The 1980s saw the beginning of a lot of trends that are still playing out, according to George Kinder, founder of the Kinder Institute of Life Planning. “In the early '80s you had the confluence of, for the first time, significant growth in no-load mutual funds, fee-only advisors and discount brokers.”
One of the major trends to emerge from that era was a “shift to the consumer. The consumer became an investor, and not nearly a gambler or a stock picker,” he said.
One of the themes that has marked the past 35 years is “tremendous respect” for the consumer, Kinder said. “That is just about to explode in meaning and reality across the base of financial services with the fiduciary [standard], with the fact that Obama's taken the fiduciary concerns that most of us have seriously and has brought it into the pension world.”
Nobody had any idea what the life planning movement was in the ‘70s and early ‘80s, he said, and by the ‘90s, only a “few dozen people” were practicing it. Now advisors from “28 countries, on all six continents" have taken Kinder's life planning courses. "The registered life planner designation itself is on five continents,” he said.
“We're seeing significant interest not only in the independent world, but also from the larger institutions recognizing that, in fact, the fiduciary movement is a train coming down the tracks,” he said.
Kinder expects the fiduciary movement will continue to expand in the future. “You're going to see that beginning this year that it's mostly considered a movement having to do with pricing of our product, and the transparency of that pricing of our offering as financial advisors.”
Also over the next 12 months, the fiduciary definition will grow to include more holistic and life planning because a true fiduciary needs to consider all aspects of their clients’ lives in their accounts. “Their life planning concerns, all of their financial concerns. It's really impossible to be a fiduciary without being a life planner.”
Kinder believes that as fiduciary becomes the law of the land, some broker-dealers will adopt that standard while others will remain focused on product.
“Commission-based broker-dealers are product companies. You can't give advice to a product. In some way, you can't even give advice about a product because you're basically selling something,” he said. “The advice world is in the world of the consumer and is in the world of fiduciary. The product world isn't, really.”
One of his boldest predictions, though, is that “35 years from now, and I feel pretty confident about this, instead of financial advisors being at the bottom of trust surveys, financial advisors will be at the top of trust surveys.”
That will be because of three things: the move to a fiduciary standard of advice giving; adoption of life planning as part of financial planning; and recognition that advisors aren’t delivering financial plans and products, but freedom. “It's delivering into the client's life a degree of freedom that they didn't realize was possible. That articulation of that freedom is what life planning does.”
Life planning deals with what clients are passionate about and “makes sure that it delivers that. It delivers people into an entrepreneurial kind of energy, whether that energy is to act in independent films, or to write the novel you always wanted to write, or to take care of you kids in a better way. Or it's about starting a new business, inventing a new product, doing something extraordinary within the community.”
Robo-advisors will begin to adopt life planning, as well, he said. “The robo‑advisor can't do everything that an advisor can do, but they can do an enormous amount, even in the area of relationship skills and life planning.”
That’s very important to reach the underserved, he said. “That's a tremendous thing that's going to continue to grow over the next number of years. That's going to drive prices down for us advisors. The value of investment advice will less and less be in assets under management, and more and more be in the conversation.”