DENVER (February 8, 2022) — Demographic shifts, economic challenges, political transitions, environmental threats, and a global pandemic have changed how financial service professionals communicate personally and professionally. To understand how financial planner/client relationships have evolved over the past 15 years, researchers from the MQ Research Consortium and the Kansas State University Personal Financial Planning Program, with the support of the Financial Planning Association® (FPA®) and Allianz Life Insurance Company of North America (Allianz Life), renewed a 15-year-old study that examined communication best practices and how they impact the trust and commitment clients have in their planners.
The research, fielded May 25 through June 15, 2021, sought to evaluate the persistence of findings from the original 2006 study and to gain insight into the development of successful financial planner/client relationships in light of need for virtual engagements, the prevalence of financial anxiety, and current demographic, economic, and equity issues. The research and analysis have resulted in an in-depth whitepaper, Developing and Maintaining Client Trust and Commitment in a Rapidly Changing Environment, with each chapter available as separate, downloadable documents.
“Financial planning is a highly relational profession, which means this important research is of great consequence to financial planners and their engagement with clients,” says 2022 FPA President Dennis J. Moore, MBA, CFP®. “FPA was honored to have this opportunity to partner with Allianz Life to support the outstanding researchers at MQ Research Consortium and the Kansas State University Personal Financial Planning Program to provide the financial planning community with data that will guide their work with clients in the years to come.”
The research was led by co-authors Carol Anderson, president of the MQ Research & Education, and Deanna L. Sharpe, Ph.D., CFP®, CRPS®, CRPC®, associate professor in the Personal Financial Planning Program at the University of Missouri; and contributing authors Megan McCoy, Ph.D., AFC®, LMFT, CFT-I™, professor of practice and the director of the Personal Financial Planning Master’s Program at Kansas State University, and Derek Lawson, Ph.D., CFP®, assistant professor in the Personal Financial Planning Program at Kansas State University and a financial planner at Priority Financial Partners in Durango, Colo.
Among the findings:
Clients want at least some virtual engagements with their planners, even post-pandemic.
- Over half of clients (57.04%) expressed a preference for virtual meetings even after pandemic meeting restrictions end, whether used exclusively (28.87%) or with occasional in-person meetings (28.17%).
- Planners expressed a significant preference shift for virtual meetings as well. Before the pandemic, one in five (20.77%) never held a virtual meeting, and just under half (46.29%) had used them only “sometimes.” Now, eight in ten expect to use virtual engagements at least some of the time going forward, 37.5% expect to use virtual meetings most of the time, and 7.1% expect their exclusive use.
- Virtual meetings reduced client perception of planner service for 22% of the relationships examined between communication tasks and desired outcomes. Comparable reductions for relationships between communication topics and skills and desired outcomes were less (18% and 13%, respectively).
- Fortunately, virtual meeting technology did not seem to impede many aspects of financial planning engagements as it only affected 18% of the variable relationships between communication topics, tasks, and skills and desired outcomes. But it’s noteworthy that these effects related to aspects of communication where understanding the client mattered and/or qualitative topics were discussed. This finding suggests that virtual meetings may work better for some types of client meetings than others.
Planners need to reevaluate their methods for getting to know and understand their clients—a critical component of building client trust and commitment.
In four key areas of qualitative data gathering, planners rated their effectiveness much higher than did their clients. Planner makes effort to learn about…
- Clients’ cultural values (68% planners / 41% clients agreed)
- Clients’ personality type/traits (73% planners / 38% clients agreed)
- Clients’ money attitudes and beliefs (80% planners / 53% clients agreed)
- Clients’ family history and family values (67% planners / 53% clients agreed)
“Because financial planning is a highly individualized process, a primary goal for financial planners must be conducting a qualitative data gathering process that allows and encourages clients to communicate their values, priorities, hopes, and concerns,” says Carol Anderson, president of the MQ Research & Education. “This study confirms that financial planners who make this type of inquiry a priority will be richly rewarded with successful and satisfying long-term client relationships.”
Financial planners need more training on recognizing and managing client financial anxiety.
- Planners greatly underestimated clients’ financial anxiety. On average, planners thought financial anxiety affected about half of their clients (49%). But nearly 3 in 4 clients (71%) reported experiencing financial anxiety at least half of the time (often presenting as avoidance, withdrawal, anger).
- Clients’ financial anxiety decreased their rating of planner ability to deliver services related to every communication topic explored in the research and to all but two communication tasks and two communication skills.
- Training in recognition and management of client financial anxiety could help planners facilitate productive meetings and identify when a referral to counseling services is appropriate. Incorporating a brief financial anxiety scale into the client intake process could be beneficial.
Are financial planners overconfident, or are clients being more critical?
Planners consistently gave themselves higher marks than their clients did for every communication topic category. Ironically, these results were a complete reversal from the original 2006 study when clients rated their planners higher than planners had rated themselves. Do planners have a false sense of overconfidence, or have clients become more critical of planners’ communication skills? More work is needed to understand why this shift occurred, but these results remind us that a real connection with clients cannot be assumed.
