FPA study: Financial planners don't plan for their own future

The sector risks being left behind as client demands change

Oct 17, 2019 @ 10:27 am

By Mark Schoeff Jr.

Financial planners need to do more planning about their own future, according a report released Thursday by the Financial Planning Association.

The study shows that practitioners are failing to adapt their services to changing client habits and preferences.

"Because financial markets have generally rewarded investors and their financial planners so handsomely since the global financial crisis, planners haven't had to think, or made the time to think, about tomorrow," states the report, Advisory Firms in 2030: The Innovation Imperative. "We wonder when they will focus on planning beyond the next two to three years. Will planners become proactive only when their best customers leave, or if another financial crisis hits?"

The FPA conducted the study with SEI, an investment management firm. It is based on in-depth interviews with eight financial planners, an August online survey of 436 financial planners and a survey of 686 investors with assets between $100,000 and $5 million.

The study shows that more than half of the respondents have no business plan and that most do not meaningfully differentiate themselves in the marketplace.

They also don't segment their clients and downplay the need to attract millennial clients, saying that the "ideal" clients are small business owners, followed by people in transition and professionals, such as doctors and lawyers.

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The financial planners surveyed are also not keeping up with changing client preferences. For instances, more than two-thirds conduct client meetings in their offices.

But clients are showing a preference for digital interaction. Investors said they would like their advisers to offer augmented or virtual reality, virtual assistance or chatbots, video conferencing and social media.

Most planning practices are not on the verge of evolving. Most planners — 42% — said they will customize every client experience based on clients' individual needs. The study questioned, however, whether that approach is scalable. Only 22% of planners said they will have to modify their processes to meet changing client expectations.

"There's this gap between what planners think they need to be doing and what the reality of the demands of their clients looking to the future actually are," Evelyn Zohlen, FPA president and founder of Inspired Financial, told reporters Wednesday at the FPA annual conference in Minneapolis.

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Planners must adapt to a market that has transformed from one that centers on them determining what clients need to one where clients are in the driver's seat, said John Anderson, managing director and head of practice management and independent adviser solutions at SEI.

"The consumer is being trained to look for choice, to have it their way," Mr. Anderson said. "I haven't seen our industry start to evolve in that direction yet."

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