The Value of Financial Planning

Transcription

1 The Value of Financial Planning FPSB s Global Consumer Survey Danel Kuhlmann Financial Planning Standards Board Marketing & Communications Director 1 Copyright 2015 Financial Planning Standards Board

2 Who We Are Global, nonprofit professional standards-setting organization for financial planning Owner of the international CERTIFIED FINANCIAL PLANNER certification program Affiliate member of the International Organization of Securities Commissions (IOSCO) Affiliate member of OECD and its International Network on Financial Education (INFE) 2

3 FPSB Member Territories (26) North America (2) Canada United States South America (2) Brazil Colombia Europe (8) Austria France Germany Ireland The Netherlands Switzerland Turkey* United Kingdom Africa (1) South Africa Middle East (1) Israel* Asia-Pacific (12) Australia China Chinese Taipei Hong Kong India Indonesia Japan Malaysia New Zealand Rep. of Korea Singapore Thailand *Associate Member 3

4 Our Vision To establish financial planning as a global profession, with the CERTIFIED FINANCIAL PLANNER marks the symbol of excellence 4

5 Our Mission FPSB benefits the public by establishing, upholding and maintaining worldwide professional standards in financial planning FPSB s commitment to excellence is represented by the marks of professional distinction: CFP, CERTIFIED FINANCIAL PLANNER and 5

6 L A S E R Leadership Sustainability, Growth & Positioning Awareness Building Awareness with the Public Standards & Professionalism Practice and Certification Engagement Engaging All Stakeholders Recognition Firm and Regulator Recognition 6

7 How was the Global Survey Conducted? 7

8 Where was the Consumer Survey Conducted? 8

9 A Global View 9

10 Key Headlines Low consumer confidence in achieving financial life goals: Just 22% have strong confidence that they will achieve financial life goals. their financial situation. Few consumers globally feel strongly in their financial know-how (17%) or strategy (21%). The debt burden tops the list of financial priorities: Being debt-free of either major debt (55% rate as very important) or common consumer debt (54%) are top financial priorities for global consumers. Being prepared for an unexpected financial emergency (52%), home ownership (52%), and building up savings (51%) are also prioritized. There is broad interest in financial planning services to help consumers get on track financially: Retirement planning is seen as the most helpful financial planning service offered (50%), followed by investment planning (38%) and budgeting/cash flow/debt management (36%). Yet consumers face a range of barriers to engaging with a financial professional: Many consumers say they do not know who to trust (66% agree either strongly or somewhat), and some question whether the fees/costs are worth the expense (59%). Many do not seem to understand the financial planning fee structure (44% are not sure if they would prefer to pay fees or a commission for financial planning services). Financial professionals can overcome consumer barriers by leveraging key benefits : Demonstrating how financial planning helps save consumers money (58% cite as major reason to work with a financial professional), simplifying/explaining financial matters (56%), and tailoring long-term plans (56%) are keys to becoming a trusted source of advice (58%). And by reminding consumers that financial planning works for others like them: Consumers working with a financial professional generally feel better prepared, and this trend is even more pronounced among those who see a CFP professional and those with a comprehensive written financial plan. For instance: 43% of those working with a CFP professional strongly agree that they are confident they will achieve their financial life goals, compared to 31% of those working with any professional and just 15% not working with a professional 39% of those with a comprehensive written plan say the same, versus just 14% of those who do not have a plan. Next Steps: Relevant messaging should focus not only on retirement planning but on budgeting and debt management as well, underscoring how help in this area can set consumers up for success in meeting many of their goals. At the same time, messaging should attack the notion that financial planning is costly, with unreasonable fees. And, building trust starts with reinforcing the code of ethics. Lastly, increase PR/visibility, driving home the notion that those working with a CFP professional have better outcomes. 10

11 Section 1: FINANCIAL OUTLOOK 11

12 Key Findings WHAT? Consumers are challenged Only 17% of consumers strongly agree they are knowledgeable about financial matters 12

13 Key Findings WHAT? Consumers are challenged Only 19% feel successful at sticking to their financial strategies 13

14 Key Findings WHAT? Consumers are challenged Only 22% strongly feel confident that they will achieve financial life goals 14

15 Key Findings WHAT? Consumers are challenged Only one in three consumers have a written financial plan 15

16 Key Findings WHAT? Having a plan and a Working with a financial professional puts consumers in control of their financial lives Consumers with a comprehensive, written financial plan are three times more likely to feel confident they will achieve their life goals Consumers who work with a CFP professional are 12% more confident, 15% more satisfied and feel more prepared over working with other advisers 16

