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Digital Planning: The Future of Financial Advice

Digital financial planning allows advisors to serve more people in a more insightful way.
Stephen Chen
April 12, 2022
3 min

The financial planning landscape has changed with a quantum shift in demographics and an increasing interest from younger generations wanting to learn more about financial planning. According to ICI Research, there are some 38% of 401K plan participants that are under 40 years old, with 14% under 30 years old. That’s a significant increase from previous decades. These younger generations of planners and investors also want, or rather expect, digital solutions for their financial planning and want to improve their financial literacy. 

Most millennials and Gen Zs have never received financial advice, but interest continues to increase. These generations are twice as likely as baby boomers to consider robo-advisors. With 45% of millennials already having either a 401(k) or an IRA, the market for financial advice is burgeoning, according to a recent Houlihan Lokey report. As individuals take financial planning into their own hands, demand for advice will increase rapidly. 

The problem 

Great financial advisors are game changing. However, most people don’t have a financial advisor or know where to start to get quality and trustworthy financial advice. Human advisors can be amazing and provide great advice, but the model is difficult to scale, and as such, most people don’t have easy access to the advice they need. Why don’t more people access advice?  

  • Inconsistency - Each advisor runs their own playbook and it’s hard to know when to reach out. 
  • Confidence - People avoid finding an advisor out of fear of not knowing what they don’t know. 
  • Trust - People don’t know where to start and who to trust. 
  • Expensive - The 1% AUM business model limits the market to people with high net worth. 
  • Not enough advisors - Great advisors are in short supply and therefore can only serve so many families. Thus they normally choose to work with higher net worth clients.  

In a recent article by Gavin Spitzner, Founder and President of Wealth Consulting Partners, he references a McKinsey report on ‘A Growth Agenda for the Decade Ahead,’ and states it most poignantly - “Existing advice models generally don't embrace these [new] investors in a holistic fashion. That needs to change. Human advice-based firms that don't catch up with digital, self-directed solutions are going to continue to get run over by direct brokerages.” 

What’s possible 

What if holistic financial advice was available to anyone? What if people had a living and integrated financial plan at their fingertips? Individual confidence would increase as they make smarter choices across their student loans, credit cards, savings, mortgages, 401k investments, and insurance options. What if coaching and decision making advice was available 24/7? What if smart notifications could be delivered in real-time as interest rates, regulations, and markets change? 

This is enabled by a hybrid approach with digital financial planning at its core - leveraging technology today where the best elements of digital experiences and human interactions are brought together in a new integrated and collaborative way. This is a win for individuals, financial advisors, and enterprises. People would save more, invest better, and level up their lives. 

Making advice scalable and more effective

Financial advice goes far beyond finance, and involves human emotion and engagement. People need a safe and approachable way to get started - one free of judgment. It starts with technology and a community that collaborates. The goal is to help people go from a fear and scarcity mindset to one of abundance and purpose. 

People need to understand enough to be confident. Most people aren’t financial experts and quickly get intimidated by complex products and experiences that make them feel inadequate. This requires ongoing education and support. People also want transparency and value. From the business model to a clear explanation behind a strategy - people want to understand what is happening, and business models need to better align with individuals. 

In order to make financial planning work, there needs to be a paradigm shift in how people define their plan and get the advice they need. This move from human-only white glove advice to a digital-first approach works by making high quality financial planning more easily accessible, understandable, and affordable, and with advice being made available in a hybrid model - a combination of both digital and human - to address all types of client needs. In turn, this enables advisors to serve a much larger client base, makes financial literacy available for everyone, resulting in insightful and actionable investment decisions at scale. 

The experience needs to be easy and natural. Digital financial planning technology takes people on a journey into the world of financial planning, where they learn as they go. They can experiment and see what’s possible and then they can access help when they need it most and in line with their plan. 

There are massive financial and emotional benefits from digital financial planning.  

  • Emotional: Individuals can build a strong sense of control and confidence in their financial security. There’s a giant emotional side to this which is why human advice will always need to be part of the process. 
  • Financial: Individuals take action to optimize across savings, retirement investments, debt, spending, healthcare, insurance, and taxes. Every element of a solid plan can be material to achieving financial goals.  

The future is digital financial planning

The ROI of effective digital advice is material. Increased advisor productivity consumer insights and actions higher client engagement and retention. 

Onboarding and empowering more people to manage their financial plans builds trust at scale through a personalized experience that educates individuals and puts them in control. 

By providing better and more consistent insights, digital financial planning maintains and monitors a living plan. Opportunities are continually surfaced showing people how to plan better across taxes, investing, mortgage, insurance, estate planning, and healthcare. 

Digital financial planning is a force multiplier that allows advisors to serve more people in a more targeted and insightful way. More productive advisors continuously providing insights will lead to happier and more confident clients. When individuals invest in a detailed digital plan, their assets tend to be stickier. One key lesson is that all individuals, regardless of age, need to be more proactive in building a comprehensive and robust financial plan, today and not tomorrow. This sets the foundation for digital advice at scale. 

This article was written by Stephen Chen from Forbes and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.

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Stephen Chen

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