The Future of Financial Planning in the Digital Age · The Future of Financial Planning in the Digital Age BBy:y: Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL

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© 2008 Presentation created by: Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, CWPP™ www.kitces.com

The Future of The Future of

Financial Planning Financial Planning

in the Digital Agein the Digital AgeBy:By:

Michael E. Kitces,Michael E. Kitces,MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASLMSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL

Partner, Director of Research, Pinnacle Advisory GroupPartner, Director of Research, Pinnacle Advisory Group

Publisher, The Kitces Report, Publisher, The Kitces Report, www.kitces.comwww.kitces.com

Blogger, Nerd’s Eye View, Blogger, Nerd’s Eye View, www.kitces.com/blogwww.kitces.com/blog

TwittererTwitterer, @, @MichaelKitcesMichaelKitces, , www.twitter.com/MichaelKitceswww.twitter.com/MichaelKitces


The Financial Planning RelationshipThe Financial Planning Relationshipof the Futureof the Future

–– Perry the Planner has been working with Carl the Client for 4 Perry the Planner has been working with Carl the Client for 4 years nowyears now

–– Carl’s financial plan lives in the cloud and can be accessed Carl’s financial plan lives in the cloud and can be accessed anywhere, from any deviceanywhere, from any device

–– Both Perry and Carl can keep track of how Carl is Both Perry and Carl can keep track of how Carl is proceeding towards his financial goals on an ongoing basis, proceeding towards his financial goals on an ongoing basis, with continuous integrated data updateswith continuous integrated data updates

–– Perry can also monitor how well Carl is implementing his Perry can also monitor how well Carl is implementing his goals and action items on an ongoing basis and send goals and action items on an ongoing basis and send remindersreminders

–– Perry and Carl connect on a regular basis to check in Perry and Carl connect on a regular basis to check in through a variety of communication toolsthrough a variety of communication tools

–– Perry and Carl have never met in personPerry and Carl have never met in person

Financial Planning in the Digital AgeFinancial Planning in the Digital Age


The Rise of the Digital WorldThe Rise of the Digital World–– The Internet isn’t a fad The Internet isn’t a fad –– it’s a fundamental shift in it’s a fundamental shift in

the way we communicatethe way we communicate

–– Over 294 billion emails per dayOver 294 billion emails per day90% of them are spam90% of them are spam

20 million 20 million real real emails… per minuteemails… per minute

–– has over 900 million usershas over 900 million users

–– serves over 4 billion videos per dayserves over 4 billion videos per day(more video in a month than the (more video in a month than the

3 major networks produced since 1950!)3 major networks produced since 1950!)


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The Rise of the Digital WorldThe Rise of the Digital World–– The flood of information on the internetThe flood of information on the internet

–– Over 29 million internet searches Over 29 million internet searches per minuteper minute

–– If Wikipedia were made into a book…If Wikipedia were made into a book…It would be 2.25 million pages longIt would be 2.25 million pages long

–– eReaderseReaders have surpassed traditional book saleshave surpassed traditional book sales



The Value of Financial PlanningThe Value of Financial Planning–– What is the value of adviceWhat is the value of advice--givers in an increasingly givers in an increasingly

technologytechnology--driven world?driven world?

–– Planners are experts when finding solutions on the Planners are experts when finding solutions on the internet is like finding a needle in a haystack…internet is like finding a needle in a haystack…

…But will improvements in search, sharing, and social …But will improvements in search, sharing, and social media change this?media change this?

What if the answers to your questions came up instantly What if the answers to your questions came up instantly in an internet search?in an internet search?

–– What is the role of a planner if useful, relevant What is the role of a planner if useful, relevant information actually becomes easily accessible?information actually becomes easily accessible?



The Value of Financial Planning in a The Value of Financial Planning in a Technology WorldTechnology World

“We Help People Navigate the Powerful “We Help People Navigate the Powerful Forces that Money Forces that Money Exerts in their Lives.”Exerts in their Lives.”


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What is the Blue Ocean Strategy What is the Blue Ocean Strategy for the delivery of for the delivery of Financial Planning?Financial Planning?

