, and enable you to deliver more comprehensive advice.

Here are five questions that can help kickstart those client discussions.

1. How will tax payments be funded, especially the next?

Tax obligations are often predictable, but the cash to pay them may not be available at the same time.

A client may know a large bonus is coming later in the year – but still need to pay a tax bill first. You can help clients weigh the tradeoffs: sell investments and potentially create another taxable event, keep more cash on hand and leave less invested for growth, or borrow for a short period and pay interest to stay in the market.

The right approach may involve existing cash, selling assets, short-term borrowing or a combination, depending on the timing of the expense, tax implications, borrowing costs and the client’s path to repayment.

2. What will retirement income look like from month to month?

Retirement planning often focuses on whether a client has accumulated enough assets, but it also raises a more immediate question: How will those assets support everyday spending?

According to Mike Holtschlag, EVP of Banking & Lending at LPL Financial, helping your clients organize their income and spending can make retirement feel more manageable.

Your clients may receive income from Social Security, pensions, required minimum distributions and investment accounts.. The planning question is how those sources will work together: where the money will be deposited, which account will cover regular expenses, how larger purchases will be funded, and how much cash should remain readily available.

Coordinating those pieces can make retirement income feel more like a dependable paycheck while giving both you and your clients a clearer view of cash flow.

3. Is there a plan for cash?

Clients may keep significant balances in checking or savings accounts because the money feels safe and accessible, even when they have not clearly defined its purpose. Some of that cash may be needed for monthly expenses or emergencies, while other balances may be earmarked for a known purchase or simply sitting without a clear role in the plan.

Jim Feller, Head of Product, Banking & Wealth Management at LPL Financial, recommends beginning with a few direct questions: “Where do you bank? How much do you have? What debt do you have?”

Those questions can reveal whether a client has enough liquidity, too much money sitting idle, or cash that could be better aligned with another goal.

The goal is to give each dollar a clear purpose and the right level of access, while balancing liquidity, near-term needs and long-term growth.

4. How will any major upcoming purchases fit into the financial plan?

A home purchase, renovation, education expense, wedding or business investment may require a large amount of money at once.

Clients often begin with a simple question: Can I afford it? But the more useful planning question may be: What is the best way to pay for it? 

Paying in cash may leave the client with less of a cushion. Selling investments could create a tax bill and pull money out of the market, while borrowing keeps more cash and investments in place, but comes with interest and a repayment plan. You can help decide which option makes the most sense based on your client’s income, debt, investment strategy and when the money is needed.

The expense may sit outside the portfolio, but the funding decision rarely does.

5. What liquidity needs could arise over the next 12 to 24 months?

Financial planning naturally looks years into the future, but a shorter time horizon can reveal needs that might otherwise result in rushed decisions.

Holtschlag suggests asking clients directly about what is coming up.

“What do the next 12 months look like for you? Are there any things that you’re going to need cash for? And how are you going to solve for that?” he said.

That could include tuition, home repairs, family support, business expenses, insurance premiums, or a gap between a known expense and future income. The discussion should also cover the client’s existing liabilities, since the amount owed, interest rate, and repayment terms can change which funding option makes the most sense.

Planning ahead gives clients more choices and reduces the chance that an immediate expense will force an unnecessary change to the investment strategy.

Bringing the Full Financial Picture Together

These conversations can help you connect a clients’ assets, liabilities, and cash flow – enabling you to see the full picture, and develop a more comprehensive wealth strategy. As a result, you can uncover planning opportunities earlier and further strengthen your client relationships.

At LPL, we have a full suite of evolving banking and lending offerings designed to help solve for the situations that will arise when you ask clients these questions. In addition, we have subject matter experts in both banking and lending who can help you navigate incorporating these offerings into your business – and drive more growth.

Schedule a consultation to learn how LPL's Banking & Lending capabilities can help strengthen client relationships and uncover new planning opportunities.