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Michael Kitces: The 2012 IA 25 Extended Profile

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One of the original founders of NextGen, 34-year-old Michael Kitces not only holds a bevy of financial planning credentials, but the third edition of the book he co-authored, “The Advisor Guide to Annuities,” is due out in May, and he’s burning up the blogosphere offering insights on the industry’s hottest topics.

Kitces, partner and director of research at Pinnacle Advisory Group in Columbia, Md., and publisher of the The Kitces Report and the blog Nerd’s Eye View, says that over the next year or so, advisors will continue to struggle with the “really difficult market environment.” Kitces says he worries that advisors are in danger of experiencing what he calls the “three strikes and you’re out” risk, which is the real possibility that “if clients have to go through a third bear market in just over a decade, advisors are going to start losing clients.”

Advisors and their clients “weathered the storm from 2000 to 2002 and then another [bear market] from 2008 to 2009, but there comes a point where clients start to capitulate,” Kitces says.

2012 IA 25What are gaining in appeal among advisors, he says, are more active strategies. Statistics from the Financial Planning Association show that “something like 80% of advisors are considering a tactical move in their portfolios in the next three to six months,” Kitces says. “Six years ago no one would have said they need tactical changes to their portfolio; the problem though is in reality not a lot of firms know how to [make this transition]. We weren’t trained in how to do this. Our CFP certification doesn’t teach us how to be more active and tactical, necessarily.”

The result, he continues, is that “we see an increasing dispersion of firms that are succeeding–and firms that are struggling–in this environment. The next bear market will come at some point, and I have a lot of concern for a lot of firms in how they will weather what will be the third bear market in over decade with their clients.”

Kitces also believes the financial planning industry is “just on the cusp of transitioning into the digital age,” an age when advisors “really start using all of the software, hardware and technology integration that’s out there.” While the financial services industry has been a slow adopter to technology, Kitces says he sees the industry’s technology use undergoing a “seismic shift” in the next decade. That change toward adopting technology, which he says is “underway,” will “impact everything from how we do financial planning for our clients–which I think will become much more interactive and much more proactive driven heavily by developments in technology–to how we market and grow our practices.”

The industry will evolve from one that now predominantly employs the marketing strategy of getting new clients through referrals to “a world where in the digital age—and thanks especially to what’s being developed in the ‘search space’—clients won’t simply work with planners who will be in their geographic area or ones they were referred to, […] but the best planner in the country who meets their individual needs.”


Find out who was named on the 2012 IA 25 in Investment Advisor’s May issue.

Check out more extended interviews of the 2012 IA 25 at AdvisorOne.


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