Financial planning’s persistent rise

As retiring baby boomers need help with their increasingly complex finances, planning becomes more critical

By: Todd Gotlieb – May 2021

The adoption of financial planning among financial advisors and their firms has gained traction steadily in recent years, and this trend is expected to continue into 2019 as the financial services industry continues to grapple with changing technology and client demographics.

“Everybody’s paying a little more attention to financial planning, whether it’s people in the industry, clients or the media,” says Jason Heath, a fee-only certified financial planner and managing director at Objective Financial Partners Inc. in Markham, Ont. “It’s just a big shift that’s happening with baby boomers retiring, [and] everyone has no choice but to pay attention.”

Investment Executive’s (IE) research illustrates the extent to which financial planning has become a bigger part of the industry. In 2018, 85.1% of advisors across all four major distribution channels (brokerages, mutual fund dealers, banks, and insurance agencies) surveyed for IE‘s 2020 Report Card series reported that they create financial plans for their clients, up from 81.7% in 2017. This is part of a longer-term trend: in 2009, only 77% of advisors said they created financial plans for their clients.

Similarly, a greater percentage of advisors’ clients have a financial plan in place. In 2018, advisors reported that 54.9% of their clients had a financial plan in place, up from 48.4% in 2009.

And financial planning is likely to continue to grow in the coming year, largely a result of retiring baby boomers who need help with their increasingly complex financial lives, says Heath: “There’s just a lot more [financial] planning questions that I find people have these days that financial professionals are being required to [answer].”

For example, navigating the decumulation phase of retirement often is far more difficult for clients than accumulating assets during their working years, says Heath. Retired clients tend to have questions such as: “How much money can I pull from my investment portfolio? What accounts should I draw from first? How can I do so in a tax-efficient way?”

As more clients and advisors embrace financial planning, there is also a push for advisors’ education about this service. In light of that, the Financial Planning Standards Council (FPSC) is rebranding and creating a new division dedicated to helping current and would-be financial planners up their game.

In April, FPSC will be rebranded as FP Canada and divided into two divisions: FP Canada Standards Council, which will continue to set standards and oversee the certified financial planner (CFP) designation, and FP Canada Institute, which will offer educational courses to planners.

“Standards are very important, and they are, of course, integral to any profession,” says Cary List, president, and CEO of FPSC. “But if you don’t have professionals who have been educated, trained, provided [with] the guidance, tools, and resources [they need] to actually be as good as they can be, all the standards in the world are not going to do any good for the consumer of the service or for the industry itself.”

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The aim of FP Canada Institute also is about enhancing the soft skills financial planners need in working with clients, something List argues will become more vital in the coming year and beyond. For example, he adds, advisors need to be more in tune with clients’ needs and act more as a personal guide or counsellor than as someone who focuses solely on the numbers.

Beyond improving education for financial planners, Heath hopes that the coming year will provide more clarity surrounding the use of the term “financial planner” within the industry because the title remains unregulated outside Quebec.

“There [appears to be] more and more of a push these days to regulate financial planning,” says Heath. “I’m hopeful that before long, there’s regulation of the financial planning industry in which someone needs to be, for example, a certified financial planner to provide financial planning.”

The continued rise of technology also will drive change as new tools become more integrated and complementary to traditional financial planning. New technology may allow clients to become more involved in the creation and ongoing maintenance of their financial plan. For example, your clients would be able to update information themselves or connect with you outside of their quarterly reviews.

“That’s probably a trend for the future,” says Jack Courtney, vice president, advanced financial planning at I.G. Private Wealth Management, a unit of Investors Group Inc., in Winnipeg. “[I don’t know] whether anyone is going to be able to execute on that to the full extent in 2020, but I know that we’re working hard to create that interactive experience for our clients.”

Another change that is likely to continue to evolve in 2021 is how you can approach financial planning, Michael Bronstine Managing Partner GBK Strategic Financial Partners in Toronto says: “The notion that a financial plan has to be an 80-page document spit out by complicated, sophisticated software is disappearing quickly.”

Thus, financial plans will become shorter, more flexible documents that focus on specific life events or financial issues and can evolve as your clients move through life.

Indeed, financial plans may need to be flexible in 2021 and beyond as markets and the economy enter rocky territory.

Says Bronstine: “Market and economic factors could make financial planning that much more important in the next few years, [because] the good times may not be as good as they’ve been over the past decade – and in the coming couple of years, in particular.”