Trend forecaster, author and business strategist, Michael McQueen, reveals the five trends that will impact and reshape the financial planning professional over the next 10 years. 

In 2014, you may have heard Michael McQueen speak at the FPA Professionals Congress in Adelaide. Back then, he spoke about living in an age of unprecedented disruption, where once lucrative revenue models – like financial planning – were under siege. Shift and change was happening, with no organisation or business immune to it.

Fast-forward six years and even Michael, as one of the world’s leading forecasters on trends, is surprised by the extent and rapidity of change, which he says has been particularly significant for the financial planning profession.

“The fact that we now use the term ‘profession’ as the standard to describe the vocation of financial planning is indicative of the change that has happened over the last six years,” Michael says. “The profession has evolved quickly over the years, as consumer demand for professionalism has led to higher education and professional standards, as well as increased regulatory scrutiny and much more compliance.”

And while Michael believes regulation remains significant for the profession, he suggests the issue around ‘trust’ has increasingly become important for planners over the last six years.

“The trust that people have for financial planners has taken a hit, but they’re not the only ones. There are many different sectors, like aged care, that have had their trust eroded in the last few years, but financial services has been particularly hit hard.”

Since the FPA Professionals Congress in Adelaide, Michael has also noticed a change in the way in which clients engage with financial services, with an increasing number of players entering the fintech space, squarely providing solutions aimed at financial, investment and wealth advice.

“With some of the technology platforms that are available now, you would have struggled back in 2014 to understand how pervasive these platforms, like Amazon’s Alexa, would become. And yet, there are a number of banks in Europe and the U.S. that are using Alexa to provide their customers with investment advice. So, the way in which people are now looking to engage with financial services and advice has changed.”

5 trends to watch

Jump forward six years, and while Michael might still be on the outside of the profession looking in, he believes the evolutionary transformation of the profession has only just begun. With a focus on the future, he identifies five major trends that he believes will irrevocably change the profession over the next 10 years.

1. Radical transparency

The first of these trends is what Michael terms, ‘radical transparency’, and is fundamental for re-establishing consumer trust in the profession.

“There’s going to be an increased need for ‘radical transparency’ in everything planners do for their clients,” he says. “We’re already seeing a shift in thinking by planners around fee disclosure and remuneration.”

He believes this ‘radical transparency’ will particularly gain momentum as practitioners engage with the next generation of financially and tech savvy consumers.

Michael explains: “If there is distrust with consumers already, one of the first things you have to do with a client is be upfront about how you get remunerated, and not rely on the FDS or PDS to convey that to clients. The reality is, consumers don’t read those documents.”

Michael points to the Hayne Royal Commission, which highlighted considerable failings of the financial services industry, which has resulted in consumer distrust and weariness of financial planners.

“A young person who has never dealt with a financial planner before is naturally wondering how they get paid. So, if you want to build trust from the outset with clients, be upfront and transparent with them about your remuneration and services. By being proactive, you can nip distrust in the bud and re-establish trust with potential and new clients. That’s going to be an important trend going forward.”

2. Generational transition

Michael identifies the second trend facing practitioners is the generational transfer of wealth and clients. With Baby Boomers entering the retirement phase, it’s their kids, the Millennials, who present a massive opportunity for planners.

“For the last 5-10 years, we’ve been talking about Millennials being the next big cohort of clients coming through. Many Millennials are now at a life stage where they are looking for advice because their financial situation has become more complicated as they deal with young families, their career, buying a house, and building their wealth. They are looking for advice and support.”

However, Michael believes the generation of clients planners should be closely watching is Generation Z – people born between 1995-2012.

“Don’t make the mistake of thinking this generation is too young to be serious about financial advice,” Michael warns. “With many of them receiving financial education at school, they are both financially and tech savvy. They are reading books, like The Barefoot Investor, and are coming into adult life with far greater financial awareness than previous generations.”

