Pictured above: Sarah Catherine Gutierrez, Lester Matlock, Nick Merriweather and Beckie Comstock
The world has changed significantly since the financial planning industry gained prevalence in the wake of World War II and, indeed, since the Certified Financial Planner designation came about in 1972 and the CFP Board was created in 1985.
An influx of diverse professionals, generational changes and technological advancements have ensured that the financial planning industry is not the same one the baby boomers grew up with.
The CFP Board graduated its largest and most diverse class of CFPs in 2021. According to the CFP Board, the number of female financial advisors increased 4.2 percent compared to 2020, the number of African American financial advisors increased more than 10 percent and the number of Hispanic financial advisors increased more than 15 percent.
“I think it will change the industry dramatically,” said Sarah Catherine Gutierrez, CEO of Aptus Financial in Little Rock. “It’s extremely important that people be able to engage with people that look like them. I think it’s an important move in the industry, and I’m excited about it.”
Lester Matlock, CEO of Natural State Private Wealth Group in Little Rock, said that women outpacing men in college attendance rates and becoming bigger players in the corporate world implies greater equality among investors and financial professionals, but there is a long way to go.
“They’re still a minority in the financial world, whether we’re talking in the executive level at financial firms or in the financial advisor, financial professional level,” he said. “There’s a way to go, and I would say that’s very similar with other minorities. Whether we talk about African Americans or Latinos, the same is the case. We’re making strides, though slowly.”
Gutierrez added that although women are contributing more to household incomes, not as many women are making family financial decisions as one might assume.
“The person making the income is typically associated with the person making decisions, and what I find that’s interesting is, even as women are increasingly becoming the breadwinner, that’s not happening,” she said.
UBS Media’s 2021 “Own Your Worth” report found that only 20 percent of couples participate equally in financial decisions and that 48 percent of women — and 51 percent of millennial women — defer to their spouses when it comes to making long-term financial decisions such as investing and financial and estate planning.
Some data, however, shows that women are increasingly becoming solo money managers. “Seeing the Unseen: The Role Gender Plays in Wealth Management,” a 2020 study by Merrill Lynch, found that 75 percent of all women younger than 45 and 50 percent of all women older than 55 manage their own finances.
More women come into marriages with their own money and manage their investments separately from their spouses, the study states, and younger married women are more than twice as likely to say they are the primary financial decision-maker in the relationship than older married women.
The study also touches on the importance of female financial advisors. Women tend to see themselves as more knowledgeable about financial products and more comfortable discussing financial topics and making financial decisions when they have a female advisor, the study states, and women are also more likely to make most of their own financial decisions when their advisor is a woman.
“Traditionally, the industry has been dominated by men going into the field, and so there’s this idea that maybe men have a tendency to do better at investing, better in financial planning,” Gutierrez said. “The interesting thing is the data doesn’t support that.”
She added that women perform better at investing partly because their humility about their lack of financial knowledge leads them to invest in passive ways that yield greater results.
“We’re not out there trying to find the latest meme stock to outperform with our money,” she said. “We tend to just average our money into the stock market, buy up that boring investment in our retirement plan, set it and forget it, and in the end, what we find is that that leads to better outcomes.”
Matlock agreed that women are more likely to play it safe when it comes to investing.
“In my experience, women tend to be better savers than men, and they tend to stick with the plan,” he said. “Ultimately, that serves them well because they’re not as easily moved off center from the long-term goal.”
The passive investing strategy is a hallmark of not only women, but the millennial and Gen Z generations, Gutierrez added.
“They’re willing to understand the actual data on investing, which says boring, passive funds that capture the entire market return is the best way to invest,” she said. “In previous generations, there was this idea that I’m trying to do better in my investing than my neighbor, so if the average performance of the market in a given year is 5 percent, I want to have been in a fund or been with an advisor that can pick stocks and help me get a return at 6 percent or 7 percent. The data does not work in your favor if you are trying to optimize investments in that way, and often, people end up underperforming the market average.”
However, younger investors do sometimes take risky bets that their older counterparts might shy away from. Young investors may not take issue with the volatility inherent in technology-driven companies as long as they are familiar with the company, Matlock said.
“I think the younger investors definitely understand the technology platform and are more comfortable with it, so I think that leads to younger investors choosing to go down paths of investing that are probably a little more aggressive than their parents would have at that same age,” he said.
Other generational trends include a sensitivity to costs and fees, he added, as well as a demand for instant access to investment accounts.
“Generations ago, you saw your statement once a month or once a quarter, and that’s when you looked at your accounts,” he said. “The younger investor, I think, wants to look at their accounts on their Apple watch or check in to see what today’s market performance did to their portfolio.”
Today’s young adults also begin saving earlier than their parents did. The 2022 Retirement Reimagined Study by Charles Schwab found that millennials began saving for retirement in their mid-20s, a full decade earlier than the baby boomer generation. The CFP Board found that 58 percent of millennials and 70 percent of Gen Z individuals are saving for retirement.
Witnessing the retirement problems faced by baby boomers, who often have not saved enough for retirement and must decide whether to downsize or continue working, has prompted millennials and Gen Zs to save early, Gutierrez said.
Matlock said many young investors choose to invest early because they believe they will need to take responsibility for their financial futures, rather than relying on Social Security or all-but-extinct pension plans.
Saving for oneself is a concept Nick Merriweather, operations manager for Ipsen Advisor Group in Little Rock, said he works to instill in younger clients.
