Let's understand how we got here. Visionaries birthed Financial Planning 1.0 over 42 years ago. Loren Dunton et al saw a need to bring multiple skill sets to money-based client engagements. At a time when some states banned the same individual from selling both securities and insurance, these prophets saw that the same fact-finders and personal relationships could simultaneously serve various product purveyors from insurance to securities to taxes to estate planning and retirement planning. Seeing the need, they filled it by creating the College for Financial Planning and its curriculum. With this, they generated the "CFP" designation while planting seeds for the future growth of an authentic profession.
For raw material, they had inherited a 25-year postwar period where money itself was turned inside out. From Bretton Woods and a world where most folks were, at most, one generation removed from the land and its bounties, the world of 1969 was one of increased urbanization, shifting demographics and the mutual interdependencies and political tensions of a money-based culture. In fact, our national relationship with money was changing. We needed folks to help make sense of it. This was Financial Planning 1.0.
Financial Planning 1.0 was just in time for the '70s, when the world went off the gold standard and adopted fiat money as its norm. Inflation raged, housing prices and interest rates soared, a scourging bear market shook the faithful and baby boomers took center stage in a storm. It was increasingly clear that personal financial security was vital to lives well lived. This meant insurance, investments, a good job with benefits, a good home and other attributes of financial safety and security. Industry responded. Financial Planning 1.0 was all about the financial product it generated-and, of course, sales. Some of this product was good to great. Other products-not so much. (See tax shelters, penny stocks, limited partnerships, savings and loan companies and unsustainable life insurance projections.)
Nonetheless, "financial planning" was hailed by industry as "the greatest product delivery system ever." Rewards were for "producers." ("Producers" were the ones with great sales numbers. Plus, they got the compliments on Monday mornings and the trips to Hawaii.)
Later in Financial Planning 1.0, personal computers came to our individual desks. They turned out information instantly and thoroughly. We could crank out customized proposals and detailed analyses with impunity, "selling it by the pound." We were in the middle of one of the greatest bull markets of all time, and we could do no wrong.
With time's passages, we also got the chance to see that there was more to money than just the right product. After 20 years, Financial Planning 2.0 was more than a gleam in our eyes. The profession's leaders thought aspirationally about building an authentic profession. With Financial Planning 1.0 as our foundation, we experienced the realities that money was intensely personal and more intimately involved in people's lives than simple accumulation. Enter financial life planning and solid efforts to understand our personal relationships with money with more than a product sale in mind. We even began to look at money from the miscellaneous perspectives provided by the liberal arts in general. Books were written and lectures were given.
With Financial Planning 2.0, different practice models emerged as client-centric financial planners sought to cut or minimize their duties to Industry employers and personal client management systems emerged. Computers and targeted software reduced financial planners' needs to rely on Industry. Many saw the conflicts of interest and "two masters" problems inherent to agency systems and worked diligently to avoid them. The "fee-only" model was adopted whole cloth by many while others developed hybrid practices with notions of closer client relationships and reduced conflicts of interest. Of course, many others remained nestled in Financial Planning 1.0 or pure sales models.
Self-regulation took huge steps forward as Industry leaders developed a meaningful "Code of Ethics and Professional Responsibility" together with some disciplinary rules with teeth. Despite Industry's resistance, common talk centered around fiduciary standards and putting the client's interests first. Collectively, we took many steps to make this a reality, including an aggressive, consumer-friendly lawsuit versus the SEC.
Yet for all that, we did not really step into the world even as the world increased its dependencies on money. On the whole, we did not grasp the importance of our work, much less its power. We did not comprehend the realities and implications of personal finance within an economic system that marginalized the individual yet demanded that individuals play the money game skillfully, mercilessly imposing huge costs for either bad luck or incompetence.
Money skills became survival skills that do not come naturally to human beings, generating unprecedented social forces in the process.
We accepted second-class status, let Industry push us around, accepted shoddy work from our academics and failed to share our insights with the world when it counted. We deserved shame. In 2005, we knew. We all knew. Who knows if they would have listened, but let's be honest. We did not try. Shame on us. In no small part, Financial Planning 3.0 has to do with ensuring such shame does not repeat. At the very least, we should be the early warning system for bad product, not silent accomplices to fraud.