8 ways financial planning is evolving for advisers and clients

| 11 Sep 2023

At a recent ThinkAdviser webcast, a panel of adviser industry experts said the rapid pace of innovation unfolding across the financial service industry is pushing advisers to elevate their game and demanding ever-greater investment of time and resources. Here are eight trends highlighted at the webcast.

  1. Technology is helping advisers fight administrative burnout

As Meighan and Mantell noted, when one talks with financial advisers today, a common point of discussion is the worry about being bogged down by administrative functions and repetitive tasks.

The good news is that advisers are seeing so much support and innovation on the product and solution side that they are increasingly able to create more customised services for clients at scale.


  1. Many advisers’ practices are rapidly becoming more holistic in their focus

"The biggest trend that I see impacting financial advisers across the board is just having more and more expectations put on their plate,' Mantell said. "So, at first, you might have had an adviser who was focused on planning and did some investment stuff, but now the investment side continues to get more complicated, and you have the annuity picture to consider as well."

In addition to these topics, Mantell warned, advisers are also being asked to support their clients with securing things like long-term care and disability insurance. Estate planning, too, is now on the table. 

"We are heaping so much on the shoulders of advisers, so anything we can do to help them keep it all straight is important," Mantell said. "Technology is a really important part of the equation, but we also have to be careful to not overwhelm people by throwing too many tools and services at them all at once."


  1. Money management is no longer a differentiator

Building on the prior point, the panellists repeatedly emphasised the idea that pure investment management has more or less been commoditised, and it no longer represents a differentiator for most firms. 

"Our business has morphed from its earlier focus on asset management to now having a clear focus on financial planning," Meighan said. "If you are trying to identify those advisers who are likely going to succeed in the future, it is going to be those who are shifting their client service perspective to this holistic framework." 

The panellists all agreed that money management is always going to matter in the adviser business, but the part of the business that is about building portfolios and helping clients rebalance has lost much of its competitive lustre.

“That’s a good thing,” Meighan proposed. “It helps free up time for advisers to focus on what really matters.”


  1. Cutting-edge investment vehicles are allowing greater personalisation

While the panel broadly agreed that stock picking and active investment management are rightly falling out of favour as adviser differentiators, that doesn't mean there is no innovation to consider on the portfolio management front.

For example, the panel urged advisers to study up on direct indexing.

They noted how direct indexing helped advisers achieve tax savings for clients during a volatile 2022, and they argued that more advisers are likely to use direct indexing and model portfolios to deliver customised strategies to clients.

Further, the panellists pointed out, researchers project that direct indexing will grow at a faster rate than exchange traded funds, mutual funds and separate accounts in the coming decade.


  1.  Investors and advisers are seeking the right role for generative Al

During the panel discussion, Bennetts took time to address a big and at-times controversial topic in the world of financial planning: generative artificial intelligence.

"The first thing to say is that we have had this conversation before in our industry," Bennetts suggested. "We all remember the early discussions about how we were all going to get replaced by robo-advisers. Well, as we all know, that didn't happen, and robo-advisers instead became a great tool to support human advisers."

Bennetts argued a similar trajectory is likely with generative AI models.

"This is because, even with advanced AI models becoming available, consumer surveys show that people still trust financial advisers and that they want a human connection," Bennetts said. "Until the Al-generated information is synthesised and checked by their adviser, people don't feel super comfortable or confident."


  1.  A big shift from accumulation to spending is remaking client priorities

According to the panel, the shift in focus from savings to spending is simply a reflection of broader demographic trends unfolding.

That is, the heart of the massive baby boomer generation is now reaching full retirement age, and this is causing a renewed focus among advisory firms on tools and services that can help clients liquidate and spend their hard-earned money in a sustainable way.

As Mantell emphasised, this effort requires the coordination and balancing of many factors, ranging from how much risk to carry in the retirement portfolio to how much annuity income to purchase to when to claim retirement benefits.

As the panellists all pointed out, the complexities of personalised income planning far outstrip those associated with wealth accumulation, meaning advisers are eagerly seeking out tools and solutions to help them better serve their clients throughout the spending phase.


  1. The act of retirement is taking on a broader, behavioural lens

As the panellists observed, many workers assume the transition to retirement will be simple once the financial picture is in order. 

Advisers with substantial experience serving retirees know the reality is that many people struggle to find meaning and stave off boredom after they leave the workforce. 

According to the panel, leading advisory firms are embracing this challenge and helping their clients with the behavioural and psychological side of retirement, for example by pushing clients to reconsider retirement as a one-time event and consider a phased approach.


  1. Wealth and retirement plan silos are fading fast


According to the panel, the rapidly evolving dynamic between retirement plan sponsors, participants and financial planning professionals represents another important competitive trend affecting the work of wealth management professionals. 

In years past, employers tended to be much more "protective" of their employees and their retirement plan accounts, viewing the appropriate job of financial advisers as providing support and guidance to the retirement plan committee and helping the company protect itself from fiduciary liability. 

Today, things have changed significantly, and more companies are coming to view the work of wealth management professionals as essential to the retirement outcomes of their workers. 

As the panellists observed, this evolution presents a huge opportunity for advisory shops with the talent, systems and skill sets to work across the traditional wealth-retirement plan divide.