Money is a mesmerizing mystery. Yet for all its charms and the abundant attention devoted to it, few can answer the question: “What is it?” Fewer still understand how it gets created. Or the various aspects of its nature. It seems to embody Winston Churchill’s description of the prewar Soviet Union: “a riddle wrapped in a mystery inside an enigma.”

It’s at the core of the financial planning profession, but the profession is still developing its own relationship with it. Still, financial planners, with their comprehensive skills and holistic understanding of people’s personal relationships with money, are in a unique position. Truth is, most folks need help relating to money; they need someone who can help them understand it. Accordingly, planners themselves need to thoroughly understand it—what it is and how it works for both individuals and collectives. I call this Financial Planning 3.0. 

This approach considers money not only from the outside in but from the inside out—from the perspectives of individuals, families and communities—in a stark contrast to macroeconomics and investment theory. And it treats money, appropriately, as the most powerful and pervasive secular force on the planet. It also treats financial planning as the most important profession of the 21st century. Financial Planning 3.0 posits a new “liberal arts” based on an academic discipline I am calling “Finology.” This all means thinking both historically and futuristically. How did we get here? Where are we going?

How We Got Here

Financial Planning 1.0 was birthed more than 46 years ago by visionaries who saw a need to bring multiple skill sets to money. At a time when some states banned a person from selling securities and insurance at the same time, these people saw that advisors’ personal relationships were key. These visionaries, convened by insurance salesman Loren Dunton, filled a gap by creating the College for Financial Planning and its product-oriented curriculum. With this, they generated the “CFP” designation.

Financial Planning 1.0 arrived just in time for the ’70s, when the world went off the gold standard and adopted fiat money as its norm. It was the end of a 25-year postwar period where money itself was turned inside out—a world where most folks were, at most, one generation removed from the land. A world of increased urbanization, shifting demographics and the mutual interdependencies and political tensions of a money-based culture. Inflation raged, housing prices and interest rates soared, and a scourging bear market shook the economic confidence of the nation. 

Baby boomers took center stage in this 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 sound 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 or great. Other products, maybe not so much (think tax shelters, penny stocks, limited partnerships and S&Ls).

This version of financial planning was hailed as the greatest product delivery system ever. Rewards were for “producers” (the ones with great sales numbers). They got the compliments on Monday mornings and the trips to Hawaii.

Later in Financial Planning 1.0, personal computers came to our desks. They turned out information instantly. We could crank out custom proposals and detailed analyses with impunity—selling it by the pound.

But after a while, we saw that there was more to money than just the right product. The people who had built planning thought aspirationally about it as an authentic profession. They realized that money was, in fact, an intensely personal subject. 

Thus came Financial Planning 2.0. In this, different practice models emerged as client-centric financial planners sought to cut or minimize their duties to financial product employers. Personal client management systems emerged. Computers and targeted software reduced planners’ needs to rely on these product companies. Many saw the conflicts of interest and the “two masters” problems inherent in these relationships 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.