A couple of weeks ago, Evan from My Journey to Millions wrote about a huge problem with the financial planning industry, which was itself inspired by a post on Sweating the Big Stuff (StBS). Yes, the Inception runs deep with three layers of articles commenting on articles.

Here’s a brief explanation for those who want to skip the Russian nesting dolls. Daniel on StBS has a friend, “Doug”, who has net worth of negative $114,000 – most of it in student loan debt. Daniel, being the awesome guy he is, is trying to help his friend get back on track.

Evan in his article on My Journey to Millions makes the point that Doug is pretty lucky to have someone like Daniel who will help him out. Why? Because most financial planners wouldn’t do it. More importantly he emphasizes that it isn’t their fault. He goes on to explain that financial planners get paid in three possible ways: selling an insurance product, selling an investment product, or via a fee from the client.

In this scenario, Doug isn’t in the position to invest. Selling him an insurance product isn’t going to help with the $114K debt. Lastly, is Doug, who is living paycheck-to-paycheck going to voluntarily pony up $500 to see a financial planner? Probably not.

The end result is that the person is in the most need of help is least likely to receive it.

Evan is right that this is a huge problem. His article lays out a plan that involves “a 2.0 type site that provides a planner with a snapshot (think more business like than mint.com – so a planner can see investments as well as cash flow… I have access to one such program at work), and then a once a month phone call with a single planner for a nominal amount.”

I liked the idea. Hopefully the Mint-y site can do 80% of the work which would allow the financial planner to do the other 20% at a cheaper rate… making it more more likely that someone like Doug get the help he needs. Evan shoots a few minor holes in this plan.

I love solving problems. So I thought I’d take a shot:

A Plan to Help the Under-Served like “Doug”

[Note: If you take this idea and create a company off it, please contact me as a consultant. This is a very general outline of what could be done and I have a lot more ideas including how such a company would be profitable. I simply don’t have the time/resources to take the reigns myself.]

You start with that “Mint-y” 2.0 website that Evan mentions. Maybe it’s similar to Personal Capital’s software for example. If done well it can provide a solid foundation. Have an initial planning session with a money coach instead of a financial planner. This is almost an 80/20 rule with the money coach maybe able to provide 75% of the value at perhaps 40% of the cost. The “money coach” would create a customized plan with that website and the client. This should be able to be done for a one-time fee.

To keep clients accountable on an on-going basis, they would be grouped together in small teams, maybe 5-6 people. Each would be required to write a money diary (like a personal finance blog). They would also be encouraged to read and comment on each others diaries. These people would meet, hopefully physically, but perhaps virtually once a week to discuss their financial progress. The idea behind these groups is to get them to be their own support system as much as possible.

Once a month the client has a check-in with the money coach. This is kept quickly as possible with the client supplying a list of question for the money coach in advance and the money coach reviewing the client’s progress through the “Mint-y” website.

By now you are probably spotting a trend: Keep costs for the clients low. Give them tools and a support system. Personalized service is expensive by its nature (the cost of money coaches), so the idea is provide this option of expert advice minimally and perhaps only when necessary.

What do you think? Could it work?