Financial planning is the process of setting and achieving financial goals, such as saving for retirement, buying a home, or funding education. It involves assessing one’s current financial situation, creating a plan to meet the desired objectives, and monitoring and adjusting the plan as needed. Financial planning can help individuals and families achieve financial security, peace of mind, and a better quality of life.
However, financial planning is not a static or uniform activity. It evolves with the changing needs, preferences, and expectations of different generations, as well as with the advancements in technology, the global economy, and the social environment. This ongoing evolution is part of the broader trend of wealth management evolution, reflecting how financial strategies and tools adapt over time.
In this article, we will explore how financial planning has developed over time, how it has been impacted by the Covid-19 pandemic, and how a new platform called Kubera is revolutionizing the way people manage their wealth and plan for the future.
The Dawn of Financial Planning: A Walk Through Memory Lane
The concept of financial planning emerged in the late 1960s and early 1970s, when a group of professionals from various fields, such as accounting, law, insurance, and investment, recognized the need for a comprehensive and holistic approach to help individuals achieve their financial goals. They formed the International Association for Financial Planning (IAFP) in 1969, and the College for Financial Planning (CFP) in 1972, to establish the standards and education for the new profession of financial planning.
The role of traditional financial advisors was to provide guidance and advice to their clients on various aspects of their financial lives, such as budgeting, investing, tax planning, estate planning, and risk management. They would typically charge a fee based on a percentage of the assets under management, or a commission based on the products they sold, such as mutual funds, annuities, or insurance policies.
Over time, financial professionals evolved from offering brokerage services to providing personalized wealth management solutions. They adopted a fiduciary duty to act in the best interest of their clients, and a fee-only or fee-based compensation model to avoid conflicts of interest. They also embraced the use of financial planning software and robo-advisors to enhance their efficiency, accuracy, and scalability.
Financial planning software is a tool that helps financial advisors and their clients create, analyze, and monitor financial plans. It can perform various functions, such as data aggregation, cash flow projection, scenario analysis, portfolio optimization, and report generation. Some examples of financial planning software are MoneyGuidePro, eMoney Advisor, and Right Capital.
Robo-advisors are online platforms that use algorithms and artificial intelligence to provide automated investment management services. They can offer low-cost, diversified, and customized portfolios based on the client’s risk profile, time horizon, and financial goals. Some examples of robo-advisors are Betterment, Wealthfront, and Personal Capital.
The global financial planning software market was valued at $3.7 billion in 2021, and is projected to reach $16.9 billion by 2031, growing at a CAGR of 16.6% from 2022 to 2031. The main drivers of this growth are the increasing demand for digital and personalized financial solutions, the rising awareness and adoption of financial planning among individuals and businesses, and the technological innovations and advancements in the financial industry.
Role of Evolving Technologies in Shaping the Financial Planning Sphere
The integration of advanced technologies has been pivotal in shaping the current and future landscape of financial planning. This evolution highlights significant financial planning technology trends, transforming how financial information is managed, processed, and secured. These developments not only enhance the quality and reliability of financial data but also redefine the dynamics of analysis and advice.
Artificial Intelligence (AI)
AI has brought a paradigm shift in several facets of financial planning:
- Client Interactions: AI enhances client-advisor interactions through NLP and chatbots, offering efficient 24/7 support. Personalized communication is achieved using sentiment analysis and NLG, crafting tailored client messages.
- Decision-Making Processes: AI aids in analyzing complex datasets, providing insights via machine learning and reinforcement learning (RL) for informed decision-making.
- Profitability: Employing predictive and prescriptive analytics, AI helps forecast outcomes, optimize portfolios, and boost customer satisfaction, thereby increasing profitability.
Algorithms play a crucial role in enhancing various aspects of financial planning:
- Predictions: They provide precise forecasts using statistical models, Bayesian networks, and Markov models.
- Personalized Advice: Leveraging behavioral finance and personalization techniques, algorithms tailor financial plans, as seen in behavioral finance applications.
- Efficiency: Enhancing process efficiency through automation and cloud computing, algorithms enable scalable financial planning.
Data analysis is pivotal in revolutionizing portfolio management and investment strategies:
- Comprehensive Data: Data aggregation and integration tools collect and enrich financial data, providing a holistic view of an individual's financial situation.
- Visual Data: Data visualization tools aid in comprehending complex data, making financial information more understandable and interactive.
- Actionable Data: Analytics tools deliver actionable insights for effective portfolio management, underscored by data-driven decision-making in finance.
These technologies have not only reshaped the financial planning sector but also opened up new possibilities and capabilities in wealth management.
The Global Jolt: Understanding the Financial Ripples of Covid-19
The Covid-19 pandemic has been one of the most disruptive and unprecedented events in human history. It has affected every aspect of life, including health, education, work, travel, and social interactions. It has also had a profound impact on the global economy, causing widespread lockdowns, business closures, job losses, and market volatility.
The pandemic has also forced a dramatic reinterpretation of financial planning. It has highlighted the importance and urgency of financial planning, as well as the challenges and opportunities of financial planning in the new normal. Some of the ways the pandemic has reshaped financial planning are:
A Crisis-led Financial Awakening
The pandemic has exposed the financial vulnerabilities and uncertainties of many individuals and families. It has also stimulated a greater awareness and appreciation of financial planning, as a means to cope with the crisis and prepare for the future. In 2020, the COVID-19 pandemic made Americans focus more on their financial planning. More than 30 percent said they revisited their financial plan, but didn’t change it, while 20 percent stated that they made significant adjustments to their financial plans in response to the pandemic.
