5 financial planning topics to bring up with clients in 2025

December 17, 2024 5:27 PM

Financial advisors will have much to talk about with their clients in 2025.

In a number of ways, we already know 2025 will be very different from 2024. How can financial advisors prepare their clients for the changes ahead?

The simplest answer is to talk to them, though sometimes that's easier said than done. Some of the most important topics to discuss touch on sensitive subjects — politics, personal health issues, even death.

The most obvious change is that in 2025, the United States will have a new president. In this divisive era, bringing up politics — especially in a professional setting — is always risky. But chances are, clients are already either very nervous or very excited about the return of Donald Trump, and advisors can help bring their expectations closer to reality.

But that's far from the only uncomfortable topic advisors should bring up next year. Also high on the list: Death. To plan effectively for retirement, advisors need a clear idea of how long their clients are likely to live. And even then there are thorny questions like, who should inherit their estates?

Added to all this, there are two polarizing revolutions to discuss: artificial intelligence and ESG (environmental, social and governance) investing. While AI products have grown more and more popular, ESG appears to have moved in the other direction. And yet many investors have the opposite attitude: They fear using AI to guide their investments and embrace the use of ESG criteria.

How do clients feel about all these topics? How do they want to invest and plan for retirement and beyond? The best way to find out is to ask them. Here are the conversations advisors should be having with clients in the new year:

So Trump is president. Now what?

Meet the new boss. Same as the old boss.

Donald Trump will be returning to the White House, and with him comes a new era of uncertainty. Will he impose high tariffs, potentially ratcheting up inflation? Will he decimate the social safety net? Or, on the other hand, will he usher in a new era of economic prosperity?

Advisors can help lower the temperature by leveling with clients about how much power the president actually has. There are limits to how much influence he has on the economy, and there are reasons to doubt he'll cut public benefits like Medicare and Social Security.

"Think of it as the Titanic or a giant cruise ship," said Kashif Ahmed, president of American Private Wealth in Bedford, Massachusetts. "Just because the captain wants to make a U-turn doesn't mean that it's going to happen, or that it's going to happen right away."

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How's your health?

In a conversation about investments, it can be off-putting to be asked about your health. But a good financial advisor can explain why the two are related.

Any sensible financial plan has a timeline. For retirement, the most conventional "plan" is to retire at 65 and die at 95. But as research has increasingly shown, health problems often derail that timeline. More than any other factor, medical traumas force many workers to retire early. And in reality, most Americans don't make it to age 95.

No one can perfectly predict the future. But for a more accurate picture of clients' real timelines, planners can start by having a frank, honest conversation about their health. Do they have any health conditions? Do they smoke? Do they exercise? How long do people typically live in their family?

Using that information, an advisor can then use actuarial data to estimate the client's lifespan — and make contingency plans, if it seems necessary, for an early retirement.

"At least they're making a decision based upon factual data, and not a number that's just pulled out of the sky," said Ron Mastrogiovanni, president of HealthView Services, a software company that projects health care costs.

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What should happen after you die?

Americans have a problem with estate planning. They know they should do it, but most don't. About seven out of 10 U.S. adults believe it's important to write a will, but only 26% have written one, according to the estate planning company FreeWill.

Even among those who have done some planning, few have communicated about it with their descendants. According to research by Edward Jones, 48% of U.S. adults plan to leave an inheritance, but only 27% have discussed it with their families.

What could explain this disparity? One possible answer is that it's simply uncomfortable to contemplate one's own death, let alone plan for it in detail. But for a financial advisor to help with someone's estate planning, that's exactly what they must do.

"We really want to work with our clients and our advisors to close that gap," said Amy Theisen, the senior strategist at Edward Jones' estate and legacy research team. "We really see that conversation as something that maybe has been overlooked over the years — perhaps it was taboo — but something that really needs to come to the front of the line."

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How do you feel about AI?

In 2024, AI features exploded across so many platforms that one might assume they're universally popular.

Not so. In fact, research shows there's a deep divide between how financial advisors and clients feel about the new technology. Among advisors, 87% expect AI to have a positive impact on their industry, according to a survey by Financial Planning.

But among average investors, fewer people are convinced. A study by the CFP Board found that only 37% of U.S. adults would trust financial advice from a generative AI tool. And according to a poll by CNBC, 58% of Americans are "not interested at all" in using AI to manage their money.

"I think the wariness is because of all the abuse via computers — scams, frauds, phishing," said John Power, principal of Power Plans in Walpole, Massachusetts. "Consumers are rightfully wary and won't want to entrust private financial information to a computer-generated source."

How can wealth managers and their clients get on the same page about this technology? Bringing it up at the next meeting could be a good way to start.

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Is ESG still the future?

Don't count ESG out yet. Yes, the socially conscious investment funds suffered their worst-ever outflows in 2023. Yes, they have faced a fierce political backlash from Republicans. And yes, Republicans will control the White House and both houses of Congress next year.

Nevertheless, many experts are confident ESG has a secure place in the future of investing — one that is only likely to grow.

Their main argument is that evaluating a company's environmental and societal impacts is not just idealism; it's a form of due diligence. If a car company ignores climate change, for example, that company is likely to miss opportunities as its competitors invest in electric vehicles — and that's important information for an investor.

"Some ESG metrics, the true ones, are actually related to firm risk," said Sam Adams, CEO of Vert Asset Management, an ESG fund manager in Sausalito, California. "So ESG will grow, it will continue to thrive and become a bigger part of the investment landscape, because it is additional information. And all investors, whether sustainability-minded or not, want additional information on risk."

That information will be especially important to millennial and Gen Z investors, who tend to be more "sustainability-minded" than their elders — and who stand to inherit trillions of dollars in wealth. For these and other reasons, wealth managers may want to give ESG another look — and listen to how their clients feel about it.

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