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Boom in financial planning expected in next 5 years

Boom in financial planning expected in next 5 years
 Infographic from the FPSB

Financial planners will see a significant rise in demand for their services over the next few years, according to research from the Financial Planning Standards Board. 

In its latest study of more than 4,200 Certified Financial Planners around the world, the Financial Planning Standards Board found an overwhelming expectation globally that public demand for financial planning would increase, driven primarily by retirement needs.

The Future of Financial Planning Practice Study, carried out as part of the FPSB's Global Job Analysis survey, interviewed 4,250 CFPs across 23 countries, including the UK, about their expectations for their profession and for consumer finances.

With rising numbers of older people and people approaching retirement across the world, 82 per cent of those surveyed expected to see rising levels of demand for financial planning services, with 61 per cent predicting this would be focused mostly on pension planning.

However, the great wealth transfer - which is predicted to see trillions of dollars' worth of money flow between the generations over the next couple of decades - also presents a challenge and an opportunity for CFPs.

The study said 35 per cent of the increased demand for financial planning would come from younger generations needing help with their new-found wealth.

An additional 41 per cent of professionals predicted that global economic uncertainty, caused mostly by Covid-19, would drive new business their way. 

However, the study warned that unless the number of advice professionals increased, the existing advice gap would widen further, with more people demanding advice from an already diminished market. 

Top four anticipated advice needs:

  • Retirement security (69%)
  • Investment planning (64%)
  • Managing inheritance / wealth transfer to the next generation (61%)
  • Finances associated with ageing and long-term care (47%).

The study said raising awareness of the value of financial planning and (re)building trust would be key to engaging the public. 

According to the study: "Although increased public awareness is expected to be one of the drivers of demand for financial planning, CFP professionals indicate there is significant work that needs to be done to promote the value of financial planning and the value of working with a financial planner.

"Respondents cite a lack of awareness of the value of financial planning (79 per cent) as the top reason people do not seek financial planning services, followed by a lack of trust in financial advisers (46 per cent)."

That said, the pandemic has shown additional practicalities of working remotely and using technology, which the study's respondents said would have a "great impact" on how financial planners work with clients over the next five years.

Almost 70 per cent said they viewed technology favourably, as something that would allow them to spend more time doing financial planning with clients.

Two thirds (66 per cent) of CFP professionals said they had increased their efforts to shift to a more virtual practice during the Covid-19 pandemic, and a majority expect at least 40 per cent of their client meetings to continue to be virtual in the near future.