A Vision of the Future of Financial Planning in the New Age

Many financial planners don’t know how they should prepare for the future. They see a rapidly changing world. Large companies in the financial service business with innovative websites, offer free financial planning tools for their clients. With those tools they are apparently a threat for financial planners. As a financial planner you are faced with a dilemma. Do you accept these changes and choose to embrace the fast changing digital world, or not? Where should you focus on? How do you prepare yourself for the future? Questions you can answer easily if you know where you are going. Do you have a vision? The following blog shows you how to prepare for a rapidly changing future.


At the end of this blogpost I’ll tell you exactly what my vision and strategy for the future is. And how you can prepare for the rapidly changing world. But first I’ll tell you a story about how I have come to this vision. It’s quite a long story. So I hope you read it all. But I think it’s necessary to understand my vision.

As you can read on my ‘about-page’ I experienced that one of my best clients has left me last year. Despite of the fact that my financial planning showed him how he could save tens of thousands of dollars, each year. That made me realize that financial planning is more than just showing the numbers. Since then I have read dozens of books of the world’s most influential leaders, writers, marketers and psychologists. People like Stephen Covey, Daniel Pink, Seth Godin, Robert Cialdini, Anthony Robbins and Simon Sinek. So that I could learn how this could occur. I’ve discovered something that I’ve never would have imagined. Something that 12 years study on financial planning hasn’t taught me. What I have discovered is that there is a common thread in the books of those great writers. I’ll tell you in a minute.
For years I studied to maximize my knowledge about financial planning. I thought: when I have the maximum knowledge, I can help people at best. So what I have been doing in my financial planning career is that I was trying to convince people with the knowledge I had gained during my studies. And my experience off course. But after reading the books, I now know that people don’t make decisions based on information they receive from me. No, I’ve learned that 95% of people make decisions based on their feelings. Each of these great authors wrote that decisions are not taken in the left brain. But in the right brain. Not on the basis of figures. But based on feelings. Not based on logic. But based on emotion. I realized that I have fed my left brain year after year with numbers, figures and laws. I also realize this knowledge is necessary to be a financial planner. But I discovered that people don’t make (important) decisions based on ‘the numbers and figures’. Their decision is based on their ‘gut feeling‘. I discovered that when I really want to help my clients, I had to learn how I can make people feel.
That’s why I believe that in the future financial planners can stand out when they learn how to use the right brain of themselves and their clients. Until about ten years ago it would still be enough for a financial planner to distinguish himself with knowledge. In that period financial planners were called ‘knowledge-workers’, according to Professor Peter Drucker. According to Drucker, knowledge workers are employees who have a deep background in education and experience and are considered as people who “think for a living.” They include doctors, lawyers, teachers, and financial planners for example. This group of knowledge workers was important because they had information that most people didn’t have. Therefore they could ask for high prices to solve their client’s problem with their information. But with the rise and the role of the internet, this advantage is much less valuable. Knowledge has become a commodity and information is everywhere. Despite of the fact that the knowledge worker has brought the world much wealth, the role of the knowledge worker in the next century will be much less important. Unless the knowledge worker is not going to focus on only knowledge (left brain) but also on emotion (right brain), success will come. As you can read in the bestselling book ‘A Whole New Mind’ from Daniel Pink, in the new age it’s not only about the left-side of the brain (the territory of the knowledge worker) but more and more about the right-side of the brain (the territory of the emotional worker). That doesn’t mean that the left-brainers won’t be necessary in the new age. It’s just not sufficient anymore. Pink argues that ‘Abundance’, ‘Asia’ and ‘Automation’ are the cause of the decreasing role of the knowledge worker (including financial planners). To succeed in the new era, according to Pink, financial planners must ask themselves the following questions:
1. Can someone oversees do it cheaper? (Asia)
2. Can a computer do it faster? (Automation)
3. Am I offering something that satisfies a non material transcendent desire of an      abundant age? (Abundance)

Here are my answers:
1. Yes. Big financial services firms are outsourcing financial analysis and number crunching to India, for many years now. And the numbers are growing.
2. Yes. The development of the internet has made it possible that people can do their financial planning themselves on the internet. For free!

To stand out, you will have to answer to the third question. I experienced that I had no answer to this question. So I went on a journey to find this answer. I’ve read many, many books and interviewed influential people in the financial service industry. Now I have a clear vision what to do, to be successful as a financial planner in the new age.

I believe that when you have the quality to use your left brain and to develop your right brain, you will have the ability to connect with the emotions of your client and innovate our business so you will be successful in the new age. That’s my vision of the future of financial planning.

What’s interesting is to know how to develop your right brain. In my next blog I’ll tell you the secrets on how to trigger the emotions of your clients.

For now I’d like to hear your vision on how to innovate financial planning? Please let me know by commenting below. Thank you very much.

 

 

Leave a Reply 3 comments

John Bohnsack Reply

I think the online tools overall enhance the financial planning process. While in some cases I may disagree with their assumptions I think it allows individuals to develop more thoughtful, deeper questions. Questions that a experienced, thoughtful advisor becomes an expert in handling. Quality conversations typically create quality decisions.

Michael Kitces Reply

Ronald,
Great article, I really enjoyed it.

This echoes some themes I wrote about last year as well, in the context of why the so-called \”robo advisors\” are not a threat to real advisors – that ultimately, human beings made decision based on more than just information alone, and that we simply don\’t engage emotionally with computers the way we do with other human beings (e.g., advisors). http://www.kitces.com/blog/archives/324-Technology-Will-Improve-Financial-Planning-And-Augment-Planners,-But-It-Wont-Replace-Them.html

Thanks again for sharing!
– Michael

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