Much of what will happen in financial planning depends on which of the two guiding philosophies will prevail. It will depend on monetary and fiscal policies by governments and central bankers, tax policy, entitlements, safety nets, health care, etc.
Tim Kochis, one of the more erudite thinkers in our profession, in a March 3, 2010 blog entitled "Solving the Healthcare Mess," outlined the battle for hearts, minds and votes now before us. Where should major societal reforms come from? "Acknowledging the over-generalization," says Kochis, "one approach (Democrat) is to rely on a wise and benevolent government to provide, or at least catalyze, the solution. The other key philosophical approach (Republican) is to rely on private solutions, harnessing the aggregate wisdom of millions of participants' self-interest."
Kochis leans toward the latter philosophy, in sync with free-market economists of the Austrian school and the invisible hand made famous by Adam Smith. The Austrian school, thinking developed by Carl Menger, Eugen von Bohm-Bawerk, Ludwig von Mises, Hayek and, more recently, Murray Rothbard, was based on the study of human action, a method called "praxeology." They saw mathematical models and statistics as undependable, noting that real-world human actors are likely to alter behavior in response to government actions.
Austrians advocate individualism in studying and interpreting economic developments, preferring a spontaneous order guided by the price mechanism instead of governmental controls and the allocation of resources. Is that not the central argument about government spending, subsidies, entitlements and tax policy? Advisors seeking to clarify their thinking, and answer the questions of clients, would do well to study the precepts of Austrian economics. We live in a world dominated by Keynesianism, with roots in Fabian socialism.
On The Shoulders Of Giants
Consider the development of financial planning. It started with a few visionaries in the late 1960s and early 1970s who sought a different relationship between the providers of financial services and products and the consumers of those services. These practitioners were willing to show up, pay their own way to meetings, contribute to the conversation, take on responsibilities, complete assignments, generate white papers, lead and expand the vision.
All of the major trends in our profession were propelled by dynamic collaboration-one person's ideas stacked upon the thoughts of others, which, through experimentation, morphed into a new way.
Initially, we had to define financial planning and the processes and conversations that supported our value proposition. We owe much to the College for Financial Planning and the educational institutions that continue the quest for professional training. The movement toward fee-based and fee-only planning, asset allocation, assets under management and the applications of technology came out of thousands of hours of interaction among those who showed up for meetings and conferences, who deepened the conversation over coffee and cocktails and who dedicated time and talent to add to the documented treasure chest of ideas. We applaud those who have the courage to tell us what works and what does not, showcasing both failure and success.
To the gentleman who dropped his membership in the FPA: You are missing a great gift-the gift of presence. You are forfeiting the richness of possibilities that stem from engagement in the theater of future-focused thinking.
"Aha" moments often come from unlikely sources, at unexpected times. I have been involved for years in the FPA and predecessor organizations, attending conferences, vendor gatherings, broker-dealer conventions and media-sponsored meetings, and I found breakthrough ideas and my dearest friendships by showing up and interacting, the same as I do in my church, community and family activities. The fabric of life comes from whole cloth woven from loving, willing and enthusiastic involvement and servant leadership. Global travel is also part of the education as there are more international conferences.
The agora in ancient Greek cities was an open-air place of assembly and interaction. The forum was the Roman equivalent. The word "forum" is rooted in the Latin word fores, meaning door, and the word foris, meaning outside. Face-to-face gatherings, the modern agora, are doors to outside-of-the-box thinking. This is where we came up with new thinking about asset allocation and new ways of asset management, about value-added services within the financial planning process, about technology advancements, about financial life planning and more recently about health-care planning and the application of fiduciary precepts.
No one person can fathom everything that clients need to know. We are a collaborative society, drawing on allied professionals and specialists within our profession as a team. We cannot hope to deliver solutions in the best interest of our clients within a fiduciary mandate without a collaborative effort. How will you build your team if you do not expand your horizons?