Financial planning gearing up for a post-covid world

IN LAST month’s column, I addressed the demise of the old style of financial planning and gave reasons why the industry has become so much more professional. This month, I’d like to look ahead to the future of financial advice. Much is changing, and it’s changing fast.

Here are six ways that financial planning is gearing up for a postcovid world:

1. Meet anywhere, any time.

One of the few good things to come out of the pandemic has been the shift to remote working and online advice. Even my older clients have embraced video-call tech such as Zoom. They love not having to sit in traffic to get to a meeting and they enjoy being able to replay a recording of the session to help them better understand our conversation.

Even before the pandemic, many smaller financial planning practices were operating from home offices, or at least partially from home with reduced rental requirements.

Since March, bigger organisations have had to follow suit. This kind of arrangement is better for advisers and clients. Nothing beats in-person for an initial consultation, but once the relationship has been established, remote meetings are preferable. You can have shorter, more frequent interactions, which is far better than only touching base once a year.

2. Niche service is key.

Just as you wouldn’t consult a general practitioner if you have a complicated shoulder injury, you can seek out a financial planner who understands your specific financial needs and can offer specialised advice. For example, I’ve heard of a female adviser in the US who offers her services to women – and women in the tech industry only. She comes from the industry herself, so she can speak their language.

This is possible only because location is no longer an issue – clients can hire specialised advisers in other provinces or other countries.

3. Investment advice doesn’t suffice. Financial planners who only offer investment advice are a dying breed.

Since most major asset managers generally deliver similar returns, it makes no sense to nit-pick between funds from the leading asset managers. Instead, your adviser should be looking at the bigger picture: whether your investments align with your life goals; if you’re suitably protected against market volatility; and whether your tax set-up is as efficient as it can be.

That said, there has been an international move towards ethical investing, or at least investing in a way that does not support companies doing damage to people and the environment.

As an adviser, if you’re going to offer any investment advice, it would be in this space – helping your client align their portfolio with their personal moral code.

4. The financial adviser as life coach. Having someone to chat to about money decisions is invaluable. Indeed, the goal of financial planning has shifted from market analysis to the psychology of investing – what are you trying to accomplish with your money?

A relationship based around this kind of discussion will always be far more beneficial than one based purely on Excel spreadsheets. Service, empathy, creativity… These are traits that will define the profession.

5. Tech takes over. “Robo-advice” is all the rage at the moment – algorithm-driven financial planning that doesn’t require an actual adviser. This is great for investors just starting out because it’s cheaper and gives more people access to planning tools, but as your portfolio grows and your life circumstances change, you’ll discover that nothing can replace old-fashioned human interaction.

I foresee a hybrid system developing, where algorithmic tools will streamline back-office operations to add even more value. Using this tech, advisers will be able to service more clients and provide existing clients with a deeper level of expertise.

6. No more hidden fees. Most financial planners take a fee percentage according to assets under management (the so-called AUM model). This works fairly well for most clients, but it fails those who have little to invest and those who have loads of capital.

Advisers who service high-networth individuals generally work for a flat fee. This model is catching on at the other end of the spectrum too, where younger advisers are taking on clients with limited funds for a set amount. It’s all part of a movement towards greater transparency. In Australia, for example, legislation has been passed whereby clients need to opt-in every second year if they’re in an AUM arrangement. This way the client is constantly reminded of the fees he or she is paying, and can reassess whether the service received is worth it.

We’re living in an uncertain world. Now, more than ever before, it’s paramount that you protect your savings and plan for the future. Contact a certified financial planner professional and start a journey together towards peace of mind.

Hardi Swart is director of Autus Private Clients and Financial Planner of the Year 2019.