–– Blue Ocean StrategyBlue Ocean Strategy: Business innovation: Business innovationthat seeks not to outcompete an existing industry, but to that seeks not to outcompete an existing industry, but to create a new way of doing things that simply makes the create a new way of doing things that simply makes the competition irrelevantcompetition irrelevant

The simultaneous pursuit of differentiation and low costThe simultaneous pursuit of differentiation and low cost



What is the Blue Ocean Strategy (BOS) What is the Blue Ocean Strategy (BOS) for the delivery of Financial Planning?for the delivery of Financial Planning?–– Focus on what matters, eliminate everything else, and Focus on what matters, eliminate everything else, and

create something newcreate something new

–– What creates the most work? What has the most cost? What creates the most work? What has the most cost? What can we leave behind?What can we leave behind?

–– What value or experience is financial planning not What value or experience is financial planning not delivering, that it could?delivering, that it could?



What is the BOS for Financial Planning?What is the BOS for Financial Planning?–– Can video help to replace physical meetings?Can video help to replace physical meetings?

How much more efficient would your firm be without travel?How much more efficient would your firm be without travel?

–– Can online software tools help to replace the physical Can online software tools help to replace the physical financial plan document?financial plan document?

Could an online platform be a live studio for the client’s Could an online platform be a live studio for the client’s financial plan, eliminating plan documents and drafts?financial plan, eliminating plan documents and drafts?

Live updates of data in the plan & continuous monitoring?Live updates of data in the plan & continuous monitoring?

–– Can software interactivity change the experience of Can software interactivity change the experience of financial planning?financial planning?

What would the financial planning process be like for the client What would the financial planning process be like for the client if they could engage in their plan handsif they could engage in their plan hands--on?on?

What if the client got an alert on their What if the client got an alert on their iPhoneiPhone when they when they exceeded a spending goal or reached a savings goal?exceeded a spending goal or reached a savings goal?

What if YOU got an alert when your client completed a goal?What if YOU got an alert when your client completed a goal?


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Financial Planning as the Financial Planning as the World goes FlatWorld goes Flat

–– The internet & the growth of bandwidth The internet & the growth of bandwidth are leveling the playing fieldare leveling the playing field

–– Geographical divisions are becoming Geographical divisions are becoming increasingly irrelevantincreasingly irrelevant

How is a financial planning firm structured where How is a financial planning firm structured where hiring and staffing doesn’t need to be connected via hiring and staffing doesn’t need to be connected via

geography?geography?



Planning Firms of the Future as Planning Firms of the Future as Technology breaks down GeographyTechnology breaks down Geography–– What (& who) needs to be physically located What (& who) needs to be physically located

at the firm?at the firm?Virtual staff vs. employeesVirtual staff vs. employees

The trend towards outsourcing has begunThe trend towards outsourcing has begun

Central hub for planners around the city/state/country/world(?)Central hub for planners around the city/state/country/world(?)

–– Planners will choose business relationships based on:Planners will choose business relationships based on:Technology offering and platformTechnology offering and platform

Flexibility to match their needsFlexibility to match their needs

Support serviceSupport service

NOT geography!NOT geography!



Financial Planning as the World goes FlatFinancial Planning as the World goes FlatPart 2 Part 2 –– The Client RelationshipThe Client Relationship

–– Eventually, there will be a disconnect between Eventually, there will be a disconnect between geography and planner selection!geography and planner selection!

–– What if clients work with the best firm that fits their What if clients work with the best firm that fits their needs… period? And not the best firm in their area?needs… period? And not the best firm in their area?

What are you “the best” at?What are you “the best” at?

What’s your niche?What’s your niche?

Can you survive if you have to compete with others outside Can you survive if you have to compete with others outside your area?your area?

Can you grow more if not constrained to nearby prospects?Can you grow more if not constrained to nearby prospects?

–– Can you build a client relationship with people who you Can you build a client relationship with people who you won’t meet face to face?won’t meet face to face?


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Trust and/via the internetTrust and/via the internet–– Can we trust at a distance?Can we trust at a distance?

Can a true trustCan a true trust--based relationship based relationship be created via the internet?be created via the internet?

–– What is it that makes us trustworthy?What is it that makes us trustworthy?

It’s all about credibilityIt’s all about credibility

–– Integrity (do you walk your talk?)Integrity (do you walk your talk?)

–– Intent (what’s your motive/agenda?)Intent (what’s your motive/agenda?)

–– Capabilities (are you able to be relevant?)Capabilities (are you able to be relevant?)

