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.
Financial planners needed to learn more about behavioural finance and coaching to be successful.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.
Soft skills will also be needed. When asked about the value financial planners will provide to clients in the future, respondents said collaborating to set and achieve financial goals (29 per cent) and providing objective advice to facilitate decision-making (27 per cent) will be the greatest value they can provide to clients.
The study added: "In support of this shift towards more collaborative client relationships, financial planners needed to learn more about behavioural finance and coaching to be successful, along with more traditional topics such as financial issues related to ageing, estate planning and investment management."
Mark Hutchinson, membership director of the Personal Finance Society, told FTAdviser: “The global pandemic has certainly refocused the need for individuals to address their own financial well-being.
"Technological innovation has a role to play in increasing access to advice, but is no substitute for face to face professional financial advice on more complex personal matters.”
The research echoed comments made at the Chartered Institute for Securities & Investment conference earlier this week (October 6).
As reported by FTAdviser, Ruth Sturkey, non-executive director at Paradigm Norton, said financial planners of the future would need to embrace technology to cater to the needs of future clients.
She told the conference: “We’ve got a changing demographic of people we’re going to be dealing with as we deal with more younger clients. At the other end of the spectrum is the ageing population.
"Robo is not something to fear; it’s something to embrace so you can actually deal more efficiently with people. I think it's going to be crucial.”
simoney.kyriakou@ft.com