17 Groups who struggle most with finances These individuals are most likely to be Women Lower-income, and with fewer investable assets Not currently working with a financial professional 17

18 Key Findings WHAT? Consumers rely on their network for information Consumers rely on friends, family and websites more than financial professionals for information on financial matters 18

19 Key Findings WHAT? Consumers rate trustworthiness as the MOST IMPORTANT Consideration when selecting a financial professional BUT MOST DON T KNOW WHOM TO TRUST 66% consumers don t know whom to trust when it comes to financial matters 68% of consumers rate trustworthiness as a very important consideration when selecting a financial professional 19

20 Key Findings WHAT? Benefits of working with a financial professional: 58% say they are a trusted source of advice 58% say they show how financial planning helps save money 56% say they simplify and explain financial matters 56% say they develop a long-term plan tailored to their needs that helps achieve financial goals 55% say they adhere to a rigorous code of ethics 20

21 Section 2: BARRIERS TO FINANCIAL PLANNING 21

22 Trust is a major barrier to starting conversations with consumers Cost and feeling overwhelmed by the process also get in the way Top Barriers to Financial Planning (Strongly / somewhat agree) I don t know whom to trust Fees/costs are not worth it [VALO R] 59% I don t know where to start It s just too complicated I can t afford it Too much work/paperwork It is too confusing 57% 57% 57% 56% 54% 22

23 Some are simply putting it off 38% say they will tackle financial planning when they are older Agreement by age (%) Younger investors are most apt to be putting off financial planning Total

24 Most lack a written plan 57% Globally, 32% of consumers surveyed said they have some type a financial plan 32% 10% Yes No Not Sure There are benefits to having a plan 24

25 Those with a written financial plan project greater confidence They also express more interest in several financial planning services: investment planning, estate planning, and risk management Have a comprehensive written financial plan Do not / Not sure Financial Assessment (Strongly agree) I am confident that I will achieve my financial life goals I have a financial strategy to deal with life events and achieve goals I am successful in sticking with my financial strategies I am knowledgeable about finance and financial matters 14% 13% 13% 11% 39% 38% 33% 31% I worry a lot about my financial situation 26% 26% 25

26 Those with and most likely to be without a written financial plan More likely to have a plan More likely to NOT have a plan Men (36%) Under 50 (41% among those 18-34, 34% among those 35-49) Upper-income (42%), and with more investable assets (44%) More educated (41%) Currently working with a CFP professional (71%) Women (29%) Older, ages 50+ (24%) Lower-income (26%), and with fewer investable assets (26%) Less educated (26%) Not currently working with a financial professional (17%) 26

27 Interest in some areas of financial planning aligns with financial goals Especially retirement planning and investment planning Financial Goals vs. Interest in Financial Planning Service Retiring in the lifestyle desired Planning for retirement 49% 50% Making sure investments are profitable Investment planning 43% 38% Reducing the impact of taxes Tax planning Leaving a good sized inheritance Estate planning 34% 25% 21% 22% Rate as a very important financial goal Select as a financial planning service interested in 27

28 But, many do not see the potential in budgeting and debt management services Financial Goals vs. Interest in Financial Planning Service Free of major financial debt Free of common consumer debt Owning your own home Prepared for an unexpected emergency Building an emergency fund Managing finances to achieve life goals Budgeting, cash flow, and debt management 55% 54% 52% 52% 51% 47% 36% Rate as a very important financial goal Select as a financial planning service interested in 28

29 Section 3: EXPERIENCE WITH FINANCIAL PROFESSIONALS 29

30 Those seeing a financial professional generally feel better prepared Consumers currently working with a CFP professional tend to express even more financial confidence Financial Assessment (Strongly agree) I am confident that I will achieve my financial life goals I am active in having a financial strategy to deal with major life events and/or achieve life goals I am successful in sticking with my financial strategies I consider myself knowledgeable about finance and financial matters I worry a lot about my financial situation 15% 31%43% 42% 29% 14% 40% 26% 13% 39% 24% 12% 32% 26% 26% Currently working with a CFP professional Currently working with a financial professional Not currently working with a financial professional 30

