Reading Financial Planning's Tea Leaves



In 2009, amid the financial crisis, retirement planners were doing everything possible to prevent clients from “jumping off a ledge” as retirement accounts shrank by the month, sending investors and pre-retirees into a tailspin.

Five years on, planners are no longer talking clients out of proverbial leaps — be they from window ledges or from one investment strategy to another.

Instead, market sweat has cooled into sober discussions about how to pay for the rising costs of education, securing income guarantees and astute tax planning, said Michele Warholic, the Certified Financial Planner Board of Standards’ managing director for examination, education and human talent.

“The biggest change from 2009 to now is the economic situation,” Warholic told InsuranceNewsNet. “In 2009, most planners were looking to keep clients jumping off ledges, and today it’s more about planning and baby boomers and how to make income last.”

Financial planners, she said, are looking to understand client attitudes toward planning and behavioral finance to a greater degree than they have in the past.

Warholic and the CFP Board are in the throes of a major reassessment of what financial planners will need to know in order to satisfy the demands of the marketplace over the next five years.

A big piece of that reassessment will come from a survey sent to more than 70,000 Certified Financial Planners this month. The last time the CFP Board surveyed its members this extensively was in 2009. That survey had a response rate of about 14 percent.

Results of this year’s survey, which closes Sept. 8, will be made public later this year after the data are vetted and certified.

The information will help guide CFP Board experts as they tweak content courses necessary for financial planning professionals. Other professional financial planning organizations will take careful note of the changes in curricular material approved by the CFP Board.

“We want to make sure we’re current and that we’re current in what the needs are and with what is going on in current times,” Warholic said.

While she doesn’t expect big changes to the content necessary to earn the Certified Financial Planner (CFP) designation, Warholic said the membership’s responses will influence what kind of weight and emphasis the CFP Board gives to future course content.

Wealth transfer and estate planning are expected to be given more weight than in the past, as the 87 million baby boomers transfer wealth among themselves and eventually pass the wealth down to Generation X.

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Indeed, in this day and age, it is investors and retirees without a long-term plan who might find reasons to jump off a ledge.

Beyond the dollars and cents of what material actually makes it into the financial planning curricula of future undergraduate, graduate and continuing education courses, important demographic changes are in store for the industry.

Those changes, too, are bound to have an effect as rapidly developing markets redefine for financial planners what it means to stay current in an age of defined contribution plans, weak savings habits, low interest rates, increasing life spans, and multigenerational and alternative households.

Client diversity — from Hispanic-speaking investors living in traditional households headed by a married couple, to extended families with several generations living under the same room, to same-sex couples legally married and adopting children — will stretch the boundaries of what planners need to know in terms of protection, investment and guaranteed income products.

John F. Nichols, president of the National Association of Insurance and Financial Advisors (NAIFA), said new opportunities for advisors lie with Generation Y as young professionals enter the workforce in droves.

By next year, there will be as many as 56 million members of Gen Y in the workforce, according to one estimate. “That next generation is just such a huge, huge potential for financial advisors,” Nichols said in an interview.

Billed as a generation of savers compared with older workers, many technologically savvy Gen Yers are also saddled with school debt. As a result, many of those young adults have delayed starting a family, the traditional entry point to considering life insurance.

Nichols said big opportunities for financial advisors lie with midsize and small businesses, but that these businesses also encounter challenges with the fiduciary responsibilities associated with retirement plan sponsorship.

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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