The Future of Financial Advice: Empowerment Over Delegation

The financial advice market is undergoing a profound transformation. Traditionally dominated by a “delegator mentality,” where financial planners managed assets on behalf of their clients, this model was particularly suited to the Baby Boomer generation. However, as we move further into the Information Age, younger generations—Gen X, Y, and Z—are seeking a different approach. They prefer empowerment and control over their financial decisions, facilitated by direct-to-consumer (DcC) platforms and advanced technologies.

The Shift in Financial Planning

In the past, the financial advice industry thrived on information asymmetry. Financial advisors held the keys to financial knowledge, and clients relied heavily on their expertise. This “done for you” model meant that clients delegated the management of their wealth to professionals, trusting them to make the best decisions on their behalf.

However, the landscape is changing rapidly. The proliferation of information, the rise of artificial intelligence, and the democratisation of financial tools have leveled the playing field. Clients are now more informed and empowered than ever before. They have access to the same information as their advisers and can utilise sophisticated tools to manage their own finances.

The Great Wealth Transfer

This shift is particularly significant in the context of the anticipated ￡5.5 trillion Great Wealth Transfer. Over the next 30 years, a massive amount of wealth will be passed down from the Baby Boomer generation to their heirs. According to research from Octopus Investments , more than two-thirds of financial advisers are unprepared for this seismic shift. Just 31% have a plan in place to address this intergenerational transfer of wealth.

The failure to adapt to this change could be costly. Almost half of advisers surveyed expressed concerns about losing assets under management upon the death of their clients. Many have already experienced significant losses, ranging from ￡300,000 to over ￡5 million, after the passing of a client.

Generational Disconnect

There is a clear generational divide in how advisors engage with clients’ beneficiaries and in the perceptions of the value of financial advice. While 58% of current investors believe their beneficiaries would stay with their advisor, only 46% of advisors share this optimism. Many advisors perceive that the next generation does not see the value they provide.

This disconnect is alarming. Advisers must build relationships with their clients’ beneficiaries now, preparing them for the wealth they will inherit and demonstrating the value of sound financial planning. As Jess Franks, head of investment products at Octopus Investments, highlights, the first meeting with a beneficiary should not occur only after the client has passed away. Early engagement and education are crucial.

Empowerment Through Technology

Younger generations prefer a “done by you” approach, leveraging user-friendly apps and platforms that give them control over their financial decisions. They value financial activation, capability, and agency. This trend is driving a shift away from intermediating financial planners who manage money to non-intermediating planners who empower clients to manage their own assets.

“Many in Gen Z feel that financial services are not aimed at them but rather at their parents. This perception creates a barrier to entry.”

Direct-to-consumer platforms and financial technology are at the forefront of this revolution. These tools provide real-time access to financial information, personalised advice, and investment options. They enable clients to make informed decisions and take ownership of their financial future.

The Role of Non-Intermediating Financial Planners

Non-intermediating financial planners are uniquely positioned to thrive in this new environment. By focusing on empowering clients rather than managing their assets, these planners can build lasting relationships based on trust and mutual respect. They offer guidance, education, and the tools necessary for clients to take control of their finances.

This approach aligns with the values of younger generations, who seek transparency, integrity, and accessibility in financial planning. As we navigate the Great Wealth Transfer, non-intermediating financial planners will play a critical role in helping clients achieve financial security and independence.

Conclusion

The financial advice market is at a crossroads. The traditional “done for you” model is becoming obsolete as younger generations demand empowerment and control over their financial decisions. The Great Wealth Transfer represents both a challenge and an opportunity for financial planners. Those who embrace the shift towards non-intermediating, client-empowering models will be well-positioned to succeed in this evolving landscape.

Financial planners must adapt to meet the needs of a new generation, leveraging technology to provide clients with the tools and knowledge they need to manage their own wealth. By doing so, they can ensure their relevance and continued success in the decades to come.

