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Five Industry TrendsReshapingFinancial Advice5.9.2018 FPA San AntonioMichael E. KitcesMSFS, MTAX, CFP , CLU, ChFC, RHU, REBC, CASLPartner. Director of Research, Pinnacle Advisory GroupPublisher. The Kitces Report, www.kitces.comBlogger. Nerd’s Eye View, www.kitces.com/blogTwitterer. @MichaelKitces, www.twitter.com/MichaelKitcesHandouts/Additional Materials at: kitces.com/FPASANAN18Five Industry Trends The LudditesHandouts/Materials: kitces.com/FPASANAN181

Five Industry Trends Cotton Production – Before & AfterHandouts/Materials: kitces.com/FPASANAN18Five Industry TrendsTechnologyThe Great ConvergenceCrisis Of DifferentiationThe Search For New MODELSThe Client ExperienceHandouts/Materials: kitces.com/FPASANAN182

Five Industry Trends“Financial Advisor” of the 1970s/80s: STOCKBROKER!Handouts/Materials: kitces.com/FPASANAN18Five Industry TrendsSource:“A Century ofStock MarketLiquidity &Trading Costs” byCharles JonesHandouts/Materials: kitces.com/FPASANAN183

Five Industry Trends “Financial Advisor” of the 1990s – MUTUAL FUNDS!Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends The online Mutual Fund Supermarket!Handouts/Materials: kitces.com/FPASANAN184

Five Industry Trends “Financial Advisor” of the 2000s –ASSET ALLOCATION!Source:“Moss Adams &Investment ls: kitces.com/FPASANAN18Five Industry Trends But now technology is commoditizing it again!Handouts/Materials: kitces.com/FPASANAN185

Technology &Financial Advice What Is The ValueYou’ll Add On Top?Exploring GoalsFinancial PlanningBehavior ChangeTradingRebalancingTax Loss HarvestingFacilitating SavingTradingRebalancingTax Loss HarvestingFacilitating SavingHandouts/Materials: kitces.com/FPASANAN18TechnologyThe Great ConvergenceCrisis Of DifferentiationThe Search For New MODELSThe Client ExperienceHandouts/Materials: kitces.com/FPASANAN186

Once upon a time, commissions were for products,and fees were for adviceHandouts/Materials: kitces.com/FPASANAN18Five Industry Trends Our regulations aren’t built for all this advice!Handouts/Materials: kitces.com/FPASANAN187

Five Industry Trends The Great Convergence is triggering regulationHandouts/Materials: kitces.com/FPASANAN18Five Industry Trends Regulatory change is not a cause, it’s an effect!– of the Great Convergence! The Fiduciary is a global phenomenon– and the trend is towards less conflicted compensation But when we all converge towards the same businessmodel, guided by the same regulation Handouts/Materials: kitces.com/FPASANAN188

TechnologyThe Great ConvergenceCrisis Of DifferentiationThe Search For New MODELSThe Client ExperienceHandouts/Materials: kitces.com/FPASANAN18Five Industry Trends The emerging Crisis of DifferentiationSource: FPA's Research &Practice Institute. "Definingand Communicating YourValue 2016: Trends inPractice ManagementWhitepaper"Handouts/Materials: kitces.com/FPASANAN189

Five Industry Trends We’re all going after the same (few) clients Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends But there just aren’t many baby boomerdelegators with money!Source: “Spectrem Group,Market Insights Report 2016”Handouts/Materials: kitces.com/FPASANAN1810

Five Industry Trends But not everyone is a delegator!Source: “Forrester Research”Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends How many baby boomer delegators are there ?– If 1/3rd of households are delegators Handouts/Materials: kitces.com/FPASANAN1811

TechnologyThe Great ConvergenceCrisis Of DifferentiationThe Search For New MODELSThe Client ExperienceHandouts/Materials: kitces.com/FPASANAN18Five Industry Trends The search for new business modelsPays 1%of IncomeNet WorthRetainer FeeHourly FeeMonthly Subscription FeeAnnual Retainer FeeNet Worth Income FeeCannot AffordFinancial AdviceHandouts/Materials: kitces.com/FPASANAN1812

TechnologyThe Great ConvergenceCrisis Of DifferentiationThe Search For New MODELSThe Client ExperienceHandouts/Materials: kitces.com/FPASANAN18Five Industry Trends The Experience EconomyHandouts/Materials: kitces.com/FPASANAN1813

Five Industry Trends The Financial Planning “Experience”Handouts/Materials: kitces.com/FPASANAN18The Catalyst:Generational Change(Digital Natives)Handouts/Materials: kitces.com/FPASANAN1814

Five Industry Trends“Science AdvancesOne Funeral At A Time”“Financial Planning Business Models AdvanceOne Retirement At A Time”Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends Younger generations are digital natives:Information is free Wisdom is valuableSource:Cerulli AssociatesSource:Scottrade 2017Retirement StudyHandouts/Materials: kitces.com/FPASANAN1815

Five Industry Trends Digital natives want solutions to problemsHandouts/Materials: kitces.com/FPASANAN18How To Survive(And Thrive)Handouts/Materials: kitces.com/FPASANAN1816

Five Industry Trends Technology is no longer a choice, it’s a necessity– And an opportunity!Source:”Fidelity 2015 Advisor Insights Study”Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends What technology can you adopt/add?Handouts/Materials: kitces.com/FPASANAN1817

Five Industry Trends The future is fiduciary. It’s global. Embrace it.– And it’s more valuable anyway!Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends Real differentiation isn’t just financial planning.– What are you the best at?Image Source:wsj.comHandouts/Materials: kitces.com/FPASANAN1818

Five Industry Trends Finding your niche/specializationPost‐CFP SpecializationNichesHandouts/Materials: kitces.com/FPASANAN18Five Industry Trends What’s YOUR business model in the future?Pays 1%of IncomeHourly FeeMonthly Subscription FeeAnnual Retainer FeeNet Worth Income FeePays 1%of AssetsAUM FeesNet Worth Retainer FeeCannot AffordFinancial Advice– Don’t change your pricing to compete on price Change who you serve, and price in a relevant way!Handouts/Materials: kitces.com/FPASANAN1819

Five Industry Trends Are you selling a product, a service, or anexperience?– Excellent experiences are standardized!Image Source:theodysseyonline.com (right), money.cnn.com (left)Handouts/Materials: kitces.com/FPASANAN18Five Industry Trends The Internet vs. Travel Agents Handouts/Materials: kitces.com/FPASANAN1820

Questions?Handouts & additional materials:www.kitces.com/FPASANAN18Contact: questions@kitces.com@michaelkitces21

3 Handouts/Materials: kitces.com/FPASANAN18 Five Industry Trends “Financial Advisor” of the 1970s/80