The role of the financial professional is changing. Their responsibilities are expanding beyond portfolio management and beyond providing advice specifically about an individual's financial situation. The future will bring a new set of client expectations and new ways that financial professionals must remain competitive.
Our research shows that not only have many in the industry already taken steps to address these changes, but that investors are eager for this expansion and even willing to pay for certain additional services outside the traditional scope of financial advice.
The Most Important Advisor-Rated and Investor-Rated Trends in Advice
Despite change, financial professionals and investors remain somewhat aligned on what the future of advice holds, according to a survey of more than 800 advisors and clients carried out by eMoney in July 2020. Of those surveyed, 420 were advisors and 403 were end clients.
When asked what they believe are the most important industry trends, financial professionals prioritized the following from a provided list:
- Life stage planning
- Values-based planning
- Total well-being
- Advisor as life coach
When asked the same question, investors prioritized this way:
- Life stage planning
- Data privacy
- Values-based planning
- Total well-being
The notable discrepancy in these responses is data security. Understandably, investors want private, secure management of their finances. Financial professionals who want to build trust with their clients should prioritize data security early in the relationship.
But in terms of life stage planning, values-based planning, and total well being, both financial professionals and investors are clear in their expectations of advice expanding beyond finances. They see the importance of taking advice deeper and understanding each client's unique values and needs.
Personalization, planning around a client's values, accounting for their entire well-being—these are all excellent ways to enhance the value you deliver to your clients, value that cannot be commodified or replicated by robo advisors.
Timing the Impact of Financial Advice Trends
If the expansion of financial advice into new territories sounds like pie in the sky, our research shows this is not the case. In fact, these trends are primed to truly transform the nature of advice, and in many instances, financial professionals are already taking action.
When we asked financial professionals how much action they or their firm has taken in response to these trends, we found that many are currently taking action or plan to in the near future:
Life Stage Financial Planning
- 83% already taking action
- 10% will take action in 1 to 2 years
- 5% will take action in 5 years
Values-based Financial Planning
- 80% already taking action
- 12% will take action in 1 to 2 years
- 5% will take action in 5 years
Advisor as Life Coach
- 55% already taking action
- 18% will take action in 1 to 2 years
- 10% will take action in 5 years
Total Well-being
- 63% already taking action
- 20% will take action in 1 to 2 years
- 12% will take action in 5 years
Financial professionals are seeing the value in these trends and taking action to secure the future of their firm. They're working to take their relationships deeper, personalize their recommendations around their client's values, and elevate advice to impact client's financial wellness and overall well-being.
By taking action now, or in the near future, financial professionals are demonstrating their commitment to a future where they're in front of clients for all life's decisions, serving as their trusted guide to finances and everything subsequently impacted by money.
It's easy to see how expanding the business model benefits clients. Financial professionals, of course, must broaden their services responsibly, offering only what clients both desire and are willing to pay for. While many of the trends we're discussing are still in their early stages, a roadmap to branching into new territories of advice is emerging.
The Roadmap to Expand the Business
In pursuing opportunities in life stage planning, values-based planning, or total well-being, there are several different paths that financial professionals can take to offer a more holistic set of services.
To gain more insight into the expanding business model for financial advice, we asked financial professionals their likelihood of expanding their role in certain areas, as well as investors' appreciation of their financial professional offering those services. We found that financial professionals are most likely to expand their business by building a network of referrals in financial and non-financial areas. Seventy-five percent of investors said they would appreciate financial referrals, and 61% said they would appreciate non-financial referrals. In this way, financial professionals and investors are on the same page. However, we found a few key areas where investor desire for services significantly outpaced financial professionals' likelihood of offering them:
Association Affiliations
- Investor appreciation: 71%
- Advisor likelihood to expand: 44%
Additional Professional Certifications, Licenses or Degrees in Other Wellness Areas
- Investor appreciation: 71%
- Advisor likelihood to expand: 42%
Business Practice Area or Joint Venture with Partners Specializing in Other Wellness Areas
- Investor appreciation: 66%
- Advisor likelihood to expand: 36%
Financial professionals are showing hesitancy in several areas where investors are demonstrating demand. This is understandable—the value of offering these services may need to be proven before the majority of financial professionals are convinced they will retain clients and bring in meaningful business.
The trends, however, are still clear: Investors desire a private, personal relationship with their financial professional that expands beyond just the financial aspects of their life to improve their overall well being. While some hesitancy is expected, like any trend, those at the head of the curve are most likely to reap the rewards.
To push your firm toward this holistic future of advice, it's important to consider what investors are willing to pay for right now so you can profitably expand your business step by step.
What Additional Services Will Investors Pay for Today?
In considering the demand for services outside the traditional scope of advice, take a look at what investors not only desire but are willing to pay extra for. Our research shows that there are clear generational lines when it comes to investors' willingness to pay for additional services.
Gen X and baby boomers would be likely to pay extra for services related to debt planning management, tax strategies, employer benefits and data privacy and protection. But for other services, particularly those in broader wellness areas, older generations show lower interest than younger generations.
Gen Y and Gen Z are far more likely to pay for services beyond the traditional scope of financial advice. In fact, these generations are highly likely to pay for services targeting those just starting out in their financial journey and for services adjacent to the traditional role of the advisor:
- Budgeting – 85%
- Debt planning and management – 75%
- Tax strategies – 89%
- Healthcare planning – 89%
- Data privacy and protection – 79%
- Insurance strategies – 78%
- Value-based/socially responsible investing – 77%
- Values-based financial planning – 76%
- Employer benefits – 76%
- Legal support – 72%
For younger generations just starting out, financial professionals have a great opportunity to connect by helping them with their budgets. Tax strategies and healthcare planning also stand out as two prime opportunities to expand the current scope of advisory services for younger generations.
The vast majority of Gen Y and Gen Z investors are open to advice in areas adjacent to typical financial services. This trend holds steady for other areas of wellness even further outside the boundaries of today's financial advice:
- Physical health – 80%
- Business advice – 79%
- Mental health – 77%
- Immediate and extended family planning – 70%
- Compensation and salary – 70%
- Spiritual health – 69%
- Professional or career development – 64%
- Relationship health – 61%
Our research shows that while Gen X and baby boomers are receptive to additional services in select areas, financial professionals may have more success by targeting these offerings at the next generation of investors.
The Future Is Focused on Well-being
Financial professionals and investors are aligned on the future of advice: Planning will be more personal, centered around a client's values, and focused on their well-being as an individual, not just the health of their portfolio.
The future of financial planning will incorporate services from a number of different areas of wellness, based on where the financial professional builds referral networks, earns degrees or certificates, and partners with other businesses serving their same clients.
The end result is a form of financial planning with wellness at the core, where clients are truly served with the financial and non-financial guidance they need to live healthier, more fulfilling lives.
Survey Methodology in More Detail
The 2020 eMoney Power to the Plan Research was an online, blind survey (eMoney not identified). Approximately 420 financial professionals and 403 end-clients were surveyed in July 2020 to learn about their attitudes and preferences around key trends impacting the future of financial advice.
Advisor participants had assets over $10 million and represented a mix of different channels and office sizes. End-client participants worked with an advisor and had assets over $100K. End-clients were broken down by demographics, consisting of 192 Generation Baby Boomers/Gen X respondents; and 211 Generation Y/Z respondents. There was an even distribution between baby boomers/Gen X but the Gen Y/Z segment skewed toward Gen Y.
Matt Schulte is the head of financial planning at eMoney Advisor