Budgeting, Long-term Planning, and Wealth Transfer Strategies
The pandemic has also influenced the financial behaviors and priorities of many individuals and families. It has prompted them to reevaluate their spending, saving, investing, and borrowing habits, and to adopt more prudent and sustainable budgeting practices. It has also encouraged them to reassess their long-term financial goals, such as retirement, education, and legacy, and to revise their financial plans and strategies accordingly. Moreover, it has stimulated a surge in wealth transfer activities, such as estate planning, wills, trusts, and charitable giving, as people seek to protect and preserve their wealth and values for their loved ones and causes.
The pandemic has also revealed the generational differences in financial planning. It has affected different generations in different ways, depending on their life stage, income level, asset allocation, and risk tolerance. It has also elicited different responses and adaptations from different generations, reflecting their financial needs, preferences, and expectations. In 2020, one quarter of Gen Zers in the United States started financial planning for the first time during the COVID-19 pandemic, while only 11 percent of Baby boomers said the same. Two thirds of Americans who lost income during the pandemic didn’t receive any financial support from the government.
Partnerships among Financial Service Firms and Tech Companies
The pandemic has also accelerated the digital transformation of the financial industry. It has increased the demand and supply of online and mobile financial services and solutions, such as digital banking, payments, lending, investing, and planning. It has also fostered more partnerships and collaborations among financial service firms and tech companies, to leverage their respective strengths and capabilities, and to unlock new systems and platforms
Unveiling Kubera: The Financial Planner for the Next Generation
Kubera is a new platform that aligns with the advancements in financial planning. It is designed for the next generation of investors, who are looking for a simple, smart, and secure way to manage their wealth and plan for the future. Kubera offers the following features and benefits:
A User-friendly Interface
Kubera’s interface is designed for millennials to high net worth individuals. It is easy to use, intuitive, and customizable. Users can create and access their accounts from any device, such as a laptop, tablet, or smartphone. Users can also choose their preferred currency, language, and theme.
Real-time Financial Tracking Capabilities
Kubera allows users to track their financial assets and liabilities in real time. Users can link their bank accounts, brokerage accounts, crypto wallets, real estate, and other assets to Kubera, and view their net worth, cash flow, and portfolio performance at a glance. Users can also add their debts, loans, mortgages, and other liabilities to Kubera, and monitor their debt-to-income ratio, interest payments, and repayment schedules.
Kubera uses data analysis to help users make better financial decisions. Kubera’s analytics track the value and growth of the user’s assets and portfolio over time, and provide insights on how to optimize their asset allocation and diversification. Kubera also helps users plan for their long-term financial goals, such as retirement, education, and legacy, and shows them how to achieve them.
A Fast Forward Feature for Future Scenarios
Kubera’s fast forward feature allows users to peek into the future of their portfolio. Users can apply certain rules to their current portfolio and observe how those rules affect their net worth in the future. Kubera lets users model real-life situations, such as market fluctuations, income changes, life events, and more, and see how they impact their future net worth. Users can also compare different scenarios and choose the best one for their financial situation. Kubera’s fast forward feature is a powerful tool for financial planning and forecasting.
A Digital Vault for Your Financial Life
Kubera is more than just a financial planner. It is also a digital vault for your financial life. Kubera allows users to store and access their important financial documents, such as life insurance, credit card information, and long-term care plans, in a secure and encrypted cloud storage.
Kubera also enables users to share their financial information with their trusted beneficiaries, advisors, or family members, in case of an emergency or death.
Connecting Individuals and Financial Planning Professionals
Kubera also caters to financial planning professionals, adapting its services to meet the evolving needs of a tech-savvy, self-directed generation of investors. It provides several advantages for professionals and their clients:
Assisting Wealth Management and Estate Planning Process
Kubera supports professionals in managing client wealth and estate planning. Its comprehensive access to client accounts and documents facilitates custom financial plans and solutions. The Fast Forward feature adds value by enabling professionals to project and plan for their clients' long-term financial trajectories.
Giving Full Visibility over Financial Information
Kubera provides users with comprehensive visibility into all their financial data, ensuring they have a clear and detailed overview of their financial landscape. With flexible access settings, users can easily view and manage their financial information. Additionally, Kubera's beneficiary check feature enhances this visibility, facilitating timely communication with designated beneficiaries in critical situations.
Ability to Grant Access to CFPs or Other Financial Decision Makers
Kubera enables users to collaborate with CFPs or financial decision-makers. This includes sharing financial information and allowing professionals to contribute to financial planning and transactions, complemented by a secure messaging system for seamless communication.
Working Together to Plan and Pursue Financial Goals
Kubera’s fast forward feature can also be used by financial planning professionals to engage their clients and provide them with value-added services. Financial planning professionals can use the fast forward feature to show their clients how their financial plans and strategies will affect their future net worth, and to help them adjust their plans and goals accordingly. Financial planning professionals can also use the fast forward feature to create and present different scenarios and options for their clients, and to help them make informed and confident financial decisions.
The evolution of financial planning, especially in light of recent global challenges and the advent of platforms like Kubera, signifies a significant leap towards a more informed, empowered, and technology-integrated approach to wealth management. As we embrace these changes, the future of financial planning looks promising, offering more robust tools, deeper insights, and greater flexibility to cater to the diverse needs of the next generation. Kubera stands at the forefront of this evolution, embodying the seamless integration of technology and personal finance, paving the way for a smarter, more secure financial future for individuals and families.