FUTURE TENSE: Post-COVID-19 Future of Financial Planning

Journal of Financial Planning: December 2020


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Note: After Dennis Stearns’s interview for our article “Future Firm, Future Planner” in the December 2019 issue, the pandemic hit and upended our world—personally and professionally. Stearns has since been involved with several pandemic research initiatives on future technologies, reopening communities safely, racial equity, and scenario work around the COVID-19 endgame and what comes next. The Journal caught him right after doing the keynote talk on the future of the financial planning profession for the FPA of Metro New York’s Annual Forum 2020. Our main question: where do we go from here? Stearns explores that in this article.

Leading up to the FPA of Metro New York’s Annual Forum 2020, I had asked many people I know in our profession what they thought the future looked like as we (hopefully) come out of the pandemic in late 2021. I supplemented this research with input by phone, Zoom, and articles from business and healthcare leaders (including infectious disease experts), humanists, and humorists. I also asked Hightower Advisor’s 100-plus RIA affiliates their take. Doing this kind of wide sweep usually produces feedback you expect and, sometimes, unusual twists on current trends.

There were a number of themes that came from this research on skills that planners need to sharpen in the next five years. Why just five years? The future of our profession is accelerating due to the pandemic. One of my friends runs a very successful company on the cutting edge of tech-enabling large public companies. He has lived the mantra that the best way to predict the future is create it. For many in our profession, predicting the future of investment returns is heresy, but in this context, creating the future means more rapidly adapting yourself and your teammates to tomorrow’s uncharted waters.

The top three skills to sharpen from my wide-sweep surveys are: communication and connection skills, behavioral finance skills, and adjusting plan assumptions in a post-COVID-19 world.

Better Communication and Connection Skills

Given that planners, especially the successful ones, have good EQ (emotional intelligence) skills to go with their IQ, this one was surprising until we think about the disruptive impact of the pandemic. Many planners I talked to said they were “off their game,” that Zoom meetings created a different feel for the mood of the client. Some liked it better since time spent commuting could now be put to more productive use. Many listed lots of pros and cons.

Our firm’s “leadership and change expert in residence” is Gary Bradt, a renowned expert on change and the national spokesperson for one of the hit bestselling books, Who Moved My Cheese? Bradt wasn’t surprised that communication and networking skills rose to the top of future concerns in a pandemic in a profession known for doing those things well.

“Meeting face to face, most discerning higher-net-worth customers or clients favor competence above other factors. Move to the Zoom world and likability moves to No. 1,” Brandt said. “The problem is people make judgements about whether they like you in about a second on Zoom. Are you looking at them eye to eye, or looking down on them? Is the audio tone of your voice vibrant or scratchy? Is your background distracting or subliminally positive?”

One of the agile entrepreneurs, the Brooks Group, which I interviewed for my new Ninja Entrepreneur book, is a sales consulting company working with hundreds of closely held and public companies. They echoed Bradt’s comments. Many top salespeople in a face-to-face world were struggling in the virtual world to get new leads and close new sales. Brooks hit on an ingenious idea after the pandemic hit. Their research institute began running roundtables for sales professionals from different companies to share best practices. Brooks had facilitators at each virtual roundtable and gathered many good ideas for adjusting to the virtual world.

Will these skills lose their edge when we get past the pandemic? Many planners I spoke with are planning on spending at least one to two days a week commuting virtually after the pandemic is over—some even more. And they believe that a meaningful percentage of existing and new clients will want some or all of their interaction to be virtual.

Here are some sharpen-the-ax ideas to improve your communication skills:

Sharpen your EQ. EQ is a critical aspect of communication. This was true before the pandemic and will be especially true as you shift between face-to-face and virtual interactions. Good EQ includes your ability to influence the emotions of others. These days, when a client or teammate comes to you in a stressed-out, panicked state, are you calming or are they more aggravated when you finish? Prolonged pandemic stress is releasing chemicals into our bodies that throw even the best communicators off their game occasionally—sometimes, way off. Better EQ equates to better communication and networking.

Get a coach or trainer. Our firm has a communication coach already on retainer, so for us, this was a natural. This coach had been helping our team with better project team skills, connecting better with clients, rehearsing public speaking, and increasing network effectiveness for prospecting.

Make sure you are clear what skills you’re sharpening for yourself and your team, and then interview several possible coaches, ideally with one of your teammates involved. Leverage your network for referrals. And don’t scrimp on cost—this could be among the highest return-on-investment skill-building you can do to up these vitally important skills in the uncharted waters ahead.

Do cross training in your office. Even if you have a small staff, spending time working on these skills can be helpful. Some firms I talked to had some of their team read books and articles or listen to podcasts on virtual world skills. One firm even combined that with best practices reminders from Napoleon Hill’s The Law of Success. Now, that’s a blast from the past to deal with a modern-day problem!

Listen to podcasts. Perhaps this doesn’t sharpen skills as well as the first two, but planners who are time strapped can accelerate their learning curve listening to even a 30-minute podcast every day. Within our profession, there are many options. As usual, Michael Kitces has some great episodes on better communication on his Financial Advisor Success podcast. One classic is with Susan Bradley, CFP®, CeFT®, who speaks on empathy and communication skills. Outside our profession, Nick Morgan, Ph.D., has retooled his classic messaging on better communications and networking for the pandemic world in his Brainfluence podcast.

Better Behavioral Finance Skills

This has been one of my top three “sharpen skill areas” for a while. It’s bad enough that people get confused by the increasing information noise in the world. Layer on top the convergence of the four major super trends—globalization, technology accelerators, demographics, and urbanization—and then hit the “pandemic frenzy” puree button on the blender, and you have the potential for behavioral mistakes galore.

