A View of the Planning Profession in the Year 2030

Among the lobbying successes of this coalition are the creation of federal standards and protocol whereby consumers own their own financial information, and can decide with whom to share it. Financial planners become their clients’ information hub and protector. This information can be shared in a private service that taps into government meta-data. In 2030, many consumers have gotten their own comprehensive financial score (like a credit score) via an app on their phones – and they can see their financial score improve as they adopt better financial habits. Consumer articles compare the average financial scores of people working with a financial planner to the scores of do-it-yourself investors or people receiving robo advice.

Meanwhile, the profession at large has adopted defined protocols for serving underserved communities, and there has been a migration of revenue models away from AUM toward a flexible panoply of arrangements conducive to serving people with disparate wealth. There are clear career path models throughout the profession, along with the emergence of large national planning firms whose scale is comparable to wirehouses.

Is that all? Hardly.

In that future day, every state will offer financial planning/financial literacy courses in high school and as electives in core university curricula, making virtually all younger Americans aware of financial planning as a career option.

Financial planning clients will have their own association, giving a voice to consumers. This newly-formed consumer organization, allied with the financial planning organizations, would also form a grand lobbying/advocacy coalition with (perhaps) the Consumer Federation of America and the AARP. Meanwhile, corporate employees will routinely receive financial planning advice through participation in their 401(k) plans.

Current challenges

All this in 10 years? This picture of the future is an aspirational composite of ideas that emerged at a brainstorming session hosted by the CFP Board on December 13 in Chicago – the day after the Board’s gala evening event celebrating the 50th anniversary of the founding of financial planning in a hotel room near Chicago’s O’Hare airport.

I was the only journalist among the 80 people who spent a morning and part of the afternoon trying to decide the best way forward for the profession. Others around the 10 tables in the room were leaders from NAPFA, the FPA, the CFA Society and the Investments and Wealth Institute, plus a number of current and past board members of the CFP Board, and a variety of professional leaders who I am not allowed to mention by name, but who you would recognize if I did.

We started the day by trying to define some of the challenges that the profession faced, and then each table was assigned a spokesperson who articulated the two or three best ideas he or she heard during the discussion. These reports quickly centered on several themes:

• We need to address the confusion around regulations and designations. What standards and services can consumers expect from financial planners and people who call themselves by that name? This was discussed in the context of a future CFP Board public awareness campaign, which would also raise the awareness of the CFP designation.

• In line with the previous observation, there needs to be more effective communication with the regulators, who are not making a clear distinction between the brokerage and RIA (fiduciary) models of advice. (From this came the first tentative calls for an independent regulated profession of financial planning, but remember, this was early in the day.)

• The profession is not keeping pace with the changing demographics – particularly the growing ethnic diversity – in America

• Advanced consumer technology (think: Amazon or Google) is raising client expectations of financial planning service levels.

• The rapid evolution of professional technology requires the planning profession to be more nimble at precisely the time when the founding cohort is aging and less flexible in adoption.

• The growing income inequality in America has caused many of the people who need it most to be unable to afford financial planning advice.

• There is a misalignment between the predominant fee structure in the profession (AUM) and the emerging planning/advice-centric service model.

• Financial planners need a more effective voice in regulatory issues. Financial planning needs to become a distinct topic in regulation. (Right now, we’re a peripheral voice in investment-related regulation.)

• “Fiduciary” needs to be clearly defined in practice as protecting consumers, rather than as something that can be accomplished through disclosure.

• The profession has put too much responsibility on the shoulders of consumers to address confusion. Professionals and professional organizations need to do a better job of reaching consumers (and the media they consume) directly, to provide clarity and guidance on what they can expect from different service providers.

To this, I would have added the fact that we face powerful, entrenched enemies of the fiduciary standard and of financial planning emerging as a profession. I’m thinking here of the brokerage and insurance industries, which function under a distribution model that is incompatible with the consumer-first ethos required of most professions. The planning profession is going to have to confront these enemies head-on at some point in its evolution.

Going down the list, I suspect the financial planning profession will have little impact on regulators and legislators until we get closer to that 2030 vision: having a financial planner or two in Congress, and having come to a detente with other, larger professional organizations that have an interest in financial planning. The income inequality issue is being addressed by a migration from AUM to flat or hourly fees, and by younger planners working with their peers. There are a number of pro bono programs around the country, and if corporations hire financial planners to serve on their employee benefits staffs, we could see planning services available to a broader segment of the population.

The diversity issue has at least been recognized, and anybody who goes back 35 years (as I do) can draw an optimistic comparison between “then” and “now.” (I remember women working at the IAFP who expressed an interest in becoming financial planners, only to be told that the profession would – these were literally the words – “chew them up and spit them out.” Remember: it was mostly sales of questionable partnership products back in the 1980s.)

Future challenges

Could the group spend a few minutes thinking about future challenges that might emerge to the profession and delivery of planning advice? I’m going to list some of the more interesting themes that came up from the various tables:

• Lifespans extending out to 120-130 years;

• Uncertainty around Social Security solvency;

• A total reinvention of what it means to “retire” and of the final phase of life;

• A market collapse and a wholesale loss of trust in financial planners and financial institutions generally; and

• A major consumer brand (Apple? Amazon?) becoming a provider of financial advice.