31 Key Findings WHAT? SO WHAT? NOW WHAT? Consumers globally are not fully confident in their finances, with most not feeling very knowledgeable. They recognize the benefits that financial planning services provide and this is something that is echoed by those who have actually worked with a professional. But, many overall are concerned about costs and project a feeling of being overwhelmed by the process. For all, trust is a key component. There are considerable unmet needs in the marketplace. Many want or are open to help, but do not know whom to trust or are beset by a range of barriers. Meaningful connection and engagement starts with understanding consumer priorities, mindset, and barriers, so that financial professionals can deliver messaging and solutions that will resonate. First, building trust starts with reinforcing the code of ethics. Second, relevant messaging should focus not only on retirement planning and investment strategy but on budgeting and debt management as well, underscoring how help in this area can set investors up for success in meeting many of their goals. At the same time, messaging should attack the notion that financial planning is confusing and costly, with unreasonable fees. 31

32 Key Findings Consumers globally There is lack of confidence in achieving their financial and are cautiously life goals and even less feel knowledgeable about financial optimistic when it matters. And, many do not feel they will be successful in sticking to comes to finances their financial strategies. and financial Majority do NOT have a financial plan planning; sizable Most consumers turn towards friends, family and websites share struggle for financial information Consumers express the most interest in retirement planning (50%) and ensuring profitable investments (38%) two areas that align closely with their financial priorities Scared off by costs (49% and 43%, respectively, select these as very and a seemingly important ) complex process, Yet, many are not connecting the dots between financial many are not goals like being free of major (55%) and common (54%) consumer debt, owning a house (52%), and preparing for seeing the full an emergency (52%) and financial planning services range of benefits around budgeting, cash flow, and debt management that come with Just over one in three (36%) are interested in this financial financial planning planning service Moreover, concerns about the cost (57%) of financial planning and not knowing how to get started (57%) are a hindrance to many 32

33 Key Findings Trust and a code of ethics are essential to financial planning in consumers eyes and is an area that cuts both ways in deciding whether or not to work with a financial professional The top barrier to financial planning is not knowing whom to trust (66%) The notions that financial professionals are a trusted source of advice and adhere to a rigorous code of ethics are among the most powerful reasons to work with a financial professional (58% and 55%, respectively, rate these as major reasons) Along these lines, trustworthiness ranks first as the most important consideration when choosing a financial advisor (68% rate as very important ) And, consumers who currently work with a financial professional praise these professionals first and foremost for demonstrating honesty and integrity (47% give an excellent rating) 33

34 Key Findings Investors reveal advantages to working with a financial professional, though there is room for improvement 45% are currently working with a financial professional An overwhelming majority of these investors are satisfied with this professional though more are somewhat (52%) instead of very (42%) satisfied Along these lines, fewer than half report being very satisfied with their financial professional when it comes to key financial planning activities, including: Clearly defining the relationship (39%) Developing a personalized plan (36%) Monitoring progress (34%) In spite of projecting some room for improvement, those working with a financial professional are more apt to be confident that they will reach their financial goals (77% vs. 63%) Higher satisfaction reported when working with CFP professionals One in three (32%) have heard of the CFP designation 9% are currently working with a CFP professional Those working with a CFP professional tend to report higher levels of satisfaction with their professional and are more apt to give excellent job performance ratings than those working with other types of financial professionals 34

35 So What SO WHAT? There are considerable unmet needs in the marketplace. Many want or are open to help, but do not know whom to trust or are beset by a range of barriers. Meaningful connection and engagement starts with understanding consumer priorities, mindset, and barriers, so that financial planning professionals can deliver messaging and solutions that will resonate with the consumer. 35

36 Now What NOW WHAT? We in this room can make a difference continue to uphold the professional standards and rigorous CFP certification requirements FPSB wants to help design content and training to help consumer financial literacy Establish global partnerships to continue to evolve the financial planning profession Continue to educate and message to the marketplace 36

37 Now What NOW WHAT? Building trust starts with reinforcing the code of ethics, or having disciplinary procedures within the profession. Second, relevant messaging should focus not only on retirement planning and investment strategy but on budgeting and debt management as well At the same time, messaging should attack the notion that financial planning is confusing and costly, with unreasonable fees. 37

38 Video Value of Financial Planning for Consumers 38 Copyright 2015 Financial Planning Standards Board

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40 THANK YOU Danel Kuhlmann FPSB 40 Copyright 2015 Financial Planning Standards Board