Q&A: The Future of Financial Advice

Q1: What is the traditional model of financial advice and why was it suitable for Baby Boomers?

A1: The traditional model of financial advice is the “delegator mentality,” where financial planners manage assets on behalf of their clients. This model was suitable for Baby Boomers because it relied on information asymmetry, with advisors holding the keys to financial knowledge, thus clients delegated the management of their wealth to trusted professionals.

Q2: How is the landscape of financial advice changing in the Information Age?

A2: In the Information Age, the landscape is changing with the rise of artificial intelligence, the democratisation of financial tools, and the proliferation of information. Clients now have access to the same information as advisers and can use sophisticated tools to manage their own finances, shifting the model from “done for you” to “done by you.”

Q3: What is the Great Wealth Transfer and why is it significant?

A3: The Great Wealth Transfer refers to the anticipated transfer of ￡5.5 trillion from the Baby Boomer generation to their heirs over the next 30 years. It is significant because it represents a massive shift in wealth management, requiring advisers to adapt their strategies in an attempt to retain assets (or at least relationships) and engage with the next generation of clients.

Q4: How prepared are financial advisers for the Great Wealth Transfer?

A4: According to research from Octopus Investments, more than two-thirds of financial advisers are unprepared for the Great Wealth Transfer, with only 31% having a plan in place. Many advisers are concerned about losing assets under management following a client’s death.

Q5: What generational disconnect exists between financial advisers and younger clients?

A5: There is a generational disconnect in how advisers engage with clients’ beneficiaries and in perceptions of the value of financial advice. While many current investors believe their beneficiaries will stay with their adviser, advisers fear that younger generations do not see the value they provide. This highlights the need for early engagement and education.

Q6: What approach do younger generations prefer for financial planning?

A6: Younger generations prefer a “done by you” approach, utilising direct-to-consumer platforms and financial technology that provide control, empowerment, and real-time access to financial information. They value financial activation, capability, and agency, moving away from traditional intermediating financial planners.

Q7: How can non-intermediating financial planners thrive in the new financial landscape?

A7: Non-intermediating financial planners can thrive by focusing on empowering clients with guidance, education, and the necessary tools to manage their own assets. This approach builds lasting relationships based on trust and aligns with the values of transparency, integrity, and accessibility sought by younger generations.

Q8: What role does technology play in modern financial planning?

A8: Technology plays a crucial role by providing user-friendly apps and platforms that enable clients to access financial information, receive personalised advice, and make informed decisions. These tools empower clients to take control of their financial future, supporting the shift towards a “done by you” model.

Q9: Why is early engagement with beneficiaries important for financial advisers?

A9: Early engagement with beneficiaries is important because it prepares them for the wealth they will inherit and helps build a relationship based on trust. By engaging beneficiaries early, advisers can demonstrate the value of their advice and increase the likelihood that beneficiaries will seek their services when they inherit wealth.

Q10: What is the future outlook for the financial advice market?

A10: The future outlook for the financial advice market involves a shift from the traditional “done for you” model to one that emphasises client empowerment and control. Financial planners who adapt to this change by leveraging technology and focusing on non-intermediating, client-empowering models will be well-positioned to succeed in the evolving landscape.

Why M-POWER?

Our holistic approach is the future of financial planning. It’s about empowering you, not taking control away from you. It’s about education, not delegation. We believe in giving you the tools and knowledge you need to manage your own finances and make informed decisions.

So, if you’re tired of the old model and ready to take control of your financial future, consider the holistic financial planning approach. We’re here to guide you, educate you, and empower you to run the show. Because, at the end of the day, who really wants to hand over their money to someone else?

Join the revolution. Be your own financial planner. Take the reins and steer your financial future with confidence. The era of the holistic financial planner is here—and it’s about time.

Read more by following this blog. See also?The Dawn of the Holistic Financial Planner: Because Who Really Wants to Hand Over Their Money to Someone Else?