New Report: Mapping the Future of Financial Advice

Distinguished group offers perspectives on trends for consumers, technology and advisors  

Comfortable with technology, consumers will demand greater transparency and a fiduciary standard when working with both human and digital advisors, according to a new report issued today by the CFP Board Center for Financial Planning.

This second annual report from the Digital Advice Working Group looks at predictions for some of the most likely outcomes for firms and individual advisors by the year 2021. The group included leaders in technology, financial services and academia. Heidrick & Struggles, a global leadership advisory firm, worked in collaboration with CFP Board’s Center for Financial Planning to facilitate the meeting and develop the report.  More about the group and its membership can be found here. 

“This report continues to show that digital advice is rapidly changing how advisors and firms are developing and delivering financial advice,” said CFP Board CEO Kevin R. Keller. “As time moves on, the human plus technology model seems to be increasingly preferred by firms and their clients. One thing that remains constant though is the desire by consumers to have holistic financial planning, which is delivered by competent, ethical financial planners.”

Specifically the report notes five areas where there is great clarity about the future of the financial planning profession:

• Consumer comfort with a digital financial advice experience will be much higher than it is today.
• Profit margins in investment management will decrease, although the extent of margin erosion is unclear.
• There will be greater transparency that will lead to a modest increase in consumer awareness and drive demand for greater value at lower costs.
• A fiduciary standard will be applied equally to both human-led and digital advisory platforms.
• The market for financial advice will expand in the Mass Market Segment.

While the group was more certain about these outcomes, they were less so about:

• Consumer demand for holistic financial planning advice or whether there will be fragmentation of financial services and products offered by advisors.
• How much of an actual wealth transfer would take place between older generations and the Generation X/Millennial generations due to rising health care costs and other variables.
• The evolution of and capabilities of digital advice platforms into areas it currently doesn’t already have a market in such as tax planning and portfolio management.
• The impact that ever-increasing cyber-security attacks will have on consumers’ and firms’ confidence in technology and the delivery of advice.

In addition to these findings, the group developed a roadmap to help firms and individuals plan their businesses. The roadmap is intended to be a guide to monitor and think through potential outcomes when planning strategic priorities and the future of a business.  

“Through the foreseeable future of digital advice, there will continue to be areas in which the human advisor excels. Digital platforms are not likely to surpass humans in their ability to build relationships, trust … or create client-tailored solutions for highly unique situations,” the report concludes. “By doubling-down on those areas where humans excel – sharpening soft skills, building deeper relationships, and expanding client networks – firms and advisors can increase their readiness to profit from this tech-enabled third wave.”