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Kitces and Winterberg Describe the Future of Financial Planning

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“One of the biggest trends I see in the next 10 years is the interconnectivity of advice and information overall,” Michael Kitces said at the outset of his Sunday afternoon breakout session at FPA Retreat 2013 in Palm Springs, Calif.

Kitces, director of research for Pinnacle Advisory Group (and a regular blogger for AdvisorOne), was joined onstage by Bill Winterberg of and moderator Dan Moisand, the noted planner who is Retreat 2013 task force chair, for “FutureThink: Future Scenarios for the Creation, Delivery and Tracking of Financial Planning.”

So what did he mean by the statement?

“Traditionally, financial planners have acted as the ‘Wizard of Oz,’ Kitces explained. “They’ve disappeared behind the curtain and emerged a while later with this plan. We all know how often clients would then read that plan, which was seldom.”

Kitces compared the adoption of a plan by a client to buying a car. While they might research a car online, they won’t buy it until they’ve taken it for a test drive to test things like the sensitivity of the brakes and the overall comfort they feel.

“That’s what they’re doing when they’re asking us ‘What if?’ questions,” He continued. “They’re test driving the plan in all sorts of different scenarios. We take it back and make the requested changes and about the seventh time we do it, they start to get the picture that we’re not enjoying it anymore, so they stop asking.”

Because they haven’t fully test driven the plan, adoption of the plan is typically low, Kitces said.

“But with technology, I can have it up on the screen and make the changes in about 90 seconds, and they can have 11 different iterations if they want. This results in better interaction and engagement, and because they had a hand in developing the plan, better adoption. We didn’t cut off their test drives.”

Financial planning software was clunky and traditionally not conducive to something like this—but no longer.

Bill Winterberg took over and described the future of financial planning in terms of “game theory,” and how advisors will begin using collective research to identify trends.

“Think of fitness apps on phones,” he said. “Users can track their own physical activity, but also take advantage of what others are doing and where they fall in relation. Financial activity will be something similar, where an individual who is 40 years old can look to see how his insurance coverage compares with others.”

It won’t be completely accurate, which is where a qualified advisor would fit, but it at least gives the individual an idea about where they fit in when comparing overall trends.

“Our jobs as advisors are to influence behavior,” Kitces interjected. “To change behavior, clients need continual feedback and interaction. Firms say they are high-service because they meet with clients four times a year rather than two. How many people here have ever tried to lose weight by getting feeback only once a quarter? This is where technology can help us. They get a report, but we as advisors get a report as to which of our clients is on target, and which need more help.”

View complete AdvisorOne coverage of the FPA Retreat 2013 on our Retreat landing page.