Updated Thursday, July 31, 2014 as of 11:45 PM ET
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He Said, They Said: Imaginary Planning Conversation Continues
Thursday, October 4, 2012
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The June 2012 issue of Financial Planning included a controversial column from industry expert, author and instigator, Bob Veres.

His "Stop Imaginary Planning" piece launched a vigorous discussion among financial planners. So much so, that at the FPA annual conference in San Antonio, Texas on Monday, an entire session was dedicated to continuing the conversation.

In a discussion moderated by Tom L. Potts, advisors Nathan Gehring, Lisa A.K. Kichenbauer and Joseph Pitzl, shared their reactions to the article.

Though Veres was not at the session, I shared with him some of the comments and themes that came up during the discussion. We have his response below.

The panelists seemed to agree that you like to be a little controversial from time to time.

"Bob likes to lob a grenade every once in a while and let us duke it out," Kirchenbauer said.

I prefer to think that I'm good at starting rich, important conversations in the profession, but this actually sounds more like the truth.

The main point the panelists made and seemed to agree on is that we have not defined what financial planning is, and therefore it's very difficult to define what it isn't or keep out or "punish" those who aren't doing it. This comment from Gehring sums it up well:

"The reason financial planning exists is to help people make good decisions. But we haven't decided what real planning is. How do you punish someone if you don't define what the terms are, if you punish them just based on your ideas?"

My first response here is, nobody is suggesting that we PUNISH anybody.  What I suggested was that people who are primarily doing asset management work call themselves something other than financial planners, and people who drift from the hard work of giving planning advice think twice about the wisdom of it.  

Similarly, Pitzl said he doesn't believe there is one right way, one true way to do financial planning.

Of course, I agree.  This has the feel of reducto ad absurdum.  We are not arguing about a "true" way to do financial planning, but about doing financial planning work for clients, rather than abandoning it for a more (temporarily, at least) lucrative service model.  I find myself wondering: Does Joe think that the profession has to come up with a "true" financial planning process and methodology before we can talk about who is and is not a financial planner?  Do plumbers have to have one "true" process for fixing your plumbing before they can hold themselves out as plumbers?

Kirchenbauer also argued that you must be doing comprehensive planning and coordinating all aspects of a client's financial issues if you are calling yourself a financial planner.

I agree.  We don't need to define what financial planning is to expect financial planners to address some universally-recognized financial issues in their service model.  I would include retirement planning, broader goal planning (including educating the kids, if there are any), estate planning (not just estate tax planning, but addressing how assets will be distributed and what legacy the client wants to leave, to whom), tax planning, investment advice, personal risk management (including life, disability, LTC, umbrella coverage and health insurance) and one-offs like charitable planning and planning for special needs kids.  There may be more, but if those issues are carefully scrutinized with a professional eye, and coordinated into a set of recommendations that takes them all into account, then I think we can say that the consumer received financial planning services.

An interesting comment from Gehring was that the compensation and business model a planner uses doesn't matter as far as whether they are doing financial planning or not, what matters is what they do.

For this discussion, I think he's right.  There's a broader discussion about who is a true professional, and whether doctors, lawyers, accountants, plumbers etc. can work on commission from the sales of products they recommend or use, and still fit under the "professional" definition.  But that really isn't what we're talking about here.

An audience member said it felt like the article was attacking people who make a living selling.

If they make a living selling, then by definition they aren't providing objective, comprehensive advice about a client's financial goals.  The analysis is being done to serve their own sales goals, not the client's--and I would argue this even if they are recommending a variety of products and choosing what they consider to be the best one; the client will inevitably receive a recommendation to buy a commission-paying policy.  

Nobody is attacking them; selling for a living is an honorable profession in our economic system.  But please don't call yourself a financial planner if you are really a mutual fund marketer, or a life insurance salesperson, and this is where your expertise lies.  I strongly believe that everybody in the financial services world should disclose their agenda for the relationship going in, so the consumer can recognize the boundaries and conflicts inherent in the advice they are receiving.  I've always wondered why life insurance agents considered that proposal to be an attack, unless they don't believe there is real value in the products they're recommending.

