In a World of Free Products, Financial Planning Must Change

Is this because the value of the plan has diminished in these last 20 years? Not at all. It is because the cost of the underlying technology has shrunk significantly, allowing disruptive players to reshape the pricing model, upending the expectations and demanding a response from the traditional providers of financial advice.

The massive reduction in market price for a financial plan should not concern true comprehensive planners, just as the precipitous fall of investment advice fees on portfolios should be met with a shoulder shrug. There is a measurable and meaningful difference between planning and the plan, between advising and the advice, and herein is where we find the Third Way.

The Third Way

The historians are right. Financial advisors have risen above the fray of their disruptors again and again. But not all financial advisors. In every disruptive event in the industry there were mass causalities as many professionals found ways to retire, sell their books of business or just slowly disappear. The risk for this turnover of people in the business today is higher than ever, with an ever-aging populace of financial advisors.

But the revolutionaries also are right. This time is different. The technological wagons have circled on the majority of commodifiable services offered by financial advisers and nearly all the Races to Zero have been won by disruptors:

• Security Picking? Race to Zero won by Robinhood.
• Diversification? Race to Zero won by Fidelity.
• Financial Plan Delivery? Race to Zero soon to be won by Wealthfront.

But the planning is not the plan. The plan — that digital or paper document of how much you should save per month or how much you can spend in retirement or how much you need in your IRA to be free to retire at all — is the least valuable part of the planning experience. The three historical advisory services: security picking, diversification, and financial plan delivery are now table stakes in the game we are all playing. To provide serious financial advice to consumers of all generations you must have them, but having them will not be enough.

Rising above the verbal fray between the historians and the revolutionaries are the integrators, those who recognize the rise of digital services, incorporate them into their service offerings, and get back to the real work of financial advice.

When I say the planning is not the plan, I am reminding all of us that our clients gain more from the conversations, the nudges, the reminders of how to behaviorally adjust to their goals than they do the numbers that make us right.

A very simple piece of technology can help the client know how much to save or the year they can retire. But it cannot calm nerves as markets crash. It cannot empathize with a family member’s illness all while encouraging fidelity to long-term goals. It cannot adjust the plan based on the priorities hidden in the subtext of stories. It won’t notice a lie about savings rate or the importance of retiring early.

The planning, a decision-by-decision partnership between a qualified advisor and a client, is the most valuable thing advisors do. In fact, it is the only unique thing left. There will be thousands of advisors and dozens — if not hundreds — of firms who do not make the trip into the next decades of financial advice. Some will fail as historians, holding onto the past and defending their right to the status quo. Some will fail as revolutionaries, rushing too hard and too fast toward a digital future where any hint of human connection is commoditized and lost.

The integrators will recognize the threads, the threads of yesterday which weave their way through the threats of today. They will see the human truths which are at the core of financial planning: fear, hope, connection, drive, tribes, families, dreams and wonder. These core human capacities cannot be digitized in any real way.

The integrators will recognize that the products, the habits, the preferences of the past may not serve them or their clients anymore. They will recognize that different pricing structures will be required, with refreshed value propositions. They will exude the sage maturity of those who have sat with a hundred retirees, attended dozens of high school graduations, delivered all-too many life insurance proceeds, and they will move with the youthful speed of digital connectivity addressing client wants while quietly meeting their unspoken and more vulnerable needs.

Among the clanging gongs and cymbals of the war between historians and revolutionaries will rise the integrators, and with them the hope of continuing to offer the beauty of true financial planning: our most valuable thing.

Nick Richtsmeier, chief innovation officer at Trilogy Financial - a privately held financial planning firm with $2.75 billion in brokerage and advisory assets.

The views expressed in this article represent the opinion of Trilogy Capital, Inc. This material is for informational purposes only and it is not to be construed as tax, legal, or investment advice.  It is not intended as an endorsement of any specific investment or services.  Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Investment advisory services offered through Trilogy Capital Inc., a Registered Investment Advisor. Trilogy Capital markets advisory services under the name of Trilogy Financial, and affiliated but separate entity.