Planning Emergence, Industry Conflict
This state persisted until financial planning emerged from the inspired imaginations of a handful of individuals. Initially, embryonic financial planning brought deliveries of different types of financial products within singular relationships. From there, miscellaneous visionaries foresaw our needs to develop and evolve financial planning into something much more profound and sophisticated than a one-stop financial product delivery system and sales tool. Namely, they foresaw an authentic profession working with individuals, their money and their choices in a world where money had become the most powerful and pervasive secular force on the planet. We still needed our relationships with Industry, but we could see that the implications of our work were so much more profound than just this.
It is worth noting and emphasizing this little unpublicized and unappreciated nugget: Industry did not conceive or create financial planning. Neither has it devoted much effort to planning’s evolution and development, not even to basic planning. It was individuals that did this work. Rather, industry continued to view financial planning as an efficient and productive marketing system, treating financial planners merely as minions. At the same time, either consciously or unconsciously, industry impeded the profession’s development through its emphasis on products at the expense of other issues relevant to people’s financial well-being. Suffice to say, these relationships have not always been virtuous or collaborative.
Let’s face it. Professions and industries do not necessarily play well with others. However, an authentic profession, such as medicine or architecture, has a raison d’être grounded in service and benevolence. In contrast, profit-making and risk management are a manufacturing industry’s primary motivations. Pharmaceuticals and building materials present excellent examples of this phenomenon. Simply put, an industry should not be attempting to circumvent the natural divisions between itself and a related authentic profession.
Unfortunately, this has not been the rule but the exception within financial services. For the most part, Industry has attempted to control the financial planning profession through relationships and agreements designed to give it substantial controls over the profession and its evolution. This has run the gamut from broker-dealer affiliations to such competitive restraints as agency agreements and arbitration clauses.
Although unaffiliated financial planning entered the arena in the 1980s, it is fair to say that there have been severe tensions between the financial planning profession, the financial services industries and those caught betwixt and between. Relationships have tended to resemble 19th century tenant farmer arrangements more than effective collaborations.
Regrettably, Industry has not been satisfied with a basic approach of simply providing products and productive working relationships. Instead, it has devoted substantial energies to confining financial planning to these profound limitations. It has devoted formidable energies to maintaining a legal environment that has protected it for decades: specifically, with arbitration, so-called suitability standards and the laws of agency. Since the interests of individuals constitute the primary concerns of a financial planner, this has been problematic.
Nowhere have the industry’s motivations been more evident than in its resistance to the Department of Labor’s new fiduciary standards. Certain sectors have worked overtime and applied considerable brute force through lobbying and lawsuits.
It is a conundrum. Financial planners need Industry in order to serve their clients effectively. But planners need to serve their clients first and foremost, not the bullying boss men of their product suppliers.
This is where we get to the inflection point. Changes will come. We need to be prepared to meet them head on.
Appropriately Aligned Relationships
I have no doubt the implementation of the DOL rules will serve as a major inflection point to change the relationships between Industry and advice providers. Likewise, I have no doubt that both companies and individuals who cannot adjust will be out of business in a short time. This is as it should be. Financial planners and financial services companies are not dealing in products that people generally understand or should even be expected to understand. Industry has too much power for deception and obfuscation in the process of product creation and delivery, and it needs to stand behind its creations and serve its end users with the utmost integrity or risk both legal penalties and public scorn. By extension, it needs to view its relationships with authentic advisors as both collaborative and virtuous, where the advisors have powerful and unquestioned first loyalties to clients.
It will be a different world, a world that will be built for the 21st century, not the 20th. As has happened with medicine, Industry would serve the profession and the profession would deliver to the public.
Our worlds will never be the same.
Richard B. Wagner, JD, CFP, is the principal of WorthLiving LLC, based in Denver. He is the 2003 recipient of the Financial Planning Association’s P. Kemp Fain Jr. Award, which recognizes a member who has made outstanding contributions to the profession. He recently authored Financial Planning 3.0 | Evolving Our Relationships With Money.