“Without a struggle, there can be no progress.” -Frederick Douglass
Does the financial planning profession have its act together? When we’re looking for a professional and wanting to hire one, it seems confusing. How do we make sense of all the different subjects? If we find it confusing, why is that the case? Should it be this way?
Admittedly, the profession is at an odd state. The profession is progressing and maturing rapidly. It is on the proper path, improving daily. If that’s the case, why doesn’t it feel like it? Well, to understand why it “appears” screwed up, but is in great shape (in terms of trajectory and societal value), we must understand three important factors.
#1 – FINANCIAL PLANNING IS A NEW PROFESSION (on a relative basis).
Let’s look at other widely accepted and understood professions:
Medicine – Origins date back thousands of years.
Accounting – Origins date back thousands of years.
Law – Origins date back to the 4th century, more than 1,600 years.
Insurance – Origins date back to the 17th century, more than 300 years.
Financial planning – Origins debated, but all agree: it is less than 50 years old.
The age and time of origin are critical. It has far-reaching impacts. Established laws, industry standards, and practice methods? Governing bodies? Professional associations and regulations? Responsibilities? Entry requirements? Education prerequisites? Career paths, structures, and opportunities? Culture perception? Compensation methods?
#2 – FINANCIAL PLANNING DID NOT BEGIN WITH A “CLEAN SLATE.”
We all can study the history of planning. In short, before there was planning, there was insurance. Insurance companies provided virtually all personal finance products. The products were sold, as it should have been, as solutions to whatever financial need the buyer had. Over time, clients wanted more. They wanted financial planning. They asked for it, indirectly. The insurance companies were there, in that role, and were the natural providers.
From that time, it has been a slow journey away from products sold as financial planning solutions to specific planning processes integrating the whole of a client’s financial components. Products have a place. Insurance has a place. But, process is what clients need when they seek planning. It requires a service model. This paradigm continues to take shape.
#3 – PERSONAL FINANCIAL PLANNING IS NOT TAUGHT IN TRADITIONAL SCHOOLING.
Would you believe you can go through all twelve grades, through college, and even graduate school (in Finance) and not take a single course in Personal Financial Planning? Believe it, because it’s possible. We can decide, as an elective or through our own initiatives, to study the subject and educate ourselves. Most don’t do that.
This leads to a largely uneducated society when it comes to the specific subject of personal finance. This further leads to incredible problems. We get our “knowledge” from the media, magazines, friends, work colleagues, etc. We have no lenses or foundation to separate fact from fiction. Ultimately, we are easy to confuse and slow to understand. This is changing, thankfully so.
All of this takes time to hone. The process is working. Considering age on a relative basis, financial planning is in its best shape right now (and getting better daily). Done right, its value is high. Great strides are being taken. Client desires and expectations are starting to align with service models in the marketplace.
“The changing nature of money is only one facet of the financial services revolution.” -Scott Cook
