As I approach the ten year milestone of my financial planning career, I’ve been thinking a lot about the state of my industry. I’m a firm believer that the winds of change will continue to blow through the financial planning industry.
For financial advisors, that means keeping up with the times or calling it a career….
When I started my financial planning career in 2006 as an intern for a large insurance company, the financial services industry functioned differently than it does today. Google was already a household name, but had just started to put phone books out of business by becoming the primary way people found answers to their questions. Google bought a startup named YouTube that year, and streaming video slowly started to become a part of our everyday lives.
In 2006, the financial services industry had little to no virtual-advice presence. I remember about two years into my career, we refitted our corporate office with video conferencing. To us it was cutting edge technology allowing our managers to have virtual meetings, thus, cutting down travel time and saving money. None of us even considered the video conferencing setup as a viable way to interact with our clients. In fact, after the novelty of the new equipment wore off, management stopped using it and went back to the old way of driving/flying to meetings or using teleconferences.
The way financial advisors found new clients was equally archaic in 2006. Meeting new clients was a combination of networking and word of mouth. Financial advisors playing golf is a cliché for a reason! Joining a country club and having meetings on the golf course was the way things were done for as long as financial planning has been a career.
– I think I’m the only financial advisor on the planet that doesn’t play golf. Mainly because I’m terrible at it, but also because a game of golf is a huge time suck. Unless it is your passion, allocating three or four hours to golf on a Saturday is a pretty big commitment. I’d rather take my kids fishing, but that might be my inner redneck talking (I am from North Dakota after all).
The necessity of in-person client meetings limited the average financial advisor and forced them to be a financial generalist, a financial jack-of-all-trades; selling everything from college savings plans, to retirement products, to long term care insurance. Because advisors were geographically limited, they had to have a broad base to give advice. Basically, they would accept anyone as a client. In my opinion, because advisors had to be so broad, the advice also had to be broad (think: ten miles wide, one mile deep). This meant product-based solutions were often recommended as opposed to advice-based solutions. I saw this first-hand at the insurance company I worked for the first decade of my career. If I’m meeting with a 23 year old at 9:00 in the morning, a married couple in their 30s at 11:00, and ending the day with a 65 year old at 3:00, how deep and focused will my advice be? Not very, and “scraping the surface” flavor of advice is why so many clients have one-size fits all products (life insurance, variable annuities), as opposed to individualized retirement plans based on advice.
Advice isn’t a product; advice is a plan.
The limitations of face-to-face meetings went far beyond questionably suitable financial products. What happens if the closest financial advisor isn’t competent? Before technology breakthroughs, clients were limited to the best financial advisor in their neighborhood, for better or for worse. Forget about finding a specialist.
Change is coming….
Thanks to the giant leaps in technology of the last ten years, clients have choices that extend far beyond their friendly neighborhood financial advisor.
Clients are now able to use Google to find a financial advisor that spends 100% of their time practicing in their unique niche.
The list of financial planning practices that have a niche focus is long and growing by the minute. Professional athletes, young parents, people with student loan questions, divorcees – the list goes on and on: If you have detailed questions about a financial topic, there is a niche financial advisor looking to provide answers.
The distance between clients with questions and advisors with answers is becoming shorter by the minute with tools like Google Hangouts and Skype that cost little to nothing.
When I founded Capital City Wealth Management after leaving the insurance industry, I knew I had to pursue a niche and find my place in the coming virtual world of financial advice. The niche I chose was the service that the largest number of clients had been asking for and the area I felt I could have the most impact:
-Assisting clients with the transition from work to retirement.-
In order to focus my niche properly, I had to turn away many friends and previous clients that didn’t yet have a need for retirement income planning. This was a difficult thing to do, but it was the right thing to do. It wouldn’t be fair to collect investment management fees from clients in their 20s while my focus would be on other areas of financial planning. Inversely, it also wouldn’t be fair to my clients transitioning to retirement if I were distracted by younger clients during the time my retiring clients needed me the most.
The financial planning concerns of young people are absolutely worthy of comprehensive financial planning and they deserve the undivided attention of a specialist in the same way a recent retiree does. The new world of financial planning leaves no-one behind and everyone wins. Nobody’s financial concerns should be treated as an afterthought. The only reason I am able to focus on a niche without feeling guilty is because there are other specialists that have niche practices that cover the areas I do not.
In fact, there are entire professional networks dedicated to it!
Locally, if I encounter a young client that desires face-to-face advice, I send them to my good friend Benjamin Martinek at Bona Fide Finance. Ben is able to use all the cutting-edge tools and resources crucial to developing comprehensive financial plans for younger clients.
Niche financial planning extends far beyond generational and life-stage planning needs.
There are even financial planners that specialize in specific life transitions, like Humphrey Thomas, Certified Divorce Financial Analyst®, of Thomas Divorce Advisors, LLC.
Young doctors can combine both demographic and career-specific financial planning niches by working with Andrew McFadden with Panoramic Financial Advice for guidance with their unique financial concerns.
If I come across clients that want to review a network of financial advisors that specialize in working with younger clients, I refer them to The XY Planning Network, where they can vet dozens of financial professionals and choose the one serving their specific niche.
The moral of the story is this: If your current financial advisor is +50 years old (as 49% of CFP®s are) and is a general practitioner, know two things:
-Other options exist for you, whatever your financial situation. New niche financial planning practices are opening every day. If you have specific needs that aren’t yet being served by a planner, hang tight! Chances are you’ll find one soon.
-His best years are behind him and if he doesn’t find a niche, technology will wipe him out and force an early retirement.
I don’t want this to seem like an advertisement for myself, because it isn’t. I want everyone reading this to be aware that if they have a unique situation – whether it be divorce, estate planning, second marriages, you name it, there are experts out there that you can work with using the power of technology.
The days of “settling” for the best advisor in your town are behind us.