With regulation, consumer sentiment and industry trends shifting in their direction, fee-only planners may have a banner year in 2017.
Two leaders of the National Association of Personal Financial Advisors, or NAPFA, recently shared their optimistic outlook for the financial planning industry and the continued growth of their organization.
“I’m excited by what the next few years have in store, actually,” says Geoffrey Brown, NAPFA CEO. “We’ve started a movement that I think is going to snowball. Things are only going to get better for the community of fee-only professionals.”
With a membership of around 2,700, NAPFA is dwarfed by the Financial Planning Association, a sister organization with more than 20,000 members, but the Lilliputian organization’s leaders expect growth to accelerate through 2017.
Part of that growth is going to be driven by millennials, who may gravitate more toward the fee-only side of the financial planning profession, argues Tim Kober, NAPFA’s incoming 2017 chairman.
“Millennials have a statistically higher degree of focus on mission-driven careers,” Kober says. “As they enter the profession, they’re not just looking for the benefits or the paycheck, they’re looking for a purpose, to create a meaningful impact. Millennial planners are graduating and trying to serve their peers by meeting them where they are -- that requires innovation; they’re experimenting with monthly retainer models and offering services that focus on cash flow and debt management. They’re a natural fit for NAPFA.”
Kober notes that NAPFA may also be a draw for younger advisors because, as a smaller organization, it offers straightforward opportunities for advisors to explore collaboration and peer education within a tight-knit, vibrant community.
Millennials entering the advisory workforce may to some extent be responsible for NAPFA’s recent growth. Brown notes that NAPFA has grown at a healthy 15 percent rate over the past three years, with 10 percent growth in the last year alone.
“We have a strong place within the planning community that’s clearly growing, and we’re seeing further support for that view in the response that we’re seeing from consumers who seek financial planning services from fee-only advisors,” says Brown. NAPFA measures consumer interest in part by tracking the use of a fee-only planner search tool on its website -- in the past year, visitors used the tool more than 353,000 times to search for an advisor.
That consumer interest is due, in part, to increased visibility around the fiduciary standard for financial advice caused by the Department of Labor’s rule-making over the past several years. After releasing the final language of a fiduciary rule in 2016, the DOL’s regulation is expected to be enforced beginning in April 2017.
The rule is not only causing advisors and broker-dealers to re-examine their revenue models, but is also causing consumers to question the quality and objectivity of financial advice.