Should financial planning be the next big employee benefit? It's an intriguing question, and one that has gained traction in recent years. I believe it's time to explore this idea further and delve into the potential implications and opportunities it presents.
The Case for Financial Planning as an Employee Benefit
Brad Arends, CEO and co-founder of Intellicents, has been a vocal advocate for making financial planning a tax-free benefit, akin to healthcare or retirement plans. His personal motivation stems from a desire to do what's right and make a positive impact. But is there more to it than just good intentions?
The Market Movers
In any industry, three key elements drive change: revenue, client demand, and legal requirements. Financial planning as an employee benefit checks the box for client demand, as evidenced by Cerulli's report. Many individuals lack confidence in their financial decision-making, and a written plan can provide much-needed guidance and peace of mind.
Challenges and Opportunities
One challenge Arends highlights is the question of advisor compensation. With rising healthcare costs, will employers be willing to invest in financial planning benefits? The data suggests a need, with 72% lacking a written plan, 78% living paycheck to paycheck, and a significant majority (79%) believing their employer should help.
The Wealth Management Opportunity
Arends' group transitioned from a TPA and record keeper to a significant RPA firm, with wealth management now accounting for 75% of their top-line revenue. This shift underscores the potential for advisors to tap into a new market and convert DC plan participants into wealth clients.
The Role of Technology
Artificial intelligence is expected to play a crucial role in streamlining the data gathering process, enabling advisors to create holistic financial plans efficiently. However, employee engagement remains a challenge, and plan sponsor support is essential.
The Human Touch
Despite the advancements in technology, human advisors are still valued for their personalized approach and immediate response to questions. A FINRA study supports this, indicating that participants build more confidence with human advice over AI.
Collaboration for Success
For financial planning to thrive as an employee benefit, collaboration between advisors, plan sponsors, and providers is crucial. Record keepers bring valuable technology and scale to the table, while advisors offer expertise and a fiduciary duty to their clients.
A Win-Win Scenario
Making financial planning an essential employee benefit not only benefits employees but also advisors and employers. Well-intentioned RPAs can feel good about helping their clients while also generating wealth for themselves.
Final Thoughts
Financial planning as an employee benefit has the potential to revolutionize the industry. It presents a unique opportunity for advisors to expand their client base and make a meaningful impact on individuals' financial well-being. While challenges exist, the demand is there, and with the right collaboration and approach, it could become a game-changer.