(7) Comments
Personal finances includes both assets and liabilities. It involves income and expenses. Somewhere along the way, our clients will need help with all of those things. I just attended the FPA Experience 2012, which was another very well organized event. No information was provided in any of those sessions that would help planners better address their clients' debt management or budgeting efforts. I really don't have a problem with that. If I need asset management or an insurance product I can contact a planner. If I want to talk to someone about debt elimination, I can check out Dave Ramsey's Financial Peace University. That's just the way it is. Dave probably considers himself to be a planner as well.

Richard

Posted by Richard G | Friday, October 05 2012 at 9:44AM ET
True story: One time Bob Veres and I were stuck in a car on the way to see Cheap Trick play the Star Plaza and he saw this little old man in the middle of the road selling Kiwanis Peanuts. The guy must have been 80 if he was a day, and he looked like he was going to have a stroke. Bob shook his head, pulled the car over, got out and sold every bag of peanuts for the poor guy. Even with the detour, we still made it before they played "Surrender." That man is a saint.
Posted by William W | Tuesday, October 09 2012 at 7:30PM ET
Thanks for the comments so far.
Posted by Samantha A | Wednesday, October 10 2012 at 11:37AM ET
RE: "addressing how assets will be distributed and what legacy the client wants to leave, to whom), tax planning, investment advice, personal risk management (including life, disability, LTC, umbrella coverage and health insurance) and one-offs like charitable planning and planning for special needs kids."

I tend to agree with the above that comprehensive financial planning is rarely done since 1. the bulk of planners are using some software product that bypasses actual real thinking in order to simply increase AUM, 2. real intensive planning takes a LOT more than a designation will ever provide. Even a planning degree does not prepare a planner for one of the most challenging of professions. That is because, as differentiated from other professions, the issues keeps changing radically (think estate tax, risk of loss, indexed annuities and life insurance, inverted yield curve, fiduciary duty, correlations, etc., etc., ad infinitum) and very few will unilaterally spend the necessary and inordinate time to retrain their minds and expertise. One can demand various continuing education but such advance in training will not/cannot come from those who have nothing more than a designation to begin with. Think also of an RIA. A fiduciary duty backed by what? Most RIAs simply converted the 'intellectual capacity' of having passed the Series 7 exam as their vaunted position to delve into sophisticated areas by generally calling themselves 'financial advisors' et al. For the uninitiated, no broker has been taught the fundamentals of investing (even diversification).

Posted by Errold M | Friday, October 12 2012 at 9:59AM ET
Therefore we have LARGE elephants in the room- which Veres and all others unilaterally dismiss: the lack of knowledge and legality. A RIA has nothing, by her/himself, as a prerequisite to being anything more than a bad securities advisor. And they are not required to take continuing education (which would do how much good just backed by a series 7?) Secondly, for those attempting comprehensive fee planning, they are illegal. And with support, acceptance with indirect- even direct statements- to act illegally on issues requiring advanced knowledge and licensing. No one is saying that fee planners are not already RIAs with the SEC or state. Easy enough to get (though with lots of time for paperwork). What is missing- in most states- is the requirement for licensing of insurance advice for a fee. I will assume readers have a compete agreement to the responsibility of being legal if one wants to be a fiduciary. For over a decade, there was only one properly licensed CFP in California who was fully licensed and legal to offer such advice. Why? Because the state exam to cover fee advice was very hard- much harder than anything a CFP had personally encountered. So the CFP Board, NAPFA, California and American CPA Society, FPA and more just inferred- or even directly stated- that members keep acting illegally but just keep quiet about it. (That the state did not have the financial resources to subsequently enforce the law in no way diminishes the requirement to act legally. See moral egoism.) So you can have all the comments about what or who is a financial planner. But underlying all is the 'effort' to impose a fiduciary duty with just words but not deeds.
Posted by Errold M | Friday, October 12 2012 at 9:59AM ET
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