“When your parents, grandparents, mostly, when they worked for a company, there was a good chance they might have had a pension through that company,” he said. “If you don’t work for the state or the federal government and some staff, be it teachers or something like that, you’re not going to get any pension income, guaranteed income whenever you’re retired.”
Merriweather, who earned his Certified Financial Planner designation this year but served clients as a financial advisor prior to that, added that the industry has shifted from investing to financial planning.
“In such a short time, being a Certified Financial Planner, I can definitely see how more clients — prospect or current clients — they want the financial planning,” he said. “They don’t just want asset management. They want us to deal with the entire financial picture, and I think that’s actually great for both sides because we’re able to help them more, knowing all the information, and they’re able to get a higher level of service by doing financial planning.”
Financial planning has gained prominence as passive investing has become more prevalent, Gutierrez added.
“If you de-emphasize investing, then you get to spend your time on the things that actually matter, and that’s your finances — making sure that you’re saving enough to retire one day, making sure that you have a smart plan to pay off your student loan, getting out of credit card debt, getting a cash-management system that helps you have better control of your money,” she said. “These are things that will actually have a meaningful impact on your wealth, not relative investment decisions.”
Another big shift in the industry is a push toward flat-fee, advice-only models such as Aptus, she said, adding that the model helps firms avoid conflicts of interest.
According to Advyzon, a technology company for financial advisors, the flat-fee model is a growing trend, and more than 40 percent of investment firms that manage more than $100 million in assets now offer a flat-fee option alone or alongside an assets-under-management fee-based system.
Beckie Comstock, owner of Comstock Private Wealth Management, a branch of Raymond James in Hot Springs, said the bulk of her business adheres to the flat-fee, advice-only model. She said the model puts her on the same side of the table as her clients.
“Our clients look at us as trusted financial advisors, not salespeople. Back in the day, it was all about sales, and advisors were looked at as another salesperson,” she said. “It’s a win-win relationship for us and the clients to have that fee-based relationship because we have a fiduciary duty to do the right thing by the client when we’re in a fee-based relationship, and transactions are based on a very disciplined approach. We use a very long-term horizon, and we’re not driven by trying to make a quick commission anymore.”
Another huge industry shift has been technology. Gone are the days of paper stock certificates and bearer bonds. Block trading and other automated technologies are here to stay.
“When I first started, we actually wrote out trade tickets by hand and had to place trades individually, and it was a very inefficient process to do it that way,” Comstock said. “Now, I can trade multiple accounts and multiple strategies with a click of a button, so it makes it a lot more efficient.”
The average consumer has online access to information that would have only been available by consulting a financial professional in the 80s and 90s, Matlock said, adding that the internet has increased financial literacy but also created confusion. For example, clients may find information that is either incorrect or unsuitable for their lives and risk tolerance.
“There’s a law of diminishing returns where there’s so much information out there, you can always find something that contradicts something else,” Matlock said. “To an extent, information is good, but inundation of information — too much information — can have a negative impact.”
On the other hand, he said, plenty of good information and tools can be found online, including software offered by financial planning firms that allows users to complete basic calculations. Consumers also have the ability to check into a financial professional’s reputation before the initial meeting, he added.
“There’s just a lot of data coming at consumers, and understanding how to mitigate, decipher and wade through the massive amounts of information that is available, I think, is not changing,” he said. “That’s a trend that’s going to be here for some time.”
The internet provides not only information but opportunities to participate in the world of finance.
“I think technology has largely made it easier to become your own investor. Before, if you wanted to invest in the stock market, you had to have your guy,” Gutierrez said. “You would have to call your person up, and they would have to go buy you a stock.”
Technology now allows average people to open accounts at investment firms such as Vanguard, Schwab or Fidelity, buy mutual funds that cover the entire stock and bond market and automatically deposit money into their brokerage funds every month, she added.
“This notion of managing your own money is no longer crazy,” she said, “and obviously a retirement plan is even easier than that.”
She added that social media is a double-edged sword for those saving for retirement. Although some influencers may motivate followers to save or provide reputable information, audiences are just as likely to receive dubious information, and it is all too easy to be sucked into a culture of spending.
As for financial professionals, social media can be a great marketing tool, but there are strict restrictions governing how social media is used in the financial industry, Matlock said.
“The laws and the rules around how financial professionals in the financial industry can use social media are constantly changing,” he said. “They were very strict on the use of social media in the financial world, but understanding that it’s here and it’s here to stay, it’s a viable means of getting information out there, I think the industry as a whole is starting to relax some of those rules.”
The industry has also taken a conservative approach to cryptocurrency, he added.
“Most financial firms are not at liberty to go into a lot of detail about cryptocurrency. It’s still not allowed by most of your retail financial firms to talk about with clients or to establish or sell with clients. That said, I think cryptocurrency is here. Every day, consumers are hearing about it,” he said. “Right now, I think most financial firms, my firm included, have taken a hands-off approach to crypto until, I think, further legalities, legislation and so forth are out there for advisors.”
Staying abreast of industry trends and legislative changes such the Secure 2.0 Act are essential to financial professionals who hope to navigate the industry’s changing landscape, he added.
“I don’t know that you can ever not be a student of the business as a financial advisor,” he said. “I think as long as you’re a student of the business, then you will adapt to the times and, in doing so, you’ll be able to help your clients achieve their goals along the way. It’s when we think we’ve learned it all and there’s no more to learn that I think we become a danger to ourselves and to others who are seeking our advice.”
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