Advisors and planners need to keep looking toward the future because the industry is shifting and the services they offer might become out of date.
That was the gist of a presentation called “The Future of Financial Planning in the Digital Age” given by Michael Kitces, a partner at Pinnacle Advisory Group in Columbia, Md. He spoke recently to a packed room at the Financial Planning Association National Capital Area chapter meeting.
“Financial planning lives in the cloud and can be accessed anywhere, from any device,” said Kitces, describing where the industry is headed.
Kitces noted there are now more than 294 billion emails per day, of which 90% of them are spam. “That translates to 20 million real emails per minute,” he said. Kitces explained that social media is experiencing explosive growth and will become the standard for all communications. Emails were once revolutionary to use, and now social media is in that phase.
The exploding popularity of Facebook with its billion users, along with YouTube and the Google and Bing search engines, means that information can now easily be found. And it is putting old models out of business. Just look at what Wikipedia did to the Encyclopedia Britannica, and what digital books are doing to hard-copy books.
He told attendees that many things will be simplified or replaced by technology, so the industry has to be always evolving.
One shift Kitces sees is that all physical plans on paper are going away. “That part has been commoditized," he said. He explained how software will make things better and there will be more regular updates. For example, computers will provide goal-related messages like, ‘Great job, you actually spent less than $200 this month.’
Kitces also posited that we meet in person too much. This did not mean that advisors communicate too much, but that the face-to-face approach is too time consuming. Advisors know this and that is why most of them do not go out to meet each client in their home or office. Instead they put that burden on the clients to come to the advisors’ offices. “We eliminate all our travel by making our clients travel," he said. "You don’t want to drive, they don’t want to drive. The break though is video.”
Another advantage of technology is its enhancement of interconnectivity. Kitces said we are now connected to each other in very short distances, and this will allow professionals to not have to be limited to a geographic area. It also creates access to virtual staff members that can help a firm at a cheaper rate.
Be The Best To Be Found
In the future, prospects will search for the best problem solver for their situation, and geography will not be the main differentiator influencing their choice. Through a show of hands, many attendees indicted they market themselves by stating their years of service or that they create customized plans. Kitces was direct and said, “Most of you are remarkably the same.”