Depending on how you define it, the modern profession of financial planning is perhaps 40 years old. A persistent debate among planners - and, increasingly, on Capitol Hill - is how to turn the industry into a formally recognized profession with the kind of clout, credentials and protections afforded to the medical and legal fields. The answer to that question will come only over time.
But the form it takes will be shaped in no small part by the efforts of farsighted leaders within the industry. We at Financial Planning honor six of these individuals with our third annual Influencer Awards. We considered exceptional nominations in six categories: Lifetime Achievement, Industry Contributor, Practice Management, Tech Innovator, Portfolio Innovator and New Generation Contributor. After debate, discussion and research, we made our choices and came to realize that each of these leaders, in his or her own way, is making substantial contributions to the evolution of the entire industry, to this ultimate goal of greater professionalization.
Outgoing FPA Executive Director and CEO Marv Tuttle, winner of the Lifetime Achievement Award, and former NAPFA chairman and Modera Wealth Management principal Tom Orecchio, winner of the Industry Contributor Award, played instrumental roles in creating the Financial Planning Coalition, which is composed of the FPA, CFP Board and NAPFA. The coalition has found important new influence in Washington as debate continues about who should regulate the financial services industry.
Julie Littlechild, through her firm, Advisor Impact, continues to popularize her research methods to help planners systematically get reliable feedback from their clients - a practice that remains rare among planners but is becoming more prevalent.
With his popular planning software program, MoneyGuidePro, Bob Curtis, the founder of PIE Technologies, has simplified the planning process for planners and clients alike, and has helped to convey planners' operations to the cloud.
Through his work in advocating for and recruiting young planners, Caleb Brown is helping to bridge a troublesome gap that persists between established advisors and the next generation of planners eager to secure a foothold in this complex and multifarious field, where barriers to entry have grown as scale has become more important.
Finally, the economist Wade Pfau is bringing new academic discipline to an industry that sorely needs empirical research into some of its basic assumptions. Pfau's research has cast serious doubt on the long-held belief that 4% provides a safe withdrawal rate from retirement savings.
We suspect that reading about this year's Influencers may be a bit like reading tea leaves. In their collective work, you begin to glimpse the future of this evolving profession.
Lifetime Achievement Award: Marv Tuttle
Telling the Industry's Story
In a three-decade career with industry organizations, an outgoing veteran has helped to steer the planning profession to political significance.
As a sign of the relative youth of the planning profession, consider this: When Marv Tuttle, the departing chief of the Financial Planning Association, first joined one of its precursor organizations in 1983, he didn't understand the very profession he was hired to represent.
"I really had no clue what financial planning was," recalls Tuttle, who became director of communications for the Institute of Certified Financial Planners, which joined with the International Association for Financial Planning to form the FPA in 2000. "I quickly learned that the leaders of ICFP were dedicated to developing a profession based on high standards of ethics, education and experience."
Much has changed since then, and Tuttle has been at the heart of much of that change. For his devotion to developing and expanding the planning profession over three decades, Tuttle is the recipient of this year's Lifetime Achievement Award. The recognition comes in the same month that he steps away from the helm of the association. His last day is Oct. 2, at the close of the FPA's annual conference in San Antonio.
"No one has been more devoted to seeing the industry develop," says writer Bob Veres, the 2011 Lifetime Achievement winner. Last year, in Veres' FinancialPlanning column, he criticized Tuttle for not prevailing more decisively in a variety of internal FPA debates. Later, however, he added praise for Tuttle, calling him a "champion of what's right and a stalwart opponent of what's wrong" in the profession, adding that "he is one of the few people in this business who has a clear idea about what the planning community needs to do in order to become a true profession."
That goal has driven Tuttle from the start. "We are still working to advance the notion that financial planning should be a recognized profession through regulation by government," Tuttle says. "The terms 'financial planner' and 'financial planning' are often abused by those who have not gone through the unique training and education for the delivery of professional financial planning services. The public deserves clarity as to what financial planning is and who is qualified to be a financial planner."
Tuttle can point to a string of achievements that increase the prospect of this happening.
In 2000, he toiled behind the scenes to promote the merger that created the FPA. He saw the Journal of Financial Planning through several major changes, including broadening the focus of its content in 1987 and the addition of advertising, combined with a new bimonthly publication schedule in 1996. Unique because of its peer-reviewed process, the Journal continues to be an active forum for planners and academics to incubate new and ground-breaking ideas about investing, practice management and retirement income.
