Six Questions for the Future of the Planning Profession

June 10, 2014

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A few weeks ago, I asked for your help as we created the scenario learning session for the Insider’s Forum conference in September – which will be led by me and Dennis Stearns, of Stearns Financial Services Group in Greensboro, NC.  We’re going to map out some possible futures that you can prepare for, using as raw material the crowdsourced thoughts and ideas that you provide to us by responding to that e-mail plea – and this one.

I’m going to summarize what people have said so far, and add some of my own ideas, hoping that you’ll respond this time around and advance our thinking.

Before I do that, I should mention that the registration price of our conference – for those of you planning to attend – will go up $75 on Friday, June 6 – that is, this coming Friday.  Believe it or not, we would prefer that you register before that date and pay us a lower registration fee, so we can properly prepare for the number of people who will attend.

You can register here and get a $100 discount if you use the coupon code “Insider2014”.  I’ve attached a copy of our conference schedule that you can look over if you’re sitting on the fence.

Here are six questions that have been raised and addressed about the future in the first round of our exercise.  If any of them catch your fancy, if you want to comment on any of them, please send a few words that will help us gain deeper perspective as we model where the profession is going.

  1. Why are we modeling the future now?  Is there any particular urgency?

    Yes; more today than at any time in your career.  I’ve heard more new, transformative ideas in the last 12 months than I’ve been exposed to in the previous 10-15 years combined – which tells me that the profession has hit another one of those rapid evolutionary periods.

    Some years ago, I wrote a “Rip Van Planner” column which posited an advisor who went to sleep for 10 years and woke up – and hardly recognized the new professional landscape.   In five years, I expect to write that column again, where that advisor from today will wake up and encounter a totally revamped initial client onboarding process that is fun and engaging rather than painful and embarrassing; a strong move away from the AUM compensation model toward monthly or quarterly retainers debited automatically from client accounts; more advisors moving to niches and expanding their marketing horizons all over the country; new revenue and investment management models; and the acquisition of scale as many smaller practices merge into multi-partner entities and a few firms create national scale.

  2. Is succession planning really a crisis? 

    Possibly not.  We’re told that the profession has many more retiring advisors than it does newer planners to succeed them.  But Michael Kitces says this is “a total mirage.”  He points out that there is very little financial incentive for advisors to sell their practices to the next generation or anyone else, and every financial incentive to keep working beyond traditional retirement age.  “Financial planning is a business that’s easy to ‘die with your boots on,'” he says, “especially for mature firms that have already done the heavy lifting of building a practice, and now simply need to retain clients. When you do the math, many of these practices generate FAR more income for the owner just working another 2-3 years than they do selling it, so it rarely makes sense to sell rather than just work 2-3 more years… which continues forever.”

    At the same time, individual advisors will be able to handle more clients in the future.  A new revenue model is emerging – and a number of younger advisors suggested that the time and attention being given to detailed asset management work will vanish from the client’s desk as it is commoditized by the so-called robo-advisors.  Advisors of the future will have more time to work with more clients, which will take up some of the much-publicized slack caused by fewer replacement advisors.  We may not need as many advisors in the future as we do today to serve a wider range of clients.

    A number of advisors also said they’re making nontraditional hires among career changers from outside the profession – including schoolteachers and therapists.  These nontraditional replacements are not being envisioned by most of the studies that are getting so much attention in the press.

    Meanwhile, there is no succession planning crisis at the multi-partner ensemble practices, which have established career ladders and (at the more advanced firms) a more efficient “leadership pipeline” system that will be described in detail at our Insider’s Forum conference.  The rich (or large) will get richer (or larger) as the solo practices either merge or age out.

  3. But isn’t there still a talent shortage in the profession?

    Absolutely.  Advisors who are growing their firms complained about the problems they’re having with finding paraplanners and client-facing advisors to handle a growing client base – even when they offer compensation at or near the top of the pay scale.

    This is not a succession issue, but a scale issue – and if the comments are right, the larger advisory firms are going to be competing, not for successors, but for staff planners who can step in and handle client responsibilities within three years.

    There will be one of two results: either advisory firms will accelerate their training processes and make them more efficient, or their growth rates will slow.

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