The Next Challenge Facing the Advisory Profession

Advisors won the last war – true professionals achieved victory by adopting fiduciary principles and providing comprehensive planning. But a new battlefront has emerged – what I call the “next argument” – and achieving victory will be slow and painful.

The financial planning profession has evolved quite a bit over my 40-year career. When I started in the business, the chief revenue model, employed by roughly 100% of the people calling themselves financial planners, was to sell “stuff.” Insurance agents would use financial planning software to create an impressive plan, seemingly endorsed by the objectivity of a computer (they were new and sexy back then). The software would take in a client’s financial information and, whatever that financial information happened to be, recommend that the customer buy copious amounts of high-commission whole life (and later universal and variable life) insurance. Tax shelter salespeople would do the same thing to sell their ”clients’ on “‘investments” that ‘promised’ a 7:1 tax write-off on their retirement money.

Early in my career, a small handful of individuals were arguing that advisors, to be real professionals, should be paid by fees rather than commissions, and that financial planning was more than just a streamlined way to make sales. I remember when they were loudly ridiculed, and then hated, and finally accepted as the mainstream of the profession.