Private wealth managers, Horan says, tend to focus on clients with between $1 million and $5 million in assets. Horan says the demise of defined-benefit plans and rise of defined-contribution plans has over the past 30 years created a greater need for advisors to high-net-worth individuals, and the need has accelerated as more baby boomers approach the end of the accumulation stage of their wealth and move into the distribution stage. Horan says another factor that brought more CFAs into the private wealth arena was the financial crisis of 2008. The crisis resulted in the layoffs of many CFAs and they have since moved into advising individual clients. "A lot of talented investment professionals were looking around saying, 'How will I use my skills?'" Horan says. "They see a need among private individuals."
The rise of the FSI, IMCA and the CFAI, and the FPA's concurrent slide in membership, may only be short-term trends. They may well be the effects of the recession. But financial planners should take note. Because the rise of these other groups may in fact be a signal that an underlying problem exists in the way financial planning is applied in business.
Financial plans have always been a loss-leader for independent advisors. Many advisors might opt to sell their services by emphasizing the holistic approach of a comprehensive financial plan or by giving away the plan or discounting its cost drastically as part of an ongoing portfolio management program. Or they might only offer "modular plans" dealing with one particular aspect of an individual's finances, such as college funding or retirement. The financial plan is offered because it is a sound approach, but most planners actually get paid for managing assets and not for financial planning.
Financial planning has been dominated over the past 15 years by high-minded entrepreneurs who have achieved success in their practice and who have good intentions but may not always be as practical as they could be when it comes to creating a business model that can be embraced by a wide range of professional advisors. The refusal of the CFP Board of Standards to give continuing education credit for sessions dealing with practice management, business and marketing is an example of how some decisions can shortchange planners by not preparing them for real-world planning applications in a business setting. It appears that advisors are increasingly turning not to the FPA for answers but going elsewhere to get the support they need.
Editor-at-large Andrew Gluck, a veteran financial writer, owns Advisor Products Inc., a marketing technology company serving 1,800 advisory firms.