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What Financial Planning Needs to do to Become a Profession

By Dan Candura, CFP

Whether financial planning is a profession or an industry is the subject of a current discussion among financial planners. Some worry that the term “industry” diminishes the aspirations of those who created a new way to deliver financial services to consumers. By integrating a goal achievement process with multiple subject areas, financial planners created a better way to meet the needs of clients.

By establishing a recognized community of like-minded and similarly trained practitioners over the past 35 years, some believe a new profession emerged in the US. They recognize the power of words and encourage terminology like “professional” and “profession” in an effort to gain greater acceptance that what we do as financial planners is unique and worthy.

Certainly, financial planners are part of a larger financial services industry that provides the products and services that consumers rely on to fund their retirements, purchase their homes, educate their kids and protect their families. The array of choices developed over the last century can be overwhelming. These choices often increase in complexity with age, wealth and individual circumstances. Blended families and dual income households are just two examples. Financial planners help their clients to navigate through the financial fog and arrive at their desired destinations. But does acting as a financial GPS system qualify us as a profession?

What Do the People Think of Financial Planning?

I believe a profession is measured by how it is viewed by the public it serves. The status is granted by the recipients of the services. Medicine and law were not always viewed as professions, and were certainly not held in high esteem. Today, doctors are also part of an industry – health care; as lawyers are part of an increasingly complex and often dissatisfying justice system. The public treats doctors and lawyers as professionals now, in part, because both occupations demand specialized training and examination. As consumers, we no longer accept self-trained practitioners marketing special elixirs or miraculous cures.

We set up review boards to license aspiring practitioners and demand that they be held accountable. We make the entry barriers significant to reduce the chance that those that were lazy or intellectually lacking could offer their services to us. In turn, we recognize that these men and women are “different” and worthy of respect. The efforts of CFP Board to require rigorous graduate level training, a difficult exam, years of practical experience, and high ethical standards support the professional aspirations of CFP® practitioners. CFP Board’s recent proposal to toughen CE requirements is another step in that direction.

If a profession is formed by the way it is viewed by the public it serves, then it matters which public the profession serves. Here is an area where financial planners fall short. The overwhelming majority of financial planners serve upper income and high net worth households. The economics of the financial services industry push us in that direction. The financial services industry rewards us in most cases for implementation. This is true across most segments. Larger implementations produce greater revenue. Wealthy clients produce greater revenue for the planner on a per capita, per engagement or per hour basis. So 95% of financial planners strive to serve the top 5% of consumers.

Financial Planners Only Serve High Income Clients 

This is not the case in the medical or legal professions. Doctors and lawyers serve everyone – not just the rich. Sure there are docs who focus on wealthy or celebrity clients; but, are they the doctors that our society holds in high esteem? Who is more valued in our society? The plastic surgeon offering tummy tucks on late night TV, or the one who volunteers to go to a developing country for 3 months repairing cleft palates of poor children? It is the same with lawyers. We all know that the rich can afford more expensive lawyers. But, we also know that the rest of us are entitled to counsel, too.  And who do we admire more in the legal profession: the slick corporate lawyer defending big oil after the latest spill or Erin Brockovich?

We see doctors and lawyers serving the poor every day.  We hardly ever see a financial planner doing the same because there is still no structure to make delivery of these services a viable occupation for a well trained financial planner at a living wage. No financial clinics and very few pre-paid financial planning benefits exist. While there are some pro-bono projects, they serve a fraction of those served at the top of the economic ladder.

Until financial planners serve lower income and middle market consumers, it will be unlikely that the public (or their elected officials) will view us as a profession.

9 comments to What Financial Planning Needs to do to Become a Profession

  • I agree with you Dan, and there are are a few of us who are serving the middle class on a successful basis but, we need a LOT more. In addition there are also and number of the FPA community doing pro bono works is also required if we operate in a society where Financial Planning is necessary for all. Thanks for your comments.

  • Agreed. I suggest that the contemporary definition should be – a vocation which is exclisively entered by tertiary level examination. Any other oocupation may be regarded as a trade or similar but unless an appropriate level of study and qualification is gained PRIOR to practiscing, an occupation cannot be regarded as a profession.

  • Dan,

    Investment Minimums are largely a function of product packaging. THere is no question in order to address transapaency of holdings and cost considerations required for a fiduciary compatable approach to portfolio construction, many high cost retail packaged products will be rendered obsolete because of their inadequacy to facilitate the managment an extraordinary degree of portfolio detail necessary for continuous, comprehensive counsel required for fiduciary standing.


  • Great blog Dan, thank you for sharing.

    I have not seen a profitable business model for the lower-middle income/networth market. With that said, I have not seen it all as there are as many business models out there as we have advisors.

    I think Doctors and Lawyers are a poor comparison to financial planners. In the medical field, the vast majority of people being served are covered through insurance. In the legal field, these people do not have a go to lawyer. They only go if they need some type of transactional work.

    Significant/fair planning fees are extremely difficult to collect from the lower-middle income market. That is why most of this market is serviced by brokers who can make commissions off products. Our model would be more viable in this market if our planning fees were covered by insurance or needed infrequently (like legal services). But we all know insurance on planning is not going to happen and our services are needed on an ongoing basis.

    I think tighter regulation and more financial education is the right path.

  • Jack Jackson

    Fascinating. So you need a CFP to work with the top 5% of earnings. That leaves want-to-be insurance sales people and registered representatives for the remaining 95%. Seems likes CFP’s need to evaluate what a “professional” is. All too many have required minimums. As noted, a true professional will work with anyone that needs the service.

    The thought that having a CFP makes you a professional is very laughable. So many industries created not one but many certifications to make them professional. Think real estate agents, business brokers, business valuation experts, bankers, etc. Those magic letters did not stop any fraud, theft or violations of clients trust.

    Being professional is not designated by the letters after your name but by the actions you take. It is having morals and acting ethically. You may need specific education to enter an industry but being certified in it hardly makes you an expert.

    If fact in the free markets of the United States, anyone can create a designation in any industry they wish. Many associations do so as a method of creating fees. The CFP board does a great job of this by charging monstrous fees which are ultimately passed on to the client. Does this really help or hurt the client?

  • Sam Hull, CFP (Ret.), ACC

    Dan I disagree that the distinction of being viewed as a true professional is gained by working with the poor and underprivileged. Being admired for one’s charity and being respected as a member of a profession are two entirely different things .

    Too often we Certified Financial Planners (and I count myself as a retired member of that body)are told we are doing the public a disservice by not offering our services to low income (or no income) people; that we are not being “professional”.

    Nothing says that we took a vow of poverty when we entered this line of work. Since time is the ultimate limited resource for most of us, how can one build a successful business through charging say, $25 per hour, and engaging in mostly short-term or intermittent relationships? We financial planners too often confuse what we do by calling it a “practice”. It should not be called that-it should be treated as a business. And no business can succeed for long by underpricing it’s product.

    Sure, set aside a portion of your time for pro bono work or working with low income clients. That should be encouraged (and perhaps incorporated) in the CFP Board licensing procedure. But don’t make us feel guilty because we don’t focus on the undeserved.

  • Great Discussion! Thanks Dan & others!

  • I have always wanted to help people with lower net worths/income. I also have NOT found a way to do this and make a profit.

    I think people like Dave Ramsey and Suze Orman have done this with books and tapes.

    This is America and if there is an open market for a service, you have the opportunity. I often thought about that approach after I retire and surrender my securities license…..if that day ever happens.

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