When money changes, life changes.
When life changes, money changes.
—Susan Bradley, CFP

Among the many unseeded gaps in our garden of knowledge, perhaps none is more obvious than our abiliy to anticipate and manage change. The frightening truth is that financial advisors work in a variable world that seems to make comprehensive, long-term planning difficult. It is a world that demands flexibility, anticipation and preparation and simply eludes decimal points. In architecture and engineering, blueprints might represent the apex of predictable, implementable “planning.” But financial plans are in a different universe entirely.

Our clients’ circumstances can change over years or within minutes. So any notions we might have of reliable financial predictability for our so-called “retirement years” are frankly laughable. We can prepare but we cannot know.

And one of the ways for us to become better planners is to better understand change. That means understanding how the concept of money itself has changed as well as understanding its fit in modern culture.

Change, Evolution And Modern Money
Money has always been mutable. It has become the primary vehicle of human value exchange. As such, its roles in both social organization and our life choices are critical and extensive. How do communities of various sizes functionally engage in acts of sharing and self-organization? How do we effectuate our choices? How can we trade our best stuff—namely, our labor, brains, talents, property, etc.—in ways that make sense and serve to enable mutual and collective benefit as well as individual reward?

Ever since some notion of money was conceived some 5,000 years ago, it has constantly evolved. A dizzying array of items have served as money. Not just gold, silver, currencies and precious stones, but objects such as liquor, tobacco, cowry shells, miscellaneous crops and seeds, cattle, pelts, wampum … even the large circular rocks of the Yap Islands.

Just take a look at money’s history within the United States. Before World War II, the United States was a country dominated by the agrarian, extraction and fishing industries. For the country’s first 77 years, “money” operated in a state of anarchy best described in Stephen Mihm’s aptly titled book A Nation of Counterfeiters. Ostensibly on the gold standard, the country wobbled between Alexander Hamilton’s elegant visions and Andrew Jackson’s populist intransigence with respect to a national bank.

“Retirement plans” mostly consisted of family and property. Trading was often done with tobacco, booze, wampum and the like as well as with bills issued by local banks, often of questionable provenance. (Imagine being a financial planner working with these things.)

The Civil War brought substantial challenges to the nation’s money supply as the United States sent its gold to France in exchange for armaments while floating “greenbacks” as an unbacked currency within its national boundaries. It was a rich country but it didn’t have much in the way of “money” in everyday life.
After the Civil War, the country ostensibly went on the gold standard, but faced conflicts with populists promoting “free silver” and bimetallism. (Hearken to William Jennings Bryan’s famous speech in 1896: “You shall not crucify mankind upon a cross of gold.” Originally, L. Frank Baum’s 1900 book The Wonderful Wizard of Oz, with its yellow brick road and silver shoes, was considered a monetary allegory.)

The national income tax was instituted in 1909 and the Federal Reserve was birthed in 1913. The Great Depression began in 1929.

Throughout the 1930s, money was, at best, scarce. At worst, it was nonexistent. Then came World War II, and after that the United States threw massive amounts of money and energy at repairing Europe and Japan while facilitating moves from farm to city for millions of men and their families.

The G.I. Bill brought millions of men into skilled office jobs where they were paid in money. This all set the stage for money’s emergence as the most powerful and pervasive secular force on the planet.

Traditionally, money has served three functions: It has facilitated the exchange of goods and services, served as a tool of accounting and functioned as a storehouse of value.

To be “money,” it must satisfy several requirements. It must be relatively scarce yet readily available and accessible. It must be effectively uniform, resistant to deception, counterfeiting and fraud. It must be difficult to reproduce cheaply yet be comparatively easy to transport and transmit. It must possess intrinsic value or utility. Perhaps most importantly, it must be subject to agreement and accord.

Today, of course, money is even electronic and virtual. This evolution has left us something physically intangible, overtly symbolic and culturally embedded into the fabric of modern life. It has been transformed from something that can be held into something that can be hacked. In fact, I suggest that “money” has added a public utility type function we have yet to name.  This utility function gives it essential roles outside of its traditional uses. Namely, it provides most folks with their access to food, shelter and clothing in manners wholly unprecedented in premodern cultures. In those cultures, money skills were not the essential survival skills they have come to be in our times.

What This Means For Us
This brings us to the modern era and the present state of financial planning. Because the current idea of money as a universal, everyday utility is not very old, the work we do is relatively new as well. In fact, it was essentially unprecedented before the 20th century. And we are still trying to figure it out.

Given these changes, the skills that got us here are not likely to be sufficient to meet new challenges. The nature of value exchange and the roles of money in society have undergone a metamorphosis and disruption. And these will change the culture. When culture changes, money changes.

Henceforth, we can anticipate substantial changes to service offerings, product sales and prospecting techniques. Personally, I expect to see the financial planning profession move away from money management and toward discussions with clients about their profound relationships with money.

The people that most need to do advanced prognoses are financial planners. We are the ones with the crystal balls. We are the ones anticipating the twists and turns of an individual’s life journey interlaced with money. Most people will lack the tools to work with it and won’t understand the demands it places on them or the history that brought it here. That means people will rely on personal financial advice to guide them throughout their lives.

While advisors probably need to be obsessively humble about our soothsaying capabilities, we can probably claim excellent fact-finding skills together with spot-on grasps of implications. As much as anyone, we operate in the terrain of the future.

Accordingly, I suggest we can add the term “futurists” to our self-proclaimed skill sets. Wikipedia says futurists include “authors, consultants, thinkers [and] organizational leaders,” and defines them as those “who engage in interdisciplinary and systems thinking to advise private and public organizations on such matters as diverse global trends, possible scenarios, emerging market opportunities and risk management.” Must financial planners all become futurists? Probably yes.