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Financial Planning Trends for 2022 and Beyond

Joe Buhrmann December 30, 2021

financial planning trend

In recent years, the impact of COVID-19 has undoubtedly been one of the major forces shaping the financial planning industry. We’ve seen accelerated digitization, disruption, market fluctuations, and uncertainty of all kinds. But the pandemic isn’t the only driving force for change in the industry.

In fact, looking forward to 2022 and beyond, some of the biggest changes will revolve around the push to become planning-led and profitably deliver advice to a whole new market. This shift will have profound impacts on the way financial professionals structure their business, the type of advice they deliver, and the way they deliver it.

The Race to Serve the Mass Affluent Client Segment

Historically, financial advice has been reserved for high net worth (HNW) and ultra-high net worth (UHNW) households, but in recent years wealth management firms of all sizes have raced to serve the mass affluent client segment. Now more than ever, this client segment represents a major opportunity for financial professionals.

A recent study1 showed that the mass affluent, defined as having financial assets between $100K-$1M, account for approximately 27 percent of U.S. households and 36 percent of U.S. financial assets. This is a huge market in need of financial advice. But the financial advice they want differs from the traditional, comprehensive financial plan.

These clients want a financial plan that balances the transactional and emotional elements of their lives by incorporating2:

  • Life-stage financial planning: What milestones does the client need to hit at each stage of their life?
  • Values-based planning: How is the client’s value system woven into the fabric of their financial plan?
  • Total well-being: In what ways does the client’s portfolio foster long-term wealth and well-being?

With a new market to serve, and new preferences for advice, financial professionals will have to keep up with the rapid pace of change in this industry.

Financial Planning Marketing Comes to the Forefront

With clients increasingly looking for a more holistic type of advice, the importance of differentiating your firm increases as well. You’ll need a strong, authentic brand that communicates the ways in which your services go above and beyond the traditional model of advice. This brand will be visible in every channel, including your website, content, email, social media, and in search engines.

What’s more, firms will need to accommodate the way people search for advice. Recent research3 shows that people are turning to digital channels to find advice and placing a higher importance on a firm’s digital presence. Forty-two percent of investors start their search for a financial professional on search engines like Google, and 98 percent said a website is somewhat or very important in choosing an advisor. Your use and adoption of technology may say more about you and your practice than you think.

It’s essential to connect with mass affluent clients on the channels they’re using to search for financial advice. But it’s not enough to merely be in front of these clients—it’s important to also cater to what they’re searching for.

The same study showed that 64 percent of investors say an advisor’s ability to offer personalized advice is a top consideration—it may be wise to speak to the way your advice is tailored to each client on your website. Further, 56 percent said that not having enough information to make a decision would cause them to hesitate to reach out. You’ll also want to make sure you’re transparent about your services, your pricing, and the next steps prospects should take to minimize any hesitancy they may have.

To engage new clients with new forms of advice, firms have to first have a strong digital presence on the channels prospects are using most.

Shifting Compensation Models Becomes Imperative

To market yourself as a planner, your firm must be planning-led. Only then can you authentically tout the benefits of personalized, holistic planning—a far stronger value proposition in the eyes of mass affluent prospects, and much more in alignment with what they desire, when compared to investment management alone.

While clients stand to see better outcomes than ever before, financial professionals have to ensure they’re being appropriately compensated for the value they’re delivering.

With an increased focus on life-stage planning, values-based planning, and total well-being, the value of financial advice may not be captured with an assets under management (AUM) fee, especially if the client has a relatively smaller amount of assets. It may be more appropriately captured with a separate planning fee.

Shifting compensation models will be an essential aspect of preparing your firm for what the future holds. While the AUM fee currently dominates the industry, firms are steadily exploring alternative fees for planning.4

Fees for financial planning give firms an important new source of revenue when the profitability of investment management is waning and younger investors are flocking to new types of self-service investing models.

Importantly, planning fees also position firms to profitably serve mass affluent clients with the types of financial plans they desire—plans focused on values and well-being.

Financial Wellness Becomes the Centerpiece of Planning Relationships

The concept of financial wellness has existed for some time, but research shows that the vast majority of clients want wellness to be an integral part of their planning relationships.

The eMoney Planning with Purpose study5 found that while 64 percent of advisors think their clients place importance on financial wellness, 88 percent of clients said financial wellness is important to discuss with their advisors. Similarly, 67 percent of advisors thought clients were receptive to financial wellness discussions, but 90 percent of clients said they are receptive to financial wellness discussions.

The trend here is clear: Clients are ready to talk about financial wellness with their advisors, but advisors tend to underestimate the demand for wellness conversations.

Financial professionals and clients also have differing views on what financial wellness means. The same study found that advisors most frequently cited meeting goals, plans, and milestones to define financial wellness, while clients framed wellness around financial health, growth, and independence.

This tells us that clients take a broader view of wellness. They want to reach milestones, but they also want a healthy relationship with money that makes their day-to-day lives better.

In 2022, financial professionals will have to start catering to their clients’ desire for wellness-centered relationships, or risk losing potential business to those who do. While a planning relationship built around financial wellness may look different in every practice, the best way to start is to ask questions that reveal a client’s values.

The Future of Financial Planning

While there are many other trends out there shaping the future of the financial planning industry, some of the most important ones revolve around clients’ increasing desire, especially among the mass affluent client segment, for advice that incorporates their values and well-being.

 

Sources:

1. Aamir, Awaad. “DAWN OF THE MARKET OF THE APES? How Retail Investor Trends Are Affecting Brokerage Modernization.” Celent, 2021. August 1.

2. eMoney Power to the Plan Research, July 2020, Advisors n=420, End clients n=403. 3. eMoney Consumer Marketing Survey, n=2,000 American adults, September 2020.4. The Cerulli Report, US Advisor Metrics 2020.5. eMoney, Planning with Purpose Research, July 2021, Advisors n=393, End clients n=391

DISCLAIMER: The eMoney Advisor Blog is meant as an educational and informative resource for financial professionals and individuals alike. It is not meant to be, and should not be taken as financial, legal, tax or other professional advice. Those seeking professional advice may do so by consulting with a professional advisor. eMoney Advisor will not be liable for any actions you may take based on the content of this blog.

About the Author

Joe serves as a Senior Financial Planning Practice Management Consultant at eMoney Advisor. With more than three decades in the financial services industry, Joe aligns his know-how and passion to help firms of all sizes increase usage, adoption, and engagement through a modern financial planning experience. He leverages his expertise and supports internal departments across the enterprise, helping Communications, Marketing, Relationship Management, and Sales. Joe attended Illinois State University, where he received his bachelor’s degree in Applied Computer Science and his MBA.

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