The views presented here do not necessarily represent those of Advisor Perspectives.
In the coming years, more investors will expect financial planning to be a key part of the services they receive from advisors. To be prepared, advisors will need technology to help streamline added workflows, as well as the expertise of certified financial planners to support their clients long term.
Marci Bair, president and founder of Bair Financial Planning, believes that planning is no longer considered an “add-on service,” as it was in prior decades in the industry.
“It’s going to become the core to a lot of advisors’ practices,” she said. “Investors, and especially younger investors, are increasingly seeking out advisors that are certified financial planners.”
Addressing Changing Client Needs
As fewer people can now lean on the safety of pensions, or defined benefit plans, when they retire, clients are more often requesting retirement planning help as part of a comprehensive financial plan. Younger clients, especially those who work in the tech industry or at startups, also require financial and tax planning to help make sense of equity compensation plans, Bair explained.
“If they work for a startup company, for instance, and get a lower salary but have a lot of stock options, that comes with a great opportunity, yet a lot of planning and a lot of taxes. And also the risk is more concentrated. Their financial future is tied up in that company,” she said.
Planning as a Key Service Offering
By 2027, advisors expect that more than half of clients (54%) will receive comprehensive, ongoing planning advice, according to a recent Cerulli Associates survey. Advisors cited various benefits of offering financial planning, including stronger client relationships, better client retention, and an improved ability to help clients meet their financial goals.
Research by Natixis also found that millennials are more likely to prioritize financial planning with their advisors than older generations. Most millennials surveyed (68%) separately said they wanted to have an active role in their investing – from partnering with their advisors to full control of their investments, the April report revealed.
Investors are shifting away from relying solely on advisors to manage their investments. And this reflects the wide-ranging, complex financial concerns they are facing today, Bair shared.
“Clients have concerns that are broader than just their investment portfolio,” Bair said. “They are waking up thinking about whether they can retire, whether they can afford to buy a home, or if they can help their kids financially and reduce their taxes.”
While investment performance remains crucial, financial planning can open the door to more longstanding relationships that also feel less “transactional,” Bair said.
Tech Helps – But Planning Is a Service Model, Not Software.
Advisors at smaller, independent shops may utilize artificial intelligence to lighten certain administrative burdens – such as summarizing client meetings and analyzing certain financial data – but there’s no tech shortcut to hiring a certified, experienced planner.
“The actual expertise should not be outsourced. You need a CFP on staff,” Bair said. “Financial planning is not just software; it’s a service model. Advisors need the expertise, process and commitment to deliver financial planning consistently, so their clients get the best advice.”
Building a Sustainable Planning Model
For small teams, that could look like hiring a full-time planner or a fractional CFP who would provide their expertise on a case-by-case basis for certain clients who need comprehensive planning, Bair said.
Teaming up with a CFP gives teams, or solo advisors, greater confidence when drafting financial plans for clients. But first, advisors need to make sure there is a process in place to support this service model long term within the business.
For example, many financial planners charge a flat fee for their services, Bair shared.
Traditional pay structures for planners were often commission or AUM-based models, but non-traditional fee models are emerging that include retainers, subscriptions and annual flat fees, according to the Financial Planning Association.
“In our case, our [financial planning] clients retain us for a full year,” Bair said. “So after we create their financial plan, we give them 12 months where we work through all of the action items that come up while we integrate that plan.”
Advisory firms must ensure that clients in their area are willing to pay for their planning specialties, and that their team has the capacity to support new workflows, which can include multiple client meetings, plan creation, and follow-ups to implement the plan, Bair said.
Limit your financial planning focus, at least to start, instead of trying to be “all things to everyone,” she added. “Narrow your scope so you can get really good at one thing, if you’re a smaller advisor shop. Develop an expertise on a problem you can solve for clients.”
Danielle Walker is a freelance journalist with 15 years of business reporting experience. She previously worked at Business Insider and Pensions & Investments, among other business publications. Her work has been published in the Financial Times, Barron’s and Chief Investment Officer. Danielle is currently based in Norfolk, Virginia.
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The views presented here do not necessarily represent those of Advisor Perspectives.