While Generation Z will require financial advice, Michael believes that due to their tech savviness, they won’t be as reliant on third-party information to the same extent as previous generations, or consume that information in the same way other generational cohorts did.

“That’s going to mean a shift for the profession in terms of how it adds value to clients and engages with them, particularly with Millennials and Gen Zs.”

3. Consolidation of financial services

Michael’s third trend has gained momentum since the Hayne Royal Commission, with increasing consolidation of the financial services industry. This is most recently evident with the sale of MLC Wealth to IOOF.

“We’ll probably see some of the big banks move entirely out of the advice space, because it’s just too risky for them. They don’t quite understand the advice space and are feeling exposed,” he says.

“You can also expect to see the landscape from a licensee perspective continue to change over the next few years, as more licensees join forces. This provides licensees with the benefits of scale, while enabling them to remain independent and non-aligned.”

4. Planner diversity

A trend Michael is seeing across other industries and professions is the increasing diversity of people joining sectors they wouldn’t have traditionally done, bringing with them complementary skills. It’s a trend he sees accelerating in the advice profession.

“If you want to recruit people for an advice business, then you need to consider the diversity of your clientele, which includes age, gender, ability, ethics and values. This means looking to implement different skillsets within your business.”

Michael says what worked in the past, won’t necessarily work in the future. While many advice firms were focused on hiring good sales people in the past, as the profession has evolved and become more focused on the needs and goals of the client, practices are more centred on embedding people-focused skills within the business, like client-connectivity and behavioural finance.

“It’s all about getting into the ‘nuts and bolts’ of what’s really happening with a client beyond their financial circumstances, and knowing what they mean by how they are feeling, and not necessarily by what they are saying. It’s about having insight, empathy and discernment to help clients shift their own beliefs and attitudes. That’s actually going to become a key part of the overall financial planning process.”

Michael adds that if the future of financial planning is going to be less reliant on education, as a result of more informed and savvy clients, the profession will need to reposition its offering to one that is centred more on personalised service and client connection.

“This means we will see different skillsets come into the profession from different types of people and professions, who we may not have seen in the advice space previously,” he says.

5. The role of technology

Michael reserves the perennial favourite, technology, as his fifth trend, with the current iteration of technology shaping up as a real game-changer for financial planners. One of these core technologies that Michael has been watching is ‘Crystal Knows’.

Crystal Knows is a tool that uses ‘personality AI’ to identify the behavioural patterns of individuals by analysing their text, responses and other attributes on social media. By entering a person’s name into this tool, Crystal Knows searches the internet for everything the person said, liked or followed in the public domain. This information is then analysed and delivered back to the user with a suggested game play to best target their communication or approach that will be most relevant to that specific individual.

“Crystal Knows can provide planners with information and insights on clients that perhaps you wouldn’t know until after you’ve had your first or second meeting with them. So, this type of technology allows planners to go into a client meeting armed with those valuable insights, enabling the discussion to be as relevant and relatable to the client as possible.”

Michael says the development of technology and tools, like Crystal Knows, are not only providing planners with valuable insights on their clients, but they are also enhancing the client-connectivity side of the business, and is a definite trend that warrants watching.

Staying ahead of the curve

With the advice profession rapidly evolving and transforming, Michael concedes it can be challenging for planners to adapt to change and the emerging trends that are reshaping society and business. But his secret to managing change is to “stay ahead of the curve”.

“My advice is don’t wait until some of the changes hit. It may be too late by then,” he says. “You need to adapt now, otherwise, you’re operating out of survival, instead of strategy.”

To use an analogy, Michael says you need to dig the well before you get thirsty.

So, how do you stay ahead of the curve, before change leaves you with no other option? Michael offers three strategies.

Make change before it’s needed

Michael points to Toyota as a great example of a business that has adapted to change well.

“There is an ethos in the Toyota business from the former global chairman, Hiroshi Okuda, who said: ‘The best time to reform a business is when business is good.’