For example, planners and clients were asked if the following quantitative topics were part of their conversations:
- Planner communicates recommendations in terms clients can understand (84% planners / 51% clients agreed)
- Planner explains pros and cons of investments recommended to the client (80% planners / 46% clients agreed)
- Planner keeps clients well informed about investment performance, especially in down markets (69% planners / 38% clients agreed)
- Planner gives clients as much financial information / education as desired (83% planners / 47% clients agreed)
Planners and clients were also asked if the following qualitative topics/issues were addressed during their conversations:
- Planner is open to discussing what client values most in life (87% planners / 50% clients agreed)
- Planner’s financial recommendations are based on client’s personal goals, needs, and priorities (90% planners / 49% clients agreed)
- Planner communicates importance of considering all areas of life when creating a financial plan (81% planners / 47% clients agreed)
- Planner contacts clients on a regular basis to see what changes in life may affect the financial plan (85% planners / 39% clients agreed)
“The study results present a fascinating contrast of stability and change. We learned that the communication topics, tasks, and skills that engendered client trust and commitment and contributed to desired outcomes in 2006 still did so in 2021. That stability builds confidence in professional best practice recommendations,” says Deanna L. Sharpe, Ph.D., CFP®, CRPS®, CRPC®, associate professor in the Personal Financial Planning Program at the University of Missouri. “But then, response to contemporary challenges of shifting to virtual engagements, the prevalence of client financial anxiety, and current demographic, economic, and equity issues highlight the ways the profession has and will continue to change in the continued pursuit of excellence in client service.”
Diversity, equity, and inclusion efforts in the financial planning profession are having an impact.
- Financial planners participating in the research were a more diverse group than in 2006. Thirty-eight percent of participants were women as compared with 27% in 2006, and nearly 6% of planners reported a non-cisgender sexual orientation.
- Thirteen percent identified as non-White, and 15% were of Latino Hispanic, Latino, or Spanish origin.
- These changes in planner demographics show the profession is moving in the right direction, but more gains remain to be made.
“This research is critically important on so many levels, and it is so helpful to have further validation of what is truly important regarding in the relationship between advisers and their clients,” said Heather Kelly, senior vice president, Head of Advisory & Strategic Accounts, Allianz Life. “The needs of clients are evolving, particularly over the past couple of years. A holistic financial planning process guided by highly emotionally intelligent advisers needs to become even more prevalent to ensure client’s financial goals are attained.”
The research data set will be publicly available to other academicians and researchers in summer 2022. For more information about the research and to download the whitepaper series, visit the FPA website.
Research Methodology
An online survey of financial planners was fielded May 25 through June 15, 2021, which yielded a sample of 352 usable surveys (an 11.08% response rate). The client survey was distributed by financial planners participating in the research to their clients, which yielded a sample of 429 usable client surveys. The total number of clients receiving invitations from financial planners is not known.
###
About the Financial Planning Association
The Financial Planning Association® (FPA®) is the principal membership organization for CERTIFIED FINANCIAL PLANNERTM professionals and those engaged in the financial planning process. FPA is the CFP® professional’s partner in planning by helping them realize their vision of professional fulfillment through practice support, learning, advocacy, and networking. Learn more about FPA at financialplanningassociation.org and on Twitter at twitter.com/fpassociation.
About Allianz Life Insurance Company of North America
Allianz Life Insurance Company of North America, one of the FORTUNE 100 Best Companies to Work For® and one of the Ethisphere World’s Most Ethical Companies®, has been keeping its promises since 1896 by helping Americans achieve their retirement income and protection goals with a variety of annuity and life insurance products. In 2020, Allianz Life provided additional value to its policyholders via distributions of more than $10.1 billion. As a leading provider of fixed index annuities, Allianz Life is part of Allianz SE, a global leader in the financial services industry with approximately 150,000 employees in more than 70 countries. Allianz Life is a proud sponsor of Allianz Field® in St. Paul, Minnesota, home of Major League Soccer’s Minnesota United.
Allianz Life Insurance Company of North America is not affiliated with any of the contributing authors mentioned in the whitepaper or the entities listed within this release.
About Kansas State University Personal Financial Planning Program
Consistently rated as a top program nationally, the Department of Personal Financial Planning at Kansas State University is renowned for its education, research, and thought leadership in financial planning. Faculty specialize in the behavioral elements of financial planning, providing insight into how advisors can shape client behavior to promote well-being. The department offers a bachelor’s, master’s, and doctoral degree along with several professional certificates both on campus and online.
About Money Quotient Research Consortium (MQRC)
The Money Quotient Research Consortium (MQRC) was formed to support the scholarly initiatives adopted by MQ Research & Education™ (MQRE), a 501(c)(3) non-profit organization founded on the belief that a multi-disciplinary, evidenced-based approach to financial planning, education, counseling, and therapeutic processes will clarify best practices and promote successful client relationships. To this end, MQRE facilitates innovative studies; forms collaborations with researchers, scholars, and practitioners; and provides learning opportunities that facilitate a deeper understanding of both the emotional and practical factors that promote financial well-being and life satisfaction. Learn more about MQRE at www.mqre.org.