To adapt a Charles Dickens quote from “A Tale of Two Cities,” “It is the best of times; it is the worst of times.” It is the best time to be in the
financial planning business, and it is the worst time to be in the
financial planning business. There is a revolution in the financial services industry; fortunately, there is no guillotine involved. As we review our practices in the light of transformation, is it the best of times?
The uprising in France changed the path of that country forever. France would no longer operate as an absolute monarchy. The citizens would have much more say in how the country was governed. Just as France was molded by outside pressures, the upheaval in the financial services industry is coming from three sides, and each in its own right involves a change in how we practice our craft. These three areas are technology (aka robo-advice), regulatory pressures and, most importantly, our clients. It is important to remember that change and upheaval bring opportunity.
Computers are designed to perform complex and repetitive calculations faster and more accurately than mere mortals. They are an invaluable tool, and we cannot operate an efficient
financial planning business without them. However, if our primary value proposition is one that can be accomplished more effectively by technology, our practice may face the same fate as the aristocrats in the French Revolution. Technology must be a tool, not a replacement. The good news is that high-net-worth clients face complex planning issues and want to have face-to-face contact with a professional financial adviser.
The vast majority of us would agree that regulation is an integral part of our industry. Effective regulations provide the guidelines and support upon which we build our businesses. The agencies and departments that regulate our industry at times appear to believe that activity means productivity. Rather than keeping to our knitting with an occasional shake of the fist, we should get involved. In our expanded practices, we must work to educate and assist the regulatory agencies in the drafting of guidelines and proposed regulations. With newer, more complex products, continued investment market volatility and a client base that is demanding more from its advisers, educating regulators has become a normal, integral part of our practices. If we are not involved, we have no say in the outcome.
The biggest change may be driven by our clients, and it will help accelerate the other two areas of change. Our clients expect more. Investment advice and expertise are not enough. They want advice on how and when to take income distributions. Should it be from the nonqualified or the qualified account? When should they file for
Social Security and what rules are involved? Risk management is a big question for clients who see retirement in their near future. The insurances — life insurance and long-term care insurance — are areas where our clients expect a meaningful conversation. Meaningful means we work with clients to develop an action plan and then work to implement the plan.
As you can see, when we expand our practices to provide the expertise, support and planning our clients now expect, technology becomes even more of a tool and less of a threat. Technology supports us; it does not compete with us. Regulatory pressures! What regulatory pressures? When we continue our practice of meeting client expectations and providing the level of advice that we expect, or would expect our mother to receive, are we not addressing regulatory expectations? Like those escaping France in “A Tale of Two Cities,” we may encounter more roadblocks and barricades than in the past, but aren't they designed to snare the imposters? The upright citizens, the professionals, will continue to provide the valuable services our clients want and expect. Candidly, the numbers represent only one element of a financial plan. The emotional and relationship areas are equally important.
Clients expect advice regarding accumulation prior to and during retirement. They expect advice regarding distribution. How do they coordinate qualified plans, IRAs, investments and
Social Security to optimize their retirement experience? How do they protect their retirement assets from long-term care expenses and provide a meaningful financial legacy? Do we design life and long-term care insurance plans in retirees' financial plans? Absolutely.
To close with another quote from Mr. Dickens, “It is a far, far better thing that I do, than I have ever done.” Let us strive to do that far, far better thing for our clients.
Vive le
financial planning!
James T. (Jim) Swink is vice president at Raymond James Insurance Group.
