The traditional value propositions that advisers rely on are being diminished so rapidly by technology and other market forces that they won’t be enough to live on, US financial planning expert, author and speaker Mitch Anthony says.
“The things planners have always leaned on – asset allocation, rebalancing, putting together a financial plan – all of these things are being commoditised to the point where they’re worth zero to maybe 35 basis points, and nobody can make a living at that level,” he explains.
Anthony, who will speak at the 2018 Financial Planning Association Professionals Congress in Sydney this week, says market forces driven by technology, such as robo-advice and managed accounts, are depreciating the things advisers put at the front of their value proposition.
“We’ve gotten by for an awful long time thinking these things are worth more than they actually are,” he says. “As long as people were willing to pay 150 basis points for nothing more than an initial basic financial plan, plus asset allocation and rebalancing every year, we thought it was worth that. Well guess what, it’s no longer worth that.”
Anthony insists that once gravity grabs hold of market value like this it never let’s go.
“What I’ve been telling planners for years is this: water flows downhill,” he says.
The shift away from these value propositions and towards ‘life-centred’ financial planning has increased pace in the last few years, he says. It wasn’t always like this though.
“When I was first exposed to financial planning, 18 or 19 years ago, it was pretty much a cookie-cutter process,” he notes. “It treated almost every individual as if their story was the same: let’s gather your numbers, analyse the numbers, extrapolate them and do some projections.
“But what makes each person unique is what should drive this process, so at the centre we don’t need money, we need the story.”
Anthony argues there are three main parts to a client’s story: the past, which shapes their views on money issues; the present, which is about how well they are managing what they have; and the future, which is about what changes may come into their life that affect them financially.
All of these parts have a “direct umbilical tie to money”, he says.
“But what we’re doing with the stories is establishing the context, a living breathing context for the planning process. And it’s deeply personal and idiosyncratic,” Anthony explains.
Advisers aren’t armed with enough knowledge and training to offer ‘life-centred’ financial planning, which is a problem he’s trying to rectify in the US, he says.
“Tomorrow, I’m going to Texas Tech University – the first in the world to offer a financial planning degree,” he says. “In January, Texas Tech and I are launching the very first life-centred financial planning course.”