“Okuda believed change shouldn’t happen when things got tight or difficult, but instead, change should happen well before then. I think that’s one of the most important things the financial planning profession can do,” he says. “Make change before change is required.”

Michael uses his first trend, ‘radical transparency’, as an example of how to stay ahead of the curve.

“With transparency, don’t wait until regulation requires you to do things or behave in a certain way. Put yourself in your client’s shoes and be upfront and honest with them at all times,” he says.

“If it makes your clients feel comfortable, then go the extra mile and do more than what’s professionally required. That’s what it means to be a professional, and that’s where you win trust and differentiate yourself from others.”

Focus on friction

Michael’s second strategy of staying ahead of the curve is to ‘focus on friction’.

“In business terms, friction is often the result of something being clunky, bureaucratic, burdensome, frustrating and confusing. If you ignore those friction points, then that will leave you vulnerable to disruption,” he says.

“In the financial services space, we’ve seen fintechs come into the market with technology and apps that are removing a lot of friction points for consumers. So, if the incumbents take their clients for granted, other players will move in and remove the things that irritate clients. But by the time the incumbents realise that, the market has moved on and it’s too late for them.”

Michael uses ‘industry jargon’ as an example of friction.

“When you’re in the industry, you’re not even aware you’re using jargon because it becomes second nature. But unfortunately, industry jargon makes consumers feel uncomfortable.

“For example, you might run through a strategy with a client and ask them if it makes sense, and they are likely to say it does, even though it doesn’t. Why? Because they don’t want to be embarrassed by admitting they don’t understand the jargon you used,” Michael says.

“As a profession, this is a definite point of friction that we have to be mindful of.”

Revolution, not just evolution

Michael’s third strategy of staying ahead of the curve is to think ‘revolution, not just evolution’. He says this distinction is important because change is often thought as being an evolutionary process.

“What’s going to be required over the next few years across many industries and professions, including financial advice, is revolutionary thinking. We need to rethink the very foundations of what it is we do, including: the way the profession works; what our clients are looking for; and the value we can provide to our clients.”

Michael shares an insight from the former head of the Business Faculty at San Francisco University, Oren Harari, who said: “The electric light did not come from the continuous improvement of candles.”

“I love that quote,” Michael says. “It doesn’t matter how good you are at making candles. You could have the best candles in the world, but making them was going to set you on a collision course with obsolescence.”

For Michael, revolution is not about continuously improving what you’ve always done, it’s actually about looking at and doing things differently to what you’ve done before. He uses COVID-19 as an example of an event that has forced everybody to think revolutionary, by modifying their lifestyles, businesses and approach to work.

“How many practitioners are now having Zoom meetings with clients? It’s an efficient, convenient and cost-effective way to have meetings. But this type of technology has been around for some time now, so why haven’t we been using it before?,” Michael asks.

“The reality is, COVID-19 has forced us to re-think how we run our businesses and do things differently. It’s been a revolutionary change for the profession. That’s precisely the type of revolutionary thinking that will keep you ahead of the curve.”

Towards 2030 and beyond

As Michael looks ahead to the next decade, his advice for the profession remains unchanged from the 2014 FPA Professionals Congress, and that is to continually focus on the human element of financial planning.

“I believe that is the key point of differentiation for financial planning,” he says. “This is a human and people business. The more we allow the requirements of compliance, paperwork and regulation get in the way of the human relationship – building empathy, trust and connectivity – the more at risk the profession is to be disrupted.

“Technology can do a lot of things but what it can’t do is – care. What a financial planner does for a client – providing them with support, peace of mind and financial wellbeing – is truly transformational. It is incredibly valuable and it’s something the advice profession does so beautifully. That’s your strength and it’s something to build on over the next 10 years and beyond.”

Michael McQueen is a trend forecaster, business strategist, author and speaker. For more information, go to michaelmcqueen.net