With the DOL rule in a state that is hard to describe and the CFP Board proposing updates to its rules, the topic of regulation has been on my mind a lot lately. I found myself referring to some of my prior writings in this publication, the Journal of Financial Planning and a few others. Despite the progress the financial planning profession has made, I was struck by how little has changed.

The professional financial planning community is still complaining about the same issues. These lamentations are warranted because these problems have not been solved.

First and foremost is public confusion. Actually, the public understands many of the essential concepts of financial planning but they lack protection from what they don’t want or need.

The subject of personal finances is full of unfamiliar terms, indecipherable disclosures, competing interests, conflicting information and a limitless number of opinions about what is best. That’s confusing. However, people know decision-making involves assessing trade-offs because they know one cannot spend a dollar on one thing, say taxes, and use that dollar for something else, like saving.

The need for financial planning is intuitive for most. If we take the latest definition of financial planning from the CFP Board’s proposed standards and ask, “Would you benefit from a collaborative process that helps maximize your potential for meeting your life goals through financial advice that integrates relevant elements of your personal and financial circumstances?”, the honest answer from most people would be “YES!”

Granted, that language doesn’t exactly roll off the tongue but that doesn’t matter. Use the old definition and I think most would still answer “YES!”

Financial planning is an inherently good thing. Done well, it can be transform a family’s life for the good. The classic six-step process makes sense to people. It’s the specifics and the trade-offs that are hard for them to assess, hence their need for financial planners. Unfortunately, our regulatory structure can make finding a real planner challenging.

I’ve been advising clients for over a quarter of a century. I’ve been involved deeply with the development of the profession. I can make a very strong case I know what is what and who is who when it comes to financial advice. Yet, when I hear someone is a “financial advisor,” I can honestly say I do not know what they do for a living. 

They could work for a brokerage, an insurance company, a bank, directly for clients or a combination of any or all or none of those. Now, I know what questions to ask and what to look for to figure it out, but if I can’t tell right away based on that title, or many similar sounding titles, how is Joe Public supposed to know?

The public shouldn’t need to know anything to figure it out. Personal financial advice is of such importance that regulations should be sorting this out for them. Alas, that hasn’t happened.

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