–– Results (what’s your track record for value/results?)Results (what’s your track record for value/results?)



Trust and/via the internetTrust and/via the internet–– Relationship trust Relationship trust –– it’s all about consistent behaviorit’s all about consistent behavior

Talk StraightTalk Straight

Demonstrate RespectDemonstrate Respect

Create TransparencyCreate Transparency

Right WrongsRight Wrongs

Show LoyaltyShow Loyalty

Deliver ResultsDeliver Results

Get BetterGet Better

Confront RealityConfront Reality

Clarify ExpectationsClarify Expectations

Practice AccountabilityPractice Accountability

Listen FirstListen First

Keep CommitmentsKeep Commitments

Extend TrustExtend Trust



Trust and/via the internetTrust and/via the internet–– Can we trust at a distance? Yes!Can we trust at a distance? Yes!

–– What is it that makes us trust?What is it that makes us trust?

Credibility and relationshipCredibility and relationship--building lead to trustbuilding lead to trust

Market trust builds from ongoing demonstration of Market trust builds from ongoing demonstration of credibility and relationshipcredibility and relationship--building building -- develop a reputation develop a reputation for being trustworthy!for being trustworthy!

–– Nothing in the trustNothing in the trust--building process inherently requires building process inherently requires a facea face--toto--face connectionface connection

–– Remember when we didn’t trust buying anything on the Remember when we didn’t trust buying anything on the internet?internet?

Until companies built a trustworthy reputation with us!Until companies built a trustworthy reputation with us!

Could we build the same relationship with our clients?Could we build the same relationship with our clients?


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The next generation of The next generation of clients clients –– Gen YGen Y–– Born from 1980 to 2000 Born from 1980 to 2000 ––

from teens to 30from teens to 30--somethingssomethings

–– They outnumber Baby Boomers They outnumber Baby Boomers (80 million strong)(80 million strong)

–– Will be the most educated Will be the most educated generation in historygeneration in history

–– They grew up with the internet (93% go online)They grew up with the internet (93% go online)

–– Accustomed to complex social connections with multiple Accustomed to complex social connections with multiple modes of communicationmodes of communication

InIn--person, text, email, call, tweet, person, text, email, call, tweet, FacebookFacebook, etc., etc.

–– Internet is surpassing television as primary source for Internet is surpassing television as primary source for news and informationnews and information



The next generation of clients The next generation of clients –– Gen YGen Y–– Gen Y is:Gen Y is:

Saddled with college debt Saddled with college debt –– Student loans exceed credit card debtStudent loans exceed credit card debt

Much more concerned about work/life balanceMuch more concerned about work/life balance

May have several dozen jobs throughout their careerMay have several dozen jobs throughout their career

–– Transitioning from “jobs” to “projects”Transitioning from “jobs” to “projects”

Starting savings (if they can pay down their debt!), Starting savings (if they can pay down their debt!), buying their first homes, starting familiesbuying their first homes, starting families

Need help finding the balance between money, Need help finding the balance between money, career, family, present, and futurecareer, family, present, and future

–– Heavily reliant on their friends (and “friends”) and the Heavily reliant on their friends (and “friends”) and the internet for making decisionsinternet for making decisions



The next generation of planners The next generation of planners –– Gen YGen Y

–– Becoming employees before they are becoming Becoming employees before they are becoming clientsclients


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The next generation of planners The next generation of planners –– Gen YGen Y

–– Very different views on work/life balance from Very different views on work/life balance from the prior generationthe prior generation

–– Technology just “is” Technology just “is” –– an extension of selfan extension of self

–– The intersection of technology and work will lead The intersection of technology and work will lead to innovationto innovation

A generation that serves each other using technologyA generation that serves each other using technology

Already accustomed to establishing trust Already accustomed to establishing trust relationships with (or exclusively through) technologyrelationships with (or exclusively through) technology

Accelerating the separation of geography and workAccelerating the separation of geography and work–– Will help to facilitate a different work/life balanceWill help to facilitate a different work/life balance

Faster adopters for new technologyFaster adopters for new technology



NextGenNextGen planners serving planners serving NextGenNextGen clientsclients

–– Personal Capital has its own Personal Capital has its own iPadiPad appapp

–– LearnVestLearnVest focuses on interactivity in a virtual focuses on interactivity in a virtual relationshiprelationship

–– Betterment and Betterment and –– simple investing simple investing for the masses, driven by technologyfor the masses, driven by technology

–– WealthFrontWealthFront –– a virtual planning firm in the tech a virtual planning firm in the tech community nichecommunity niche

–– The greatest challenges to established planners The greatest challenges to established planners may come from outside, not within.may come from outside, not within.

