Good news, financial planning is better than ever in the United States. The number of people obtaining their CFP certification continues to grow, the media and consumer advocacy groups have embraced the concept of competent, ethical advice and consumers know they need help. A recent CFP Board survey of certificants revealed that an overwhelming number of us really like our jobs. You can find us in a wide variety of business models. Some are affiliated with banks, insurance companies, or brokerage firms. Others choose to work in smaller, independent firms. Many focus on wealth management issues, while others specialize by type of client or topic area.
Planners can be found running nonprofits that provide financial literacy education. Still others work inside large organizations offering financial planning advice as an employee benefit. And the nature of the advice can range from a few hundred dollars for an hour of billable time to tens of thousands of dollars for ongoing, concierge-type comprehensive advice.
But is financial planning recognized as a distinct profession in the United States? No, we’re not there yet. Part of the problem is in the numbers. We know there are roughly 63,000 CFP professionals in the United States but there are hundreds of thousands of people in the financial services industry that market themselves as financial planners yet offer very little to their clients beyond product sales. Consumers can work with a “financial planner” for years and still have questions on very basic financial planning issues: What are the options for caring for aging parents? Is it better to pay down debt or add to a retirement account? What are the consequences of working part time when my children are school age? Worse, they have no idea how much they are paying for such incomplete, substandard advice. The term “financial planner” is not regulated, and the industry has muddied the definition of planner with lots of marketing terms: wealth manager, financial adviser, life coach, comprehensive planner, investment adviser, holistic planner and so on.
Another real part of the problem is that even financial planners who have obtained the CFP certification find that managing money for clients is much more profitable than the actual giving of financial planning advice. As a result, many of our most experienced planners only do financial planning for clients who are wealthy enough to have considerable money to manage. It’s hard to build a profession around services targeted solely to the wealthy where there is such overwhelming need for planning at all levels of income and wealth.
As in so many countries, the financial crisis of 2008 triggered a review of our regulations. Although financial planning is not separately regulated service, the insurance and securities products used to implement planning recommendations are regulated. The Securities and Exchange Commission is considering the adoption of a requirement that advisers put the interests of their clients before their own. It seems like a fairly straightforward rule to rally around. But if we go back to the numbers, the vast majority of planners who would be affected by such a rule are practicing in business models that currently don’t require such a standard. CFP professionals have been held to that standard since 2007 but becoming certified is still voluntary and our voices are relatively few.
There are several things we can do to nurture financial planning as a distinct profession in the United States and around the world.
- Continue to share best practices with each other;
- Provide regulators with the facts they need to write effective regulations;
- Empower consumers to demand a “client first’ advisor;
- Work with large firms to demonstrate that rules written for the good of the client are also good for business;
- Encourage business models that don’t require asset management fees to deliver financial planning advice;
- Raise our expectations about the changes that can be made.
One of the benefits of working in an emerging profession is that we are shaping our world by our vision of what should be rather than what has been. By keeping the vision clear and the standards high, the emergence of a distinct financial planning profession will happen faster than the many challenges suggest is possible.