In the first part of our discussion, we covered what it means to be commoditized, as well as the areas of financial services that are currently experiencing commoditization.
So given this context for what it means to be commoditized and the trends in the overall financial services industry, what is the outlook for financial planning in particular?
Overall, it’s difficult to see how financial planning itself is in any danger of being commoditized in the foreseeable future. The primary reason is simply that the nature of customized, personalized and comprehensive financial advice is itself not conducive to being commoditized; to the extent every client’s situation is different, and the circumstances for applying advice vary too, it’s difficult for commoditization to take hold (although arguably planning firms still have a lot of room for more standardization of process and deliverables).
This is quite different than a service like tax preparation, where TurboTax was able to gain momentum both because everyone must go through the process annually, and because ultimately everyone must follow and implement the exact same rules. With financial planning, though, the client needs, services rendered, expertise of the planner provider, and tools for implementation, are all so unique from one client-financial planner interaction to the next, the reality is that getting financial planning services in today’s marketplace is actually the antithesis of undifferentiated and interchangeable!
In fact, ironically the greater challenge for financial planning may be that the services provided vary so much from one firm to the next that consumers have difficulty identifying a good planner in the first place or knowing what factors to prioritize when making a choice; to say the least, this isn’t a marketplace where the only difference from one planner to the next is the price for an identical service and outcome!