What does the future of personal financial planning look like?
Hello! Thanks for your question on what the future of personal financial planning looks like. The short answer is that the future of personal financial planning is going to be focused on a more educated customer. Customers will expect simple and efficient tools to aid them in their personal finances, which will force companies to change with the times or be left behind. Below you'll find a deep dive of my research.
To find this information I search academic databases, corporate websites, trusted media sites, and industry reports. The corporate and media sites were useful in finding new technologies and how they impact the industry. The industry reports and databases were more useful in finding overall trends and statistics.
FOCUS ON AN EDUCATED CUSTOMER
Customers in the personal finance industry are demanding more control, understanding, and transparency of their finances and investments. People are looking to understand their situation and the opportunities that they have for their future. Firms will be able to convert more prospects by focusing on education, making existing customers more loyal, and growing their market overall. One firm taking advantage of this is TD Ameritrade, with TD Ameritrade U. Mary Ryan of TD Ameritrade said, “TD Ameritrade U exposes students to our trading technology at the same time they are being introduced to the markets. This combination enhances their education while showcasing the superior service and first in class technology that we offer.”
Financial firms will begin to use data-driven personalization of finance, similar to how Amazon innovated their space with their personalization of the shopping experience. As more customers understand their situation and investments, they will also understand the tools that they need. Continuing the “one-size-fits-all” experience that we currently see in the financial industry would mean customers sifting through options and features that they know they do not need in their situation. In addition, conventional data like real-time quotes, charts, and financial news are now mainstream information. Firms that manage to generate unique, useful data will reap the rewards. An example of this is LikeFolio, which uses data from Twitter to predict shifts in consumer spending.
ADVANCED FINANCIAL TOOLS
It is no secret that a multitude of new companies, apps, and tools have been popping up in the personal finance industry. Robo-advisers allow for a lower cost, easier to access financial adviser to handle their financial planning. Apps like Mint give people a full picture of their finances for free without having to sort through all of their accounts. New brokerages like Robinhood, Betterment, and Acorns give a great starting point to investing for those that are inexperienced or do not have a large amount of funds. New tools are not just changing planning and investments, but credit and banking as well.
Consumers are increasingly doing banking entirely online. New banks like Chime and Simple are offering an alternative to traditional banks, without the fees. With the advent of focusing on customer education, the average credit score has moved up to 695 from 688 pre-recession. In addition to the average, scores over 800 are now at 19.9% versus 16.9% pre-recession, and scores below 550 are not at 12.5% versus 14.4% before 2005.
To wrap it up, I have included a lot of information but all of these tools and companies are trying to focus on giving the educated consumer what they need to personalize their finances. Simpler, more efficient financial tools and education are the future of the industry.
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