This was a provocative list. The last challenge doesn’t worry me too much; it’s an extension of the ancient (five years old now) “robo” challenge in that these new competitors would be providing portfolio advice rather than delivering comprehensive financial planning services. As financial planning becomes a distinct service in the eyes of the public, portfolio management might be a commoditized adjunct to the more valuable service delivered by the real profession.

The market collapse, of course, is inevitable. I strongly suspect that it will, in some as-yet-unforeseeable way, tarnish the major Wall Street brands. My takeaway there is that the financial planning organizations need to do a much better job than they did in 2008-9 to point out that the financial planning profession had a positive impact on the lives of consumers through the bear market. It did not profit from or contribute to the nefarious activities that brought about the downturn.

In other words, let’s use the next economic reversal to help consumers distinguish between Wall Street firms and financial planning professionals.

Congress won’t let Social Security go insolvent, but even if it does, the projections say that people will still receive 75% of the benefits they were expecting, which would be painful for many, but not the calamity that some expect. This will not be the major financial planning challenge that some are expecting.

Finally, the profession is making terrific progress on counseling retirees to pursue something meaningful. And if lifespans are extended, I hope that planners will encourage their clients to keep working so long as they’re healthy and the work is satisfying. It could be an opportunity to rescue some very difficult retirement savings situations.

Achievements so far

Before we talked about what to do about these problems and challenges, the group was asked to list the key achievements for the profession since its putative founding in 1969. Every table offered a different list, but a composite might look something like this:

• Popularization of the general concept of financial planning as a distinct service model in the U.S. and in 27 other countries;

• Rise of the CFP (and it was not mentioned, but also the CPA/PFS) as a real financial planning designation, with defined minimum standards of knowledge and education;

• An incremental rise in standards of practice; (Fiduciary was an unheard-of standard as recently as the late 1990s, and in the early 1990s many advisors were hostile to the idea that the profession should have any written standards at all.)

• The emergence of financial planning as a distinct academic discipline;

• The rise of institutional custodians as a support infrastructure;

• The evolution of increasingly sophisticated software tools and services to help in the delivery of financial planning services;

• The creation of several membership organizations that support financial planning practitioners;

• The emergence of a defined body of knowledge for the profession;

• Even the brokerage firms and insurance agents support the concept of financial planning advice in the context of their product recommendations; and

• There are many more women and people of color in the profession than there were 20 or 30 years ago, and fewer barriers to their entry and success.

The people at my table took a few minutes to appreciate just how much of this was accomplished in just a few years after the 1969 meeting: the foundation of the College for Financial Planning and the development of an (admittedly primitive) curriculum; the founding of a professional and a trade organization, the formulation of a designation and the fairly rapid adoption of financial planning in “needs-oriented” selling of mutual fund products. Progress since then has been significant but incremental.

Is there any way to get back to rapid progress? That would require great dedication on the part of some professional leaders. One of the purposes of this meeting was to gain clarity about what we need to do in 10 years – and keep up with the energy of the original founders.

Mission statements

The penultimate step of our brainstorming process was for each table to write out a mission statement that would define some major accomplishment that might be traced back to this day’s work.

Different tables proposed different things, including the normalization of college degrees, mainstreaming financial planning as a distinct profession and making it available to a wider cohort of Americans.

Several other tables offered a version of what we came up with at our table. A composite of them would look something like this:

At this meeting we laid out a clear path to create a broad consensus around the regulation and standards of delivery of financial planning services. This would be a step toward the recognition of financial planning as a distinct regulatory entity.

We were asked to follow this up with an action step. A consensus version of the action step might read like this:

Organize a summit meeting among the professional organizations that have a strong stake in the components of financial planning, whose members are acting as financial planners already in the marketplace. This would include the AICPA PFP Section, the CFA Institute and the Investments and Wealth Institute – and would be organized by the CFP Board. At this meeting, all parties would lay aside their self-interest and determine a path toward harmonization and agreement for the good of the profession and the consuming public.

This aspirational mission actually may not have been far from the CFP Board’s mind, as the leaders of two of the three organizations were rubbing shoulders with CFP Board and staff leaders in the collaborative spirit of the brainstorming conversation.

At the end, we were asked to provide a vision of the future – and the year 2030 was selected apparently at random. I want to go on record saying that I don’t in any way imagine that the vision of the future outlined at the start of this article has a chance of manifesting in 10 short years. But the exercise does provide a stretch goal. If you begin with the end in mind, you will at least know what you want and can outline the steps to get there.

I should warn the reader that even though I took copious notes throughout the 5-6 hours we were in the room, there were a lot of ideas presented, and not all of them made it into my article. It is entirely possible that the CFP Board will come to different conclusions based on its review of all the inputs. But I suspect they’ll agree with my impression that we have a long way to go between now and 2030 to achieve our vision, and it won’t happen unless we can get buy-in from the professionals who make up the planning world.

What do you think? Was this exercise worthwhile? Do you agree with the group’s thinking about the present and future?

Bob Veres' Inside Information service is the best practice management, marketing, client service resource for financial services professionals. Check out his blog at: www.bobveres.com

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