Biggest Opportunities in Financial Planning Profession

This year, financial planners and those seeking financial advice can look forward to positive changes as a result of new regulations and rules, additional retirement savings options, increasing diversity across the profession, and the impact of various technological advancements.

Demonstrate Your Commitment to Your Client

The SEC’s new Reg BI establishes an obligation for broker-dealers to act in the consumer’s best interest when making recommendations. The SEC’s Reg BI comes on the heels of CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”). As a professional certification and standards-setting organization, CFP Board has established standards for CFP® professionals that may, in some circumstances, go beyond what is required by law to benefit the public. For example, with the new Code and Standards, CFP® professionals have made a commitment to CFP Board to act as a fiduciary when providing financial advice to a client. Among other things this means that they have agreed to put their clients’ best interests first, above their own and above their firm’s. Both new sets of rules will be enforced beginning June 30.

Strengthen Retirement Savings

The Setting Every Community Up for Retirement Enhancement (SECURE) Act modernizes retirement savings by offering new advantages to small businesses, increasing the required minimum distribution age, and providing better benefits to part-time workers and parents. Small business owners who start a retirement plan will be rewarded with tax credits and will enjoy increased accessibility to multiple employer plans (MEPs). Also included among the changes is a new provision allowing parents to withdraw up to $5,000 penalty-free after the birth or adoption of a child. Any employee who has worked more than 1,000 hours in 1 year or 500 hours over 3 years is now legally entitled to join their company’s 401(k) plan. The changes adjust retirement savings to better accommodate longer life expectancies and a variety of lifestyles. This new law, most of which took effect on January 1, 2020, offers advisors new ways to help their clients navigate the complexities of their retirement as well as additional avenues for consumers to make the most of their retirement income.

Advance Diversity and Inclusion

CFP Board experienced 12% year-to-year growth in the number of African American and Latinx CFP® professionals last year. The year also saw the highest number of new female CFP® certificants in a single year, growing the total number of female CFP® professionals to over 20,000. An increasingly diverse body of financial planners supports the profession in serving the needs of every client. As the Center for Financial Planning recently reported, greater diversity also supports an organization’s talent retainment and pipeline, ability to innovate and overall business performance. The report cites American Sociological Review research that found that an organization with gender and racial diversity is more likely to report higher than average percentages of market share and average profitability than those with low levels of diversity. Providing education and transparency around firm diversity and inclusion initiatives is important to secure real progress. CFP Board’s Center for Financial Planning will be looking to advance diversity and inclusion in its third annual Diversity Summit, which will take place during the fourth quarter of 2020.

Leverage Technology in the Traditional Client-Advisor Relationship

Technology is playing an increasing role in all aspects of life, and financial planning is no exception. As the Center for Financial Planning’s 2018 Digital Advice Working Group found, technology will continue amplifying and enhancing – but not replacing – human advice. As fully automated financial advice technology is introduced, the working group predicts that client-advisor relationships will likely remain very important to clients seeking financial advice because they provide irreplaceable personalization. Financial planners should prepare by understanding the digital options available to consumers and integrating technology into their practices when possible.

To create a more seamless experience for clients, financial planners can upload financial plans to a cloud service for easy access, or open digital lines of communication via videoconferencing, texting or social media. Clients receive the personalized experience they seek at a fast and convenient pace, and advisors can service clients who live far away or have busy schedules that do not allow for regular in-person meetings.

Conclusion

Progress in the financial planning profession is improving access to high-quality financial advice. Recent trends impacting the profession and society provide opportunities for financial planners to enhance their reputations as client-focused professionals and to provide a growing number of clients with competent and ethical financial advice.

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