The Future of the Financial Planning Industry
Current problems in the financial industry
Human advisors can improve their clients’ quality of life. But the traditional advisory model is difficult to scale. It’s a service that’s not accessible to many, here’s why:
Inconsistency in the quality of advice, stemming from varying levels of expertise, process, and competence among advisors, can create uncertainty for clients.
Finance is a complicated topic. The lack of education makes it hard for people to have the confidence to tackle the unknown and make sure that the advisory relationship will help them reach their financial goals.
Clients may doubt your intentions as a financial planner, fearing that you have a hidden agenda and aren't prioritizing their well-being.
With the number of certifications and experience needed to be a reputable financial advisor, there aren’t a lot of advisors available.
The current pricing models used, on top of the scarcity of reliable professionals available, makes financial advisors a luxury to the general public. This makes most advisors only available for high net-worth individuals – and inaccessible to those who could benefit from it the most.
What does the future of financial planning hold?
In the coming years, these emerging trends will shape the financial planning landscape. Get familiar with these trends and make sure that you’ll adapt to these changes to stay ahead in the industry.
Technological trends
In this rapidly evolving landscape, advisors have the chance to engage with clients using tools that make it easier to communicate and share valuable insights.
For example, Asset-Map’s Discovery Interview lets you collect relevant financial data from wherever they are, through any devices. Another example of this is robo-advisors, which are becoming increasingly popular for their ability to offer automated, cost-effective investment management services.
Additionally, financial planning software and digital dashboards can help advisors provide a more holistic view of their clients' financial lives, enabling them to make more informed decisions.
An example of this is the Asset-Map’s Report and Target-Maps, which help you make your client meetings more productive so you can engage clients in a discussion about their financial future instead of giving a one-way report.
With the use of social media platforms like LinkedIn, Twitter, and Facebook, advisors also have much easier access to their audience. They can freely interact with their ideal clients, tap into what they’re thinking to tailor their messages and use these insights to create educational content that helps people understand the impact a financial advisor might make on their lives.
By embracing these technological advancements, financial advisors can not only enhance their service offerings but also strengthen their relationships with clients and attract new business in an increasingly competitive market.
Fiduciary trends
The financial industry has been witnessing significant regulatory changes on your fiduciary responsibilities as a financial advisor.
The Securities and Exchange Commission (SEC) adopted new regulations in 2019 that require brokers to prioritize their client needs over their own.
These regulatory changes might lead to greater transparency in pricing and disclosure policies. This shift will empower your clients now that they have a clearer understanding of the costs associated with various financial services and help them make more informed decisions.
Furthermore, the compensation model for advisors is likely to evolve from being fee or commission-based to a regular periodic retainer. This change will promote a more client-focused approach, as advisors will be incentivized to maintain long-term relationships and provide continuous, high-quality service.
This will affect all financial advisors with fiduciary responsibility, such as financial planners with a CFP designation and investment advisors.
Generational gap
Over the next few decades, more than $50 trillion will transfer from the Baby Boomer generation to their descendants, presenting a massive opportunity for you as a financial advisor.
This unprecedented transfer of wealth presents a unique challenge for financial advisors to adapt their services and offerings to cater to the needs and preferences of younger clients. Generation X and Millennial clients often have different financial goals, values, and priorities compared to their parents, and advisors must be equipped to address these differences.
Moreover, these younger generations are more tech-savvy and expect seamless digital experiences when it comes to managing their finances. Adopting digital financial planning methods earlier on will help you cater to this market better than your competitors.
By proactively engaging with Generation X and Millennial clients, financial advisors can position themselves to capitalize on the upcoming wealth transfer and secure a sustainable future for their practice.
Embracing new technologies, tailoring services to the needs of younger clients, and understanding their distinct financial goals will be crucial in capturing this significant market opportunity.
Demographic changes
As demographics shift and the world's economies become increasingly globalized, financial advisors will have the chance to tap into previously unreachable markets using a unique, digital-first marketing strategy.
The changing demographics include an increasingly diverse and multicultural population, which means financial advisors need to be culturally sensitive and adaptable in their approach. Understanding the financial needs, values, and priorities of different cultures can help advisors build trust and rapport with clients from various backgrounds.
The globalization of economies has led to an interconnected financial landscape, with investors seeking opportunities beyond their home country's borders. You need to stay informed about global markets and investment strategy so you can serve better investment advice to clients interested in international financial products.
Educational debt
Student loan debt has increasingly become a major concern for many graduates and parents, now even surpassing credit card debt in the US. As this burden grows, financial advisors who can effectively guide clients through repayment strategies and debt management will find themselves in high demand.
Navigating the complexities of student loan repayment can be overwhelming for borrowers, especially when faced with multiple loans, varying interest rates, and different repayment options. Make sure that you’re well-versed in student loan management so you can help clients create a tailored plan to tackle their debt, factoring in income-driven repayment plans, loan consolidation, and even potential loan forgiveness programs.
Additionally, advisors can help clients understand the long-term impact of student loan debt on their overall financial health, such as its effect on credit scores, home-buying potential, and retirement savings. By addressing these concerns, advisors can empower their clients in their decision making and reduce the financial stress associated with student loans.
Retirement planning
Retirement planning has always been a complex process. But as younger workers face the possibility of substantially outliving their parents, the challenges only continue to grow.
As life expectancies increase, there will be changes to financial products that help your clients navigate their post-retirement life. Particularly, insurance products such as life insurance policies might eventually include expenses for long-term health care.
Another product that is likely to gain popularity is longevity annuities. These specialized annuities are designed to provide a steady income stream later in life, typically starting around age 75 or 85. By delaying the payout, policyholders can secure a higher monthly income, helping to address concerns about outliving their retirement savings.
In addition to longevity annuities, advisors should be prepared to give financial advice on other retirement planning strategies, such as maximizing Social Security benefits, optimizing asset allocation, and exploring long-term care insurance options.
By providing comprehensive, knowledgeable guidance, financial advisors can help their clients successfully navigate the ever-evolving landscape of retirement planning.
Secure your financial advisory future with Asset-Map
With all the changes happening, the landscape of the financial advisory industry will never be the same. Whether you’re working in wealth management, estate planning, or any other subsection of the financial advisory industry, you’ll be affected by the shifts.
You’ll need to adapt to these new challenges and figure out how you can capitalize on the opportunities unveiled by these changes.
Use Asset-Map to stay ahead of your competitors by providing a VIP service to your clients at scale. Schedule a demo today and see how Asset-Map can streamline your existing process.