The financial planning profession is entering a new era of profound change. Personal finances are a top concern for Canadians from coast to coast, but particularly for young people, who face unique financial challenges in the years ahead. Can the financial planning profession evolve to help younger Canadians begin their journeys toward financial well-being as they begin accumulating wealth?
The financial planning profession is aging. More than half of working planners are approaching retirement, at a time when many of those who most need their services are millennials and members of gen Z.
What’s more, many established financial planners are focused on higher-net-worth clients rather than young people who are just starting their careers.
These young people also face additional challenges associated with increasingly unaffordable housing and lack of access to retirement and health benefits because they often work in the gig economy. Many of them are also trying to pay off unprecedented levels of student debt. All these factors have an impact on their ability to achieve financial wellness.
But the opportunity within this younger demographic is undeniable. Many are in line for a substantial inheritance in what’s frequently referred to as the “great wealth transfer.” Even millennials who will not inherit wealth are still building wealth and, according to Statistics Canada, starting small businesses at a faster rate than the generation that preceded them.
In other words, these are the high-net-worth clients of tomorrow. Billions of dollars in assets are on the move, and many of these young people, poised to inherit or build wealth, are not currently being served by financial service professionals.
Recent research illuminates both the challenges and major opportunities for professional financial planners to embrace this new generation of clients.
A recent Capgemini study found 80% of millennials will want new financial advisors after inheriting their parents’ wealth and, at the same time, 62% of wealth managers say they cannot confidently understand or cater to millennials.
Other research suggests clients of financial services and wealth management firms increasingly want advice, not products — and they’re willing to pay for it. An Accenture study found that 89% of clients are open to paying for advice, and 83% want a blended digital/human experience. A Brookings Institution report, meantime, found that millennials and gen Z are receptive to working with professional financial planners and want trustworthy advice.
At FP Canada, we’ve also been exploring what this next generation of wealth builders is looking for in a financial planner. We’re learning they want advice and personalized service. Whether young Canadians are earning money or inheriting it, they’re indicating a real need for financial planning professionals.
In other words, it’s the ideal time for the financial planning profession to focus on forging relationships with millennials and members of gen Z.
Recruiting young planners who can easily connect with this cohort is a vital first step. One of the best ways to attract young talent is by effectively promoting financial planning as a viable and rewarding career in post-secondary institutions — something we’ve been focused on at FP Canada.
In addition, it’s important to carefully consider how best to reach young clients. Ensuring that we’re listening, as opposed to making assumptions about their goals and values, is a significant piece of the puzzle. While some millennials may be working toward home ownership as their parents did, others might regard being able to travel the world a more worthwhile investment.
Digital disruption is also creating major transformation across industries, including within financial services. Millennials and gen Z demand convenience and seamless experiences, which fintech is increasingly able to provide. That said, the research makes clear that the human element is still critical. Younger Canadians have indicated a need for genuine partners as they build financial resilience and accumulate wealth.
The financial planners who will be most successful in the years ahead are those who leverage technology strategically, using it to streamline processes and increase efficiency so the planner can focus on providing the personalized advice young clients expect. That personalization is key. It’s important that financial planners understand their clients, appreciate their unique life goals and create seamless experiences that are enabled by technology.
It’s the dawning of a new day for the financial planning profession as a profound shift begins. This new era needs to ensure financial planning is accessible and regarded as a valuable service prioritized by millennials and members of gen Z as they accumulate wealth and seek exactly what the profession excels at: expert advice and true partnership on the road to financial well-being.
Tashia Batstone is president and CEO of FP Canada.