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.
Richard
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).