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Advisers ignore these trends at their peril

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Working on my new book about financial planning forced me to think hard about an important question: What do planners most need to know in order to be successful at providing great value and service to their clients, and succeeding personally and financially as professionals?

I believe there are several points to be aware of. First, a growing number of you are already acting as professionals, which means that, by your actions, you’re creating an ethos that will, in the near future, coalesce into a real profession.

What do I mean by acting as professionals? For starters, I mean putting the interests of your clients first when you provide advice. I mean no sales agenda and, increasingly, either no commissions or leveled commissions, and eventually (for those of you who are providing insurance advice as an accommodation) outsourcing service on anything that is commission-related.

"Doctors, lawyers and CPAs don't limit their services only to people who have a certain amount of assets. Soon, advisers won't either."

This is going to be a painful transition for people who think of themselves as professionals but who also take pride in being a top producer for their broker-dealers. But many dually registered planners I speak with are already acting as professionals, and bringing their compensation in line will be a relatively small step.

I also expect there will be a transition from AUM compensation to retainer fees, so advisers will be indifferent to whether clients move assets to their management.

Professionalism also implies professional training. Increasingly, planners will be required to hold the CFP or CPA/PFS designations to represent themselves as professionals. We may see a bifurcation between planners and asset managers (with one referring clients to the other), and firms that specialize in asset management will be staffed by people who hold the CFA.


Meanwhile, there are future trends you ignore at your peril. One is a democratization of the planning service.

We are entering a time when financial planning firms will offer their services to young clients and middle-market consumers — profitably. This is a necessary precursor to the definition of a profession; doctors, lawyers and CPAs don’t limit their services only to people who have a certain amount of assets in a custodial account.

Three forces are driving this trend. The first is the automated asset management platforms, commonly known as the robos, which greatly reduce the cost of managing small portfolios.

The second is the trend toward retainer fees. When you’re compensated by retainers rather than AUM, it suddenly becomes possible to charge an appropriate fee to a younger person who has a great job and cash flow, but is looking at student loans rather than a $2 million retirement portfolio. Similarly, you can provide services profitably to validators who don’t want you to manage their assets, but who do need advice and counseling.

The third trend is demographic. The millennial generation is like the baby boomers: a huge cohort, too big to ignore. It represents most of the future clients of your firm.

Fortunately, you’re either hiring or about to hire millennial planners, who will be eager to start providing service and advice to their peers. Let them create a service model, fully leveraging the robo options and the business platform you’ve created, that allows them to serve, profitably, this huge emerging client base. They will also provide meaningful service to the heirs of your existing clients, helping the firm conserve business for the day when the millennials eventually take over your firm.

Another trend is collaboration, which I think is also an emerging hallmark of professionalism. Instead of dropping a financial plan in your clients’ laps, you work alongside them over several meetings to collaborate on a plan. That includes brainstorming over several sessions about what they want to happen in their lives, then allowing them to take control of the mouse and explore the various tradeoffs.

Can they afford more of what they want if they continue working past age 65? Should they buy a beach house together with friends rather than buy one themselves — or simply rent for their vacations? What if they save more, or less, each month?

"People will pay for an enjoyable interactive experience that invites them to explore their own future with a wise, well-educated partner."

I still hear advisers say that people won’t pay for financial planning. I think it’s true that they’re reluctant to shell out thousands of dollars for a spreadsheet exercise they could do on their own, or get from an online calculator. But they will pay for an enjoyable interactive experience that invites them to explore their own future with a wise, well-educated partner who understands how to build a map to the future.

Do you have time for one more? I think, increasingly, planning professionals will specialize in a niche clientele. This is also a component of professionalism. Would you go to a heart specialist if you have a skin rash? If you did, and the heart specialist decided you represented additional revenue, took you as a patient and excused himself while he tried to find something online about your condition, wouldn’t you feel that he was acting unprofessionally?


The niche trend will be driven by something very simple: increasingly powerful face-to-screen technologies that will make coming to your office for meetings obsolete. Instead, you and your client can connect through Google Chat or FaceTime, talk over whatever needs to be discussed, and the client doesn’t have to fight traffic to get to your office. Meetings can take minutes instead of an hour.

When you’re video connecting, you can work with clients anywhere. If you have a narrow niche that can’t possibly be supported by a population within a 30-minute commute of your office, you can now service people on the far side of the Mississippi.

Of course, the same thing will be true of other firms. Suddenly, you’re competing with every planning firm in the country. If your specialty is people who can fog a mirror and some other planner specializes in people just emerging from dental school, whom do you think that young dentist is going to prefer working with?

In my new book that details such matters, The New Profession, I outline dozens of trends, explore their implications and generally provide advice on how to meet the challenges in a way that puts the winds of change at your back.

The important message here is that a variety of trends all seem to be interacting and reinforcing one another to create something exciting: an entirely new, real profession called financial planning.

In this era of hyperchange and swirling trends, many of you are already practicing fully as professionals, and many others have a fairly small step to get to that same place. It’s going to be up to you to show the rest of the industry how to do it right.

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