Are You Ready for the Future of Financial Planning? - FP Advance

Are You Ready for the Future of Financial Planning?

BY brett

Financial Planning Future | FP Advance

Seeing the future

There’s a lot of industry talk about the future of advice, and some of it is quite confronting. What will clients want from their adviser in the next decade? Will it be materially different from what they wanted in the last decade?

Unfortunately, a lot of the information I see on this topic is sensationalist; trying to grab your attention. I’ll try not to fall into that trap myself as I give you a few thoughts on what’s happening, and how it might impact your decision making on the future of your business.

The Millennials

There’s an awful lot being written about the Millennial generation, anyone born between 1982 and 1995 (aged 23-36 right now).

Why, you might ask, when 85% of the wealth is still with the baby boomer generation? Which is where most advisory firms are focused.

Let me paint the picture for you. Stay with me for a few paragraphs. This does have direct relevance to the model you’re using or creating for your target markets.

Going digital

In a 2017 report from Accenture, Millennials and Money: Next Era of Wealth Management, there are some important observations.

Here is how Millennials are accessing advice right now in the US:

  • 11% are using digital only
  • 20% are working exclusively with an adviser
  • 66% are using digital and working with an adviser

What’s this got to do with you and your clients?

“All other generations are adopting new methods with money as rapidly as Millennials. The impact is clear. All demographic segments are changing their wealth management expectations due to Millennials providing them a different lens to view their own situations.”

Source: Kendra Thompson, Millennials and Money: Next Era of Wealth Management

I think of my in-laws who are aged 78 and 75. Over the last five years or so they’ve become much more technology literate, accessing a range of information and services online with help from my wife. As a result their expectations for many of the companies they are dealing with have changed accordingly. Maybe you’ve seen this too with your family or clients.

The Amazon effect

24/7 digital access is becoming the norm in terms of expectation.

Sometimes I’ll go onto a website to buy something and find that it’s just a little clunky or hard to use. I often close the site to find and buy the same product on Amazon instead. Let’s call it ‘the Amazon effect’.

Amazon have made life so simple in terms of ordering and delivery. It’s not even about the price for me, it’s about the ease and convenience. If another supplier’s purchasing process has any more friction than Amazon’s I get frustrated and return to Amazon.

“Millennials, more than any other age group, see anything other than a simple, straightforward customer experience as ‘friction’. They address this friction by taking charge of their own experience to drive their own outcomes.”

Source: Kendra Thompson, Millennials and Money: Next Era of Wealth Management

The Implications

The Financial Plan as something that sits on the bookshelf is dead. The process of Financial Planning is, or should be, a living breathing ongoing experience.

The leading Financial Planning firms have embraced this. They are eliminating the written Financial Plan, and moving to interactive advice conversations with clients using cash flow modelling tools.

They don’t send clients a printout of the cash flow model. They sit there with the client in front of the technology. Clients ask ‘What if we did this…?” type questions, and the adviser helps them see the implications of their decisions.

You might call it co-planning.

Getting it right

Beyond the initial planning phase, clients should be able to access a portal or consolidation tool to see all of their accounts and investments in one place.

At a recent presentation I saw in the US, Advisory Industry expert Angie Herbers, described the business of the future getting three core areas right:

  • People – who are you delivering to?
  • Process – what are you delivering to them?
  • Platform (Technology) – how are you delivering it?

In her view most firms spend 1% on people, 1% on process, and 98% on the technology.

The recommended approach is 33% on each aspect:

  • People – staff training, client training
  • Process – defined processes, automated workflows
  • Technology – best fit for your advice model, integrated

The Future

High tech meets high touch is the future of advice.

Here are a few areas to focus on to get your business in the right place for the next decade:

1. Communicate, communicate, communicate

Communication from your business to your clients needs to be focused on their specific issues, not generic financial issues. It’s why I’m not a fan of outsourcing your client communications.

“59% of Millennials desire education on cash flow and budgeting.”

They want to know what you know.

“51% agree or strongly agree with the statement, “I try to avoid situations where people tell me what to do.”

Source: Kendra Thompson, Millennials and Money: Next Era of Wealth Management

2. Get more out of your current suite of technology

We all joke that we only use 5% of the technology we currently pay for; Word, Excel, Powerpoint, or your back office system.

Commit time and money to more training on how to use all of your technology more effectively. There isn’t a one size fits all system, so you’re going to have to craft together something from your various technologies. It’s annoying, but right now that’s where we’re at.

3. Systemise the 90% so you can customise the 10%

Mechanise the inside of your business, so you can totally customise the external customer experience. It’s amazing how customised you can make things, whilst still relying on a few core processes internally if you give it some thought.

4. Modularise the planning process

This is particularly important for younger or accumulation style clients.

“Interestingly, millennials didn’t seek out advisory firms that can do both investment management and financial planning. They sought out two types of firms to help them.”

Source: Angie Herbers

You can still offer full-service Financial Planning as we know it. However, more and more potential clients want choice over how much of your service they access. I know several firms that work on this basis. They find that most clients, once engaged with an initial planning service, elect to purchase other services as a next step. But by not making this compulsory the firms make the initial engagement ‘safe’ for the client.

Start thinking for the future

“The chances of a traditional wealth management model working in the future is slim to none.”

Source: Kendra Thompson, Millennials and Money: Next Era of Wealth Management

Things are changing, and our businesses have to start changing too. For those of us who embrace these changes, and start thinking forward, the future of advice is bright.

“The Financial Plan as something that sits on the
bookshelf is dead.”
Bob Veres

“The Financial Plan as something that sits on the bookshelf is dead.”
Bob Veres

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ABOUT BRETT DAVIDSON When you work with FP Advance you work with me, Brett Davidson, directly. My motto is ‘advise better, live better’ and I practice what I preach. I’m straight talking and get to the heart of an issue quickly. There’s no beating about the bush, just a focus on helping things improve. Ask my clients – what I teach works.