Clients who share the same financial characteristics as existing clients: successful, well-off, money to invest and who appreciate the long-term value of Financial Planning.
There’s nothing wrong with all this. It’s perfectly natural for businesses to focus on their core client base, to look after the most profitable and numerous clients in their demographic. To stay within their comfort-zone perhaps.
This is certainly what many planners have done in the past and very successfully too. It’s why referrals are so sought-after by planners.
Unfortunately sticking to such a strictly-defined client type may not be so easy in future, according to a new report. The report by Canada Life, called ‘Financially Mature and Stress Free’, suggests this ‘core’ client base for Financial Planners has shrunk over the past 10 years by 25% and may decline further.
The report defines retirees in the traditional Financial Planning bracket as having “very comfortable levels of wealth and health” built up over a lifetime thanks to good fortune in employment and steady family life.
Instead of this group, the report sees the emergence of new, more complex clients with more complex finances. These clients will have more demands on their wealth from divorcing spouses, step children and the like.
The other group to emerge may be ‘late financial boomers’ who have some wealth but because of marrying later, struggling to buy a home and so on, have had to condense their ‘accumulation’ stage of life. They may want Financial Planning and appreciate its value but their wealth ‘pot’ could be smaller than traditional clients of the past and their gold plated’ pensions.
Separately, the pandemic may also itself affect planners’ traditional client base. It’s too early to be certain of the long term impact but already some planners and planning firms have said that while looking after existing clients remotely has worked reasonably well, finding and on-boarding new clients has been much more of a challenge.
In addition we do not yet know the full impact of the pandemic on clients’ wealth but many will have lost businesses, jobs and money. Some will see early retirement as more of an option now, perhaps even a pressing need. They may need counselling as much as good tax planning advice. Planners’ roles may well expand.
I remain optimistic that the demand for Financial Planning will continue to grow long term and the prospects for the profession remain strong but it could be a bumpy few years and planners may need to be more nimble in targeting younger and more varied client groups a little out of their client comfort zone to be sure of being future-ready.
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Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience. This topical comment on the Financial Planning news appears most weeks. Follow @FPT_Kevin