Pinnacle's Kitces: Virtual firms could leave traditional planners in the dust

Pinnacle's Kitces: Virtual firms could leave traditional planners in the dust
Technology is going to alter how advisers deal with clients dramatically; upstarts could steal away next generation of clients
MAY 21, 2012
Prepare to dump written financial plans and quarterly meetings, and get ready for a more dynamic world of virtual financial planning, industry commentator Michael Kitces said Monday at the Financial Planning Association retreat in Scottsdale, Ariz. Mr. Kitces, director of research at Pinnacle Advisory Group Inc. and a widely followed blogger, envisions a world of cloud-based planning documents, instant data updates, and advisers' and clients' communicating more frequently than ever — without ever meeting face to face. The key question for advice-givers is what value they will be able to add in a tech-loaded world where information and answers are easy to find, he said. Improvements in search technology, sharing and social media will make it easier for consumers to get answers to specific financial questions. That's why planners "will go from being the expert to being the navigator" for clients, he said. "Increasingly, it will be a question of how to apply our knowledge to change [clients'] behavior" and implement a plan, rather than simply providing answers. Planners should think about eliminating quarterly meetings and written financial plans, said Mr. Kitces, whose firm manages about $850 million. Improvements in software and the ability to create personal trust online will lessen the need for these traditional tools, he said. Someday, video conferencing will allow planners to meet holograms of their clients and “pick up on all the non-verbal clues,” he added. And younger investors prefer updates over the phone anyway. While planners figure out the new technologies, the biggest competitors for planning clients — especially for Generation Y prospects — will be technology companies that are figuring out the planning process, Mr. Kitces said. He predicted the “rise of the virtual platform firms” like Veritat Advisors, Personal Capital Corp., LearnVest and Betterment LLC, he said. These firms have attracted significant start-up capital and are making inroads into the Gen Y market, possibly leaving traditional planners in the dust, Mr. Kitces said. Successful planners must be discoverable on the web, have a niche they can use to attract virtual clients from anywhere and provide results strong enough to drive referrals through social media, Mr. Kitces said.

Latest News

SEC kills 'gag rule' that silenced thousands of settling defendants for over 50 years
SEC kills 'gag rule' that silenced thousands of settling defendants for over 50 years

ASA reacts as regulator drops no-deny policy, freeing firms and individuals to publicly dispute allegations after reaching settlements.

Washington state regulators claim advisor was running Ponzi-like fund
Washington state regulators claim advisor was running Ponzi-like fund

Joel Frank allegedly sold more than $39 million worth of investments in the Equilus Funds to more than 90 investors,

Bipartisan bill aims to take down 401(k) charitable giving hurdle
Bipartisan bill aims to take down 401(k) charitable giving hurdle

The Charity Parity Act would eliminate a costly IRA rollover requirement that blocks direct charitable transfers from workplace retirement plans.

Trump drops $10 billion IRS lawsuit as $1.7B settlement fund takes shape
Trump drops $10 billion IRS lawsuit as $1.7B settlement fund takes shape

A last-minute court filing ends a case against the federal tax-collecting agency that had drawn unprecedented conflict-of-interest questions from Democratic critics.

You Can’t Spell Advisor without AI
You Can’t Spell Advisor without AI

Advisors discuss their use of AI now and how it will change going forward

SPONSORED Beyond wealth management: Why the future of advice is becoming more human

As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management

SPONSORED Durability over scale: What actually defines a great advisory firm

Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline