Financial Planning Industry Analysis

Part
01
of two
Part
01

US Financial Planning Industry: Challenges, Part 2

Some clear industry challenges for the US financial planning industry include the looming shortage of financial planners (advisors) and clients that are questioning whether there is any need for a financial planning advisor or the worthiness in paying their fees. Some experts feel the United States financial planning industry is not sufficiently inclusive.

Looming Shortage of Financial Planners (Financial Planning Advisors)

  • An industry analysis published by CNBC reveals that there are more certified financial planners aged over 70 than those aged under 30 within the United States. Replacing these professionals is going to be challenging for the industry, as 40% of financial planners (advisors) would retire within ten years. The CFP Board (an organization that oversees some aspects of training and certification for financial planning professionals) has a total of 83,106 certified professionals in the United States.
  • Research credited to the TD Ameritrade Institutional reveals that one thing typically stops more people from becoming financial planning professionals. The obstacle that prevents most people from ever becoming financial planners is that "they do not know about it."
  • According to Marilyn Mohrman-Gillis, the low level of diversity in the financial planning sector is unacceptable. There is a need to change the look of the financial planning profession. Marilyn Mohrman-Gillis is the executive director of the CFP Board Center for Financial Planning.
  • A recent Forbes publication reveals that there are a lot of statistics that are not comfortable to analyze. However, the statistics on the nearly nonexistent presence of minority financial planners are "really" shocking and saddening. The founder of Envision Wealth Planning in Chicago, who is the former vice president of the Association of African American Financial Advisors (James Brewer), agrees with Forbes on the striking nature of the statistics on minorities in the financial planning sector.

Why It is A Clear Challenge

  • It is a definite (clear) challenge because it represents the views of several experts in the financial planning sector, as highlighted above.
  • Several credible resources believe that drastic measures are required to prevent the looming shortage of financial planners that will occur within a decade.

Clients Questioning the Need for Professional Financial Planning Services Or The Worthiness of Their Fees

  • Several financial planners in the United States reveal that people are not engaging the services of financial planning advisors in the financial planning sector. A certified financial planner (Douglas Boneparth) recently disclosed that many Americans question the cost of their services and feel they are expensive or meant for the wealthy.
  • According to Dwayne Moyers (a financial planning advisor), advisors are concerned about clients who are thinking they can depend on market returns to take care of their income needs. Such clients think they don't need any financial planning advisor. Clients are also questioning the need for professional financial planning services or the worthiness of paying their fees.
  • However, Dwayne Moyers believes that history is a better guide, and clients should know that they need financial planners who can dig up this history and "help them not repeat it."
  • An expert in financial planning for millennials (Boneparth) recently stated that clients think the services of advisors (including financial planning advisors) are solely designed to manage money. They feel the services of advisors are "not about receiving financial advice" as well as "financial planning" services. Consequent to the above challenge and other reasons, 99% of Americans do not seek the services (including financial planning services) offered by financial advisors.

Why It is A Clear Challenge

  • Studies published by several credible resources, including CNBC, agree that about 99% of Americans do not seek the services (including financial planning services) offered by financial advisors due to obvious reasons (such as expensive fees and costs), as discussed above.

Lack of Inclusion

  • In 2018, the CFP Board Center for Financial Planning hosted its first-ever Diversity Summit in New York City at the Times Center. The Summit brought together leaders and experts to discuss research-based initiatives aimed at increasing racial as well as ethnic diversity within the financial planning profession. According to Richard Salmen, a summit related to researching initiatives on diversity was not just the right thing but also a response to a clear challenge (demand) from the financial planning market — Richard Salmen is a certified financial planner and chairman of the CFP's Board of Directors.
  • Experts believe that the United States financial planning industry is not sufficiently inclusive. The Wall Street Journal recently reported that although there are a few women that function within the financial planning sector (such as Amber Miller, who is a financial planner with The Planning Center in Minneapolis), Only about 14% of financial planning advisers within the United States are female. This situation makes things difficult for some clients that are asking to work with female financial advisers.
  • There is also a shortage of people of color within the financial planning industry. This under-representation exists at a scale that some people suggest that "trying to expand awareness of financial planning" or merely inviting (campaigning for) more diversity in the industry might not be enough. The above insight reveals the view of expert financial planners such as Nicole M., Madeleine Burton (a certified financial planner, CFP), and a certified financial planning student Eugenié George. Eugenié George feels becoming a certified financial planner is challenging for people of color in the United States as only 3.5% of financial planning professionals (CFPs) are black or Latino.

Why It is A Clear Challenge

  • It is a clear challenge because it represents the views of several experts in the financial planning sector, as highlighted above.
  • Several leaders, including those from CFP (an association of financial planners that currently has a total of 83,106 certified members in the United States) agree that it is a significant challenge. Some regular members of CFP concur with the views of their leaders.

Research Strategy

The study has investigated some clear industry challenges for the United States financial planning industry. The study includes US-based business-focused magazines like the Wall Street Journal. This strategy examined the most significant challenges facing the financial planning sector when offering services to their clients.

The research included another investigation that included non-traditional (unique) investment research as well as thought leadership publications such as Catalyst Insights. This strategy reviewed the most pressing issues currently affecting the financial planning industry. The study also examined stock markets, business news, and financial news publications like CNBC for clear challenges facing the US financial planning industry. This strategy revealed that several Americans do not know that "financial planning" services are among the different functions or services of a financial advisor.

The study also investigated insights published by the CFP Board Center for Financial Planning for insights on clear industry challenges for the United States financial planning industry. Articles recently published by respected financial planning resources such as Kitces are also in the study. Kitces has the most popular Podcast serving the financial planning advisory sector. The study relies on the number of people affected by a challenge that relates to the United States financial planning industry (whether professionals or clients) to determine clear challenges facing the financial planning industry.
Part
02
of two
Part
02

US Financial Planning Industry: KPIs, Part 2

Net Profit Margin, Cost of Client Acquisition, Time Spent Serving Clients, and Current Ratio are some additional clear key performance indicators used by the US financial planning industry.

Net Profit Margin

Description
Indicator of Success
  • It indicates how much each dollar earned by the company translates into profits.
  • This financial KPI is instrumental in making long- and short-term financial decisions and shows how fast the company can grow in the long-term prospect.

Cost of Client Acquisition

Description
  • Cost of Client Acquisition is the cost associated with convincing a client to buy your product or service and knowing this KPI allows companies to understand their marketing efforts.
Indicator of Success
  • Cost of Client Acquisition KPI measures the costs of acquiring new customers and the ones that work can get more attention and companies do not spend money on the ones that do not.

Time Spent Serving Clients

Description
Indicator of Success

Current Ratio

Description
  • This KPI reflects on an organization’s ability to pay all the financial obligations in one year.
  • This financial KPI takes into account a company’s current assets such as account receivables, and current liabilities such as account payable.
Indicator of Success
  • This KPI indicates how well the company is positioned to meet its financial obligations consistently on time and to maintain a level of credit rating that is required to grow and expand the business.

Your Research Team Applied The Following Strategy

To find the additional common KPIs used by the US financial planning industry, we began to search for articles, publications through industry sites like the accounting department, Forbes, Investopedia among others and found various KPIs listed in these sources. From these channels, we were able to identify common KPIs used by the US financial planning industry. Indicators were determined to be commonly used based on their mention by multiple experts.
Sources
Sources