Top 5 Financial Planning Trends in 2021
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Goodbye 2020 & Hello 2021!
The start of a new year is a good time to review your personal finances, ditch those bad money habits, make new financial resolutions to flourish, build wealth, and use better tactics to make the year impactful.
Here are the top 5 financial planning trends to watch this year:
- Adoption of New Technology
- Increased Longevity Needs more Financial Planning
- Growth in Workforce Diversity
- Increased Focus on the Customer
- Increase in the Value of Certain Stocks
1. Adoption of New Technology
In today’s dynamic era, digital transformation is underway and is affecting the financial services industry, consumers, small businesses, corporations, governments, institutions, and even individuals at all levels.
The fast-paced economy, technological advancements, ever-changing customer expectations, modifications in regulations in the financial sector along with emerging FinTech organizations is shifting the game for financial planning and wealth management by making it more accessible, faster, secure, and easy to perform and consume.
FinTech companies are altering the way we handle money by bringing interactive and data-driven tools/apps to provide a seamless experience, increased security and greater convenience to their customers. These tools allow investors to keep track of their investments in real-time and execute transactions based on the current market conditions. Organizations leverage advanced technologies such as AI/ML and Big Data to provide intelligent and contextual recommendations based on various underlying factors such as customer’s buying patterns, prior engagement, risk appetite, age, demographics, etc., helping them make more accurate decisions.
Electronic wallets have taken the payments world by storm, especially due to an urgent need for contactless payments methods as a result of Covid-19. The digital wallets are becoming the new mode of tap-and-go consumerism which has made transactions simpler, faster, secure, and transparent.
2. Increased Longevity Needs more Financial Planning
A whitepaper by World Economic Forum (WEF) “We’ll Live to 100 – How Can We Afford It?” echoes some interesting data on increasing life expectancy that “Population over 65 will increase from 600 million in 2017 to 2.1 billion in 2050.
What does this mean?
It simply means that the global life expectancy has been increasing at a steady rate and implies that we need to do some meticulous financial planning to bridge a potential cash flow gap at the time of retirement.
With the rise in longevity, it becomes imperative to re-evaluate the conventional investment plans and make a positive headway towards saving for the retirement nest egg to live a balanced life. It also means that you must be able to keep at least 10%-15% of an average annual salary to lead a reasonable quality of life post-retirement.
When life transitions from one phase to another, life goals and priorities also change with time. These can further give rise to financial hurdles. Some commonly faced challenges in old age include long-term care expenditure, miscellaneous bill payments, caregiver fees, and coordinating required minimum distributions (RMDs) from multiple accounts, such as an Individual Retirement Account (IRA), a 401(k) account, etc. Therefore, it is essential to save money from an early stage so that you can handle these hassles without too much financial disruption.
Look for a financial advisor who can help you put together a long-term plan for growing your wealth and also help you reach your retirement income goals.
3. Growth in Workforce Diversity
Diversity at the workplace has increased manifold with more women and millennials joining the workplace. Today, women are spearheading businesses and have started to take control of their lives as well as their finances. A lot of women investors are seeking help from financial advisors to manage their finances and build wealth. While the financial services industry has been traditional, they are gradually modifying processes to become more women-friendly and are capturing a larger group of women investors.
On the other hand, millennials, i.e., the next generation investors, are highly wary while investing their money, which leads the market to change its mindset from being product centric to becoming more customer-centric. The advisors must ensure that the customers are well informed about their portfolios and provide services that suit their unique circumstances.
4. Increased Focus on the Customer
Financial planning and money management are becoming more and more complex these days, which is why many investors turn to a financial advisor who can partner with them and help put all the pieces together to provide a more comprehensive financial plan.
Although modern financial advisory companies are embracing technology to serve their customers better and scale their businesses, nothing can replace the deeper and personal advisor-to-investor relationship. Advisors need to brace themselves by spending more time meeting their clients and understanding their unique challenges and goals to deliver significant value to the clients. The most successful financial advisors will be those who show compassion and empathy and suggest plans that allow investors to fulfill their goals instead of selling products forcefully.
5. Increase in the Value of Certain Stocks
The Covid-19 vaccine has put many things into perspective. With a target of making the U.S Covid-free by summer, not only is the focus on healthcare but also the market. Pharmaceutical stocks are expected to go up with the success of the vaccination drive. Public companies, as well as private companies involved in distribution, storage, and inventory of the vaccine, are likely to benefit in huge numbers. This influx of money in the pharmaceutical industry can be a boon to the market. The same can be said for travel stocks. Airlines stocks that had taken a significant hit in 2020 are expected to bounce back. Hotels, cruises, restaurants, etc. will also see an increased clientele, thereby boosting the travel industry.
To sum it up
The Congressional Budget Office (CBO) has predicted a Gross Domestic Product (GDP) growth of 3.7% in the fourth quarter of 2021. The jobless rate will also likely drop to 5.3% by the end of 2021, as compared to 6.8% at the end of 2020. Although the recovery is going to be slow, these trends can bring in positive ramifications to the world of finance and investing.
To know more about how to implement the top 5 financial planning trends in 2021, you can reach out to financial advisors for guidance and direction. Use our free advisor match tool to compare 2-3 vetted financial advisors that meet your requirements and are ready to help.