24 January 2023 |

Wealth Tech & the Evolution of Financial Advice


When you think about a financial advisor, what comes to your mind? 

Maybe it’s the image of an older man in a suit and fancy watch, with a huge binder ready to flip through the pages of your financial history as if every one of those numbers doesn’t tell a lifetime of stories. 

Or maybe it looks more like someone similar to you – with your shared life experiences – whom you trust will see the story of your financial situation and help you achieve the life and identity you’ve always wanted. 

Financial advice is going through an evolution with the emergence of wealth tech as a growing and powerful fintech subsection.

Investor interest would agree. According to CB Insights, wealth tech companies brought in $1.7 billion across 164 deals in the fourth quarter of 2022. That makes wealth tech the third hottest subsector of fintech behind payments ($3.4 billion) and banking ($1.8 billion). 🔥

On top of funding, three main cultural evolutions have propped up wealth tech:

  1. Financial advice as an industry and profession
  2. Consumer behavior favors engagement & education 
  3. Technology as a tool for human-centric advice 

I want to delve into all 3 of these shifts. For today, let’s start with No. 1: The evolution of financial advice as an industry and profession. 

Class is in session. 

History of Financial Advice 101

Before diving into the history, it’s important to note the differences between two common subsets that go along with financial advice: financial planning and wealth management

Wealth managers manage literal wealth for high earners that need help with things like estate planning.

Financial planners help with budgeting, cash flow, and retirement planning for everyday consumers who need to make their money go as far as possible (we’ll focus our attention here because it gets to the root of humanizing the industry). 

Financial advice could date back to Ancient cuneiform tablets when assets were cows, and the planning was about the herd’s growth over time or the estimated output of milk and cheese. 

But most celebrate December 12, 1969, as the anniversary of financial planning. On that day over 50 years ago, 13 men met in a hotel outside Chicago’s O’Hare Airport to discuss a new way of delivering financial advice. 

The group (Chicago 13) would articulate its vision for a new profession that would concentrate on helping clients manage their finances.

Meetings organizer, Loren Dunton, was a former vacuum and encyclopedia salesman who reinvented himself as a financial consultant and would become a public figurehead for the new movement towards the profession of financial planning.

Talk about a career shift. 

The meeting led to the International Association for Financial Planning and the College for Financial Planning. By 1973 the college had certified its first class of just 42 planners.

These first financial planning professionals would begin to practice just as America entered a new period of economic uncertainty, and the critical role of the financial planning profession came quickly into focus.

There were few women at the beginning, but icons like Alexandra Armstrong started working in the financial services industry in the 1970s, becoming the first woman in the country and the first person in Washington, D.C., to become a certified financial planner.

And other powerhouses followed. Suze Orman is one of the most recognizable financial gurus in the country. Today, she’s even dabbling in fintech as a co-founder of SecureSave (watch me interview Suze and her co-founder Devin Miller here). 

The Evolution

Ultimately, the profession of financial advice hasn’t been around very long. But thinking about how my father practiced financial planning in the 1980s is much different than today. 

*Flashback to that image of an older man in a suit with a binder of materials.*

Instead, imagine a conversation with a young family where no one has gone to college, but they’ve got children who might be the first ones in their family to attend college. So the financial advisor starts looking at what it’s going to take for that kid to go and get in and get through and graduate from college.

That’s financial advice. 

For years, financial advice was considered by the everyday consumer as a luxury that only the wealthy needed. 

We know now that that’s not the case because financial stress is a huge problem that permeates all relationships and all other parts of society.

Thanks to wealth tech, the doors have opened slightly. But that paradigm shift in our society’s mainstream mindset has only happened recently since the coronavirus pandemic spurred communities to think more about generational wealth and long-term planning

That has also given rise to niche financial advisors who focus on particular communities like adult entertainers, families who experienced an influx of wealth, women in leadership, LGBTQ+ families, and progressive business owners, among many others. 

Financial advisors are like content creators. An infinite number of communities need help, whether it’s managing money or learning about the perfect liquid eyeliner. 

But the only way to unlock which community you will serve best to have a thriving business is by tapping into your past

Community-focused financial advisors are building loyal and thriving businesses around them because they reflected on a past trauma that spurred them to build a business to stop transgenerational trauma

Put simply: They keep it real ‼️

Today’s client can tell the difference between someone that has done that self-reflection work and someone who is here to just make money

And trust me, they rather work with a human over a profit-hungry machine. 

Changing the Face of Wealth 

The future success of this industry boils down to the representation of financial advisors because, ultimately, people follow people and want services from people who understand their shared experiences. 

Today there are over 95,000 certified financial planners, according to the CFP Board. 

The class of 2022 welcomed 5,214 new CFPs. Of those:

  • 55% are under age 35 (!!) 
  • 30% are women
  • 15% are diverse

While the new gen is the most diverse cohort, the number of diverse financial planners across the board still needs work

  • 23.6% are Women 
  • 2.9% are Hispanic
  • 1.9% are Black 
  • 4.1% are Asian or Pacific Islander 
  • 0.2% are American Indian or Alaskan Native 
  • 0.1% are multi-ethnic

The industry needs to increase these numbers to break the cycles of financial exclusion and create real generational wealth for women and marginalized communities. 

When you look at this breakdown – it’s almost ridiculous that people thought technology would make the financial advisor as unnecessary as the taxi driver. 

While technology opened up access to financial planning, servicing these underrepresented groups takes both human, financial advice, and wealth tech – and the combination of both has barely scratched the surface.  

Technology amplified the higher need for human advice while evolving the role of a financial adviser to become that of a behavioral coach over an asset manager

Plus, a new, more agile generation of investors is emerging and seeking holistic advice that humanizes money management by acknowledging the behavioral dimensions of their lives — feelings of belonging, personal values, mental health, and physiological needs — to achieve financial actualization.

At the same time, more than technical expertise is needed for a financial advisor to attract new clients and bind existing ones. 

The key is to focus on what sets us apart as human beings from technology and develop these particular skills.

For financial advisors, it involves providing value beyond algorithms’ capability.
In part 2, we’ll get into the different elements of the changing consumer behavior and how that influences the future of financial advice and wealth tech. Stay tuned.