In Jason Zweig’s book, Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich, he outlined many of the behavioral issues that can trip up a client, or you, on the way to better financial decision-making. A key Zweig quote on his research: “The best investors make a habit of putting procedures in place, in advance, that help inhibit the hot reactions of the emotional brain.” Susan Bradley, recently said that financial planning itself is one of the best “procedures” to inhibit the hot reactions of the brain.

An interesting suggestion coming out of the thought leaders involved in the NYC FPA conference is to combine a retirement policy statement with behavioral results from interviewing clients. Recognizing a problem is the first step to solving it; there is considerable work going on in this area and I believe we will be working with better tools in future years.

Here’s another Zweig finding that ties into the COVID-19 endgame and aftermath: getting exactly what we planned for is basically a non-event for your brain activity. This is not good news for keeping clients excited about achieving planning goals. Seeing the fruits of our labor to save money, or survive the pandemic, should be satisfying. Turns out our brains need a bigger hit of adrenaline or dopamine to get a bigger fix every time for the same emotional response.

Here are some sharpen-the-ax ideas to be better at behavioral finance:

Study various forms of behavioral finance issues. There are classic books in our profession like Conscious Finance (by Rick Kahler, CFP®, and Kathleen Fox), and tangent to our profession like Your Money and Your Brain, to completely outside our profession like Nudge: Improving Decisions About Health, Wealth and Happiness (by Richard H. Thaler and Cass R. Sunstein). Our firm has done Stearns Financial University training sessions around all three of these books.

We’ve also done workshops and special reports for our clients on behavioral finance as part of a “better decision-making” series. Maybe one of your clients doesn’t want to believe their subconscious could sabotage their financial plan, but they do want to make better decisions in their life and attend a workshop with that title, even though behavioral finance mistake avoidance is a central theme.

Walk in your client’s shoes. Stories are rampant in our industry of client’s expressing worries or concerns who were turned off by financial advisers who focused on their perception of the facts, and spent little time listening and really trying to understand their concerns. People can be a huge source of stress. What drives your negative emotional reactions? Too often, it is the opinions and judgments of others who want to tell you why they are right and not try to understand your point of view.

We’ve done role-playing in our firm where teammates play the part of the client and express many different worries or concerns. We include observer “coaches” who are experienced planners. The person playing the adviser responds, and then we talk about what the client has heard and felt. It’s eye opening. Then we repeat the simulation under higher-stress conditions.

Highly trained Navy Seals still run through drills and simulations when life or death decisions are in the balance—why not highly trained planners preparing for uncharted waters ahead?

Will Clients’ Planning Assumptions Prove to Be Way Off?

Think of your client who is least prepared for the future and one who is better prepared. Which one is making better health choices? Which one may make more fumbles later in life that erode financial independence? Planners of the future (and some in the now) are adjusting plan assumptions for these factors, and coaching (not lecturing) clients with risk factors about the cost of poor lifestyle decisions.

For pre-retirees, career safety in the age of pandemics and discontinuous change can’t be taken for granted. Since the last 10 years of work tend to be among the highest savings years, planners in the future will need a combination of good common sense and sophisticated tools to model scenarios around possible career disruption.

Future projections are just that and we all caution our clients that we’re trying to get a sense of the direction of their financial health, not pinpoint a single number.  It’s becoming increasingly clear to me from my networking that future assumptions post-COVID-19 are all over the map in our profession. Go to one planner and they will tell you to save more. Go to another and they will tell you it’s fine to save less and buy the second home or RV.

Here are just a few of the assumptions that forward-looking planners are already reconsidering in the near future:

  • Longevity extension and fourth-quarter spending patterns
  • Tax rates as a result of pandemic budget deficits
  • Long-term care shifts in expenses and lifestyle
  • Investment returns that look nothing like past modeling

One great idea being used today by forward-looking planners is getting together in mastermind groups to regularly discuss how to model future change.

The other areas needed for sharpening planner skills in the age of disruption that rose to the top in my networking are:

  • Digital skills—cyborg planners rise! The great equalizer. The great de-stabilizer. You’ll need big H (human skills), and little d (digital skills that are less apparent to the client).
  • Entrepreneurial skills—growing a firm? Having an entrepreneurial seizure?
  • Broader asset class options—what to do about bonds and stocks? Surrender to lower returns? Use more alternatives?
  • The rise of ESG—understand the “virtue versus sin” issues, including greenwashing and numerous paradoxes, backwards and forwards—not one size fits all. The tipping point was reached in 2019 and we believe it will be a huge trend in the next decade.
  • How will you leverage yourself—are you relying on technology or humans, or both?
  • How will you replace yourself—recruiting challenges and NexGen hand-off issues.

We all need to consider that “average is over” in today’s fast-paced world. The pandemic put the nail in the coffin of being average. Think you’ve got a comfortable margin of expertise? Let’s all remember the “better-than-average effect”—the studies that show most people believe they are better-than-average drivers, and many (especially men) believe they are better than average at making decisions of all kinds.

Continuous learning is crucial for today’s planner seeking to achieve (or maintain) mastery as we sail together into uncharted waters. 

Dennis Stearns, CFP,® is a full-time financial planning practitioner, though he wears numerous hats, including community leader, president of a $1.5 billion RIA (now partnered with Hightower Advisors), author of several books, Pan-American chess champion, and technology entrepreneur. The Journal has called him a super trend expert and a leading futurist in our profession.