Our profession's history is a story of mass migration away from, and then back to, what we might call real planning. In the 1970s, giving away plans was the hot new way to sell life insurance. In the 1980s, planning experienced a brief resurgence before people discovered that the real money could be found selling tax shelters. After another resurgence in the 1990s, the profession drifted into the assets-under-management business model. There was a brief revival when the tech bubble burst, and we're in another one now.
It's encouraging to see how the core planning service has become better, stronger and more consumer friendly with each revival. These days, we're customizing technical advice and services directly to a client's goals, an improvement over the retirement and estate planning focus that came before, or the textbook-size plans of the 1980s.
PLANNERS WHO STRAY
If history is any guide, the profession is once again about to stray off into an altogether different business model. This pattern is too well established for us not to take it seriously.
Why does this keep happening? If we really want to fix the pattern then we have to face some hard facts about the profession and recognize what drives people away from its core service.
Hard Fact 1: Financial planning, done right, is difficult work.
How difficult? You try to get people to open up about the most private, intimate subject in the world (more so than sex), and educate them in all the necessary complexities of investing, taxes, estate planning, saving, budgeting and daring to dream about the things that are close to their hearts. Then you do something even tougher: help people change their behavior in positive ways. The technical work is getting easier all the time, due to new software innovations. But it will never be easy to provide good financial planning service. Something else - anything else - always will be easier.
Hard Fact 2: Financial planning has never been an especially lucrative profession.
Let's face it: Most of you, in normal times, could be making a lot more money selling insurance or simply managing assets than by charging a fee for comprehensive planning services.
THE HAZARDS OF UNDERCHARGING
I think this is partly our fault. Many planners have a social work mentality. That is, they prefer to undercharge for their services, and don't manage their own business as carefully as they tend their clients' financial circumstances. As a result, the profession doesn't have enough prosperous role models. Making the problem worse are the organizations that give planning away so they can sell something.
The combination is clearly dysfunctional. When planners look at the best service providers, they see a chronic lack of prosperity. Then, when they try to charge appropriately, they face competition that gives away some version of their services. Is it any wonder planning professionals are easily lured into other businesses?
Hard Fact 3: Financial planning, done right, is always confrontational to the established institutions in the financial world.
If you sit on the same side of the table as your clients, then you are protecting them from high expense ratios, high trading costs, excessive trading, soft-dollar arrangements and, of course, the rampant sleaze that is cheerfully incorporated into large corporate business models whenever nobody is looking.
You are an enemy to everybody else's profit margin and every marketing gimmick. As I see it, companies that spend the most on advertising and marketing hate you (there's no way to put this gently), and the planning services you provide.
Is there anything planners can do about this? First and foremost, I think you should take great pride in the difficulty of your work. Planning done right creates its own barriers to entry. Not everybody can do it, and those who can are scarce and precious and ultimately important to the world around you.
It's also time for planning professionals to charge appropriately for their work - and, in the bigger picture, to give themselves the same level of care that they bring their clients. That means you should find an excellent financial planner and go through all the life planning exercises of identifying your own personal goals and dreams and ambitions, and visualize your ideal practice.