Northern California, not the banks of the Hudson.Northern California, not the banks of the Hudson.



Marketing & Growing a Firm Marketing & Growing a Firm in the Digital Worldin the Digital World–– 97% of consumers use online media when researching 97% of consumers use online media when researching

products products and servicesand services in their local areain their local area

–– 65% of consumers cite the web as important when making 65% of consumers cite the web as important when making buying decisionsbuying decisions

–– 85% of the world’s internet users surveyed have 85% of the world’s internet users surveyed have purchased something onlinepurchased something online

Remember when we didn’t trust buying online, just a decade ago?Remember when we didn’t trust buying online, just a decade ago?


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Marketing & Growing a Firm Marketing & Growing a Firm in the Digital Worldin the Digital World–– How will firms communicate their attractiveness to How will firms communicate their attractiveness to

prosectiveprosective clients in the digital world?clients in the digital world?

Be discoverableBe discoverable

Have a niche (especially if you’re not already “big”)Have a niche (especially if you’re not already “big”)

Be “the best” at somethingBe “the best” at something

Be Be referrablereferrable

What results do you provide? What is the client What results do you provide? What is the client experience?experience?

Be able to effectively describe your value!Be able to effectively describe your value!



Marketing & Growing a Firm in the Digital World:Marketing & Growing a Firm in the Digital World:Social MediaSocial Media

http://www.youtube.com/watch?v=3SuNx0UrnEohttp://www.youtube.com/watch?v=3SuNx0UrnEo



The Social Media RevolutionThe Social Media Revolution–– Social media and referralsSocial media and referrals

Social media will serve to accelerate Social media will serve to accelerate –– or hinder or hinder –– the the trust processtrust process

You won’t find news (and business) You won’t find news (and business) –– relevant news and relevant news and business opportunities will find (be pushed to) you!business opportunities will find (be pushed to) you!

–– Referrals from people we trust help to establish Referrals from people we trust help to establish credibility in knowing who to work withcredibility in knowing who to work with

–– The quality referral of the future:The quality referral of the future:RetweetedRetweeted onon

Liked onLiked on

+1’d on+1’d on

Recommendations from people you know and trust about Recommendations from people you know and trust about who who they they know and trustknow and trust


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Bringing It All TogetherBringing It All Together–– The internet is fundamentally changing how we The internet is fundamentally changing how we

communicate & do business communicate & do business –– it’s not a fadit’s not a fad

–– Increasing access to information will challenge the Increasing access to information will challenge the value proposition for financial planningvalue proposition for financial planning

From expert to wise coach, guide, and navigatorFrom expert to wise coach, guide, and navigator

–– Technology innovations will push towards the new Technology innovations will push towards the new Blue Ocean opportunities in financial planningBlue Ocean opportunities in financial planning

Where should we be focusing, Where should we be focusing, and what can we leave behind?and what can we leave behind?



A new kind of client experienceA new kind of client experience–– “The Experience Economy” “The Experience Economy” -- People will pay more for People will pay more for

an experience than just a product.an experience than just a product.

–– What would financial planning be like if clients paid What would financial planning be like if clients paid twice as much money and invested 10x the time for a twice as much money and invested 10x the time for a ““financial planning experiencefinancial planning experience”?”?


Vs…


Questions?Questions?

Michael E. Kitces, Michael E. Kitces,

MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASLMSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL

Partner, Director of Research, Pinnacle Advisory GroupPartner, Director of Research, Pinnacle Advisory Group

Publisher, The Kitces Report, Publisher, The Kitces Report, www.kitces.comwww.kitces.com

Blogger, Nerd’s Eye View, Blogger, Nerd’s Eye View, www.kitces.com/blogwww.kitces.com/blog

TwittererTwitterer, @, @MichaelKitcesMichaelKitces, , www.twitter.com/MichaelKitceswww.twitter.com/MichaelKitces

[email protected]@kitces.com

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The Future of Financial Planning in the Digital Age · The Future of Financial Planning in the Digital Age BBy:y: Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL