If you love someone, set them free.

If they come back they’re yours;

If they don’t they never were. 

—Richard Bach

The financial services industry is vital to financial planning in many ways. It provides financial products that meet the needs of the public, including our clients. 

Unfortunately, the industry has not recognized its limitations or worked to put itself in an effective position with respect to the financial planning profession. It treats planners like tenant farmers; it ought to be treating us like partners. In any event, the relationships between profession and industry need to be properly addressed and clarified.

Financial planning should be unique and unto itself. It ought not be the property or playground of others. It is unique, singular. An authentic profession in the making. 

The bad news is that industry continues to aggressively confuse and befuddle the public and employ non-fiduciary products and sales tactics. The good news is we are coming to a historic inflection point likely to generate momentous, seismic shifts in the relationships between these financial services industries and the financial planning profession. 

This has been spurred on by the Department of Labor’s imposition of fiduciary standards for retirement accounts. Weeping and wailing notwithstanding, our relationship with industry will never be the same.

We won’t necessarily be at odds. It means that our respective interests will be properly aligned. That will be a good thing, indeed.

Natural Growth

If financial planning is to reach and fulfill its potential, it must be given every opportunity to seek its own levels, paths and destinies. How else can we explore our possibilities or develop miscellaneous gardens of knowledge? Yet this is made most difficult so long as the financial services industries persist in generating confusion and trespassing on our turf. Moreover, it is demeaning, stultifying and infantilizing. I suggest it is time for industry to back off. With any luck, the changes being generated by the Department of Labor’s fiduciary standards will cause Industry to voluntarily reconsider its working relationships with the financial planning profession and our clients. It would be good for everybody.

This is about more than product sales. 

We all know the facts of life. Whether biological or sociological, lives begin with acts of conception. From there, the generated life forms witness development, then birth, then more development and, finally, maturity. Maturity is then inevitably met with miscellaneous disruptions, aging and eventual obsolescence, then death. So it is with human beings and our undertakings. And so it will likely be with the financial services industries. 

Right now, these industries are in their maturity and disruption phases. IMHO, they generally do a good job, especially in light of sales volumes and uncertainties. Yet, despite the daily realities whereby they are all duly occupied with the care and keeping of profoundly complex financial services industry products, they have all wanted to claim and control a chunk of what we are now calling “financial planning.” 

Shame on them. 

Financial Services Industries

History gives perspective. The “financial services industries” are defined in Wikipedia as follows:

“Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds and some government-sponsored enterprises.”

Today, Industry can be roughly summarized as banking, investments and insurance, plus their offshoots. Each of these sectors has developed in-house sales forces presented to the public under the guise of “financial planning” but actually serving as marketing arms. Note how the Wikipedia definition excludes businesses and professions serving single individuals one-at-a-time—financial planners, lawyers and accountants.

These primary financial services industries have intriguing and admirable histories. For example, banking dates back 4,000 to 5,000 years; investments and insurance are much younger.

In contrast, securities can only be traced back to the 11th century. In 1602, the Dutch East India Company became the world’s first publicly traded company. With greater resemblance to modern times, the 19th century witnessed stock exchanges becoming common throughout the world.

The life span of insurance in history depends on how you count. It is probably fair to credit its start with maritime insurance dating back to the Greek and Roman empires. However, the seeds of modern insurance were basically planted in 1688 with Lloyd’s of London—a coffee shop that became a business center for pooling and allocating the many risks of shipping. In so doing, it became a progenitor of the modern insurance industry. Lloyd’s continues to this day.

It might stretch the point, but the life insurance industry can arguably date itself to the Roman Empire and the burial clubs popular among Roman troops. However, life insurance as we know it today really began in the 18th century with the Presbyterian Synod of Philadelphia offering life insurance to Presbyterian ministers. Other forms of insurance also got their starts in the 18th century. Mutual companies developed in the 19th century.

Nonetheless, it was not until the 20th century that Industry evolved into the powerfully moneyed behemoth we have come to know and love. During this time, the financial services industries evolved new and effective risk management tools. Along the way, their actuaries, lawyers and sales forces generated some amazing products designed to help folks meet the financial demands, risks and opportunities of their lives. Notably, they developed enormous menus of insurance options, banking services and investment products. By spreading risks, they enabled both functionality and family security while providing cover for immense risks.

In so doing, postwar Industry became big, brawny and immensely powerful. Unfortunately, although it could develop complex products, it was just not very sensitive to the needs of ordinary folks. Each individual sector had its sales forces, but these were not integrated, comprehensive or individualized. Product delivery was anarchic, expensive and inefficient.

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