More recently, Tuttle helped to bring the Financial Planning Coalition into being in 2008, along with this year's Industry Contributor honoree, Tom Orecchio, the former head of NAPFA. Composed of the FPA, NAPFA and the CFP Board, the coalition was born in the aftermath of the 2008 financial crisis as a means of unifying the disparate voices of planners on core issues for the profession.
The coalition's importance can't be overestimated. It gave the member organizations more clout on the Hill during the debate on the Dodd-Frank proposals that were instituted after the meltdown and the Bernie Madoff scandal. That louder voice proved important this year when Rep. Spencer Bachus, an Alabama Republican, introduced a bill in the House that could open the way for all planners to be regulated by FINRA, a prospect opposed by many independent planners. Due in part to the coalition's lobbying, legislators have tabled the debate, at least for now.
"With a larger voice of approximately 75,000 planning professionals," Tuttle says, "we were more openly received, not only by the regulators, but it was the first time in the history of financial planning when the doors were open to us to spend time with legislators to tell the story of financial planning."
Going forward, Tuttle hopes to see the CFP designation grow as the professional mark of choice for financial planners. He also advocates the adoption of a fiduciary standard in which all planners are trained to serve the best interests of the public.
His passion for that last issue may wind up keeping him at the FPA in a less-demanding role. After taking a few months off, he says, he would like to find a way to support planners to devote more of their time, on a pro bono basis, to help more members of the public.
"I'm not going away," Tuttle says. "I'll just come back in a different iteration."
Industry Contributor Award: Tom Orecchio
The Strength of Numbers
At a time of crisis, the head of an industry group took the difficult step of joining with traditional rivals in common cause.
In August 2008, planner Tom Orecchio played a key role in putting together a meeting that few in the planning community ever thought could happen.
The fire sale of Bear Stearns five months earlier had sent a powerful signal that the world was changing. As the chief of NAPFA, Orecchio wanted to help shape a solution to the still-unfolding crisis that would see Lehman Brothers declare bankruptcy within weeks and Madoff's shocking Ponzi scheme come to light.
It was at this point that Orecchio sat down with two leaders whom he had been led to see as adversaries: Nick Nicolette, then-president of the FPA, and the CFP Board's new chief executive, Kevin Keller. Together, the three sought to find enough common ground to speak with one voice. The result was the Financial Planning Coalition, an alliance that has played a critical role this year in advocating on the Hill for regulatory reforms to the industry.
"Normalizing their voices was an act of singular courage," Veres says. "NAPFA was the hardest group to figure out how to bring to the table, and Tom made it happen."
Orecchio recalls that he took plenty of flak for his decision from within the ranks of NAPFA. But he was surprised to discover that Nicolette and Keller - from whom he also had expected resistance - made it easy. That's because, like him, they had come to believe that speaking with discordant messages was getting them nowhere in their lobbying efforts. They needed the strength of numbers.
At their first meeting, the three leaders agreed that "when we strip away some of that baggage, our three entities probably have more in common than we have in difference," recalls Orecchio, who runs the planning firm Modera Wealth Management in Westwood, N.J.
Not that they believed they could ever agree on everything. They steered away from hot topics like compensation models. That topic still divides NAPFA members, who must hew to a strict fee-only requirement, and the FPA, which is neutral on the topic of compensation.
The easiest issue that the three could come together on, Orecchio says, was lobbying for greater professionalization of the industry. They also decided that if they succeeded at quickly ensuring the passage of new regulatory standards for planners, the coalition probably would disband. He adds that this decision now seems overly optimistic.
Although Orecchio stepped down from NAPFA in 2008, he continues to watch the coalition's progress and feels it still has much to contribute. The profession will evolve, he thinks, as planners keep their focus on what's best for clients and stop arguing over "all the other nonsense" like business models and methods of payment.
Practice Management Award: Julie Littlechild
Giving Clients a Voice
Some planners have changed the way they interact with their customers, based on information about what clients really value.
Most clients come to planners for superior investment performance, right? Well, not always, as Julie Littlechild, the winner of this year's Influencer Award for Practice Management, can tell you.
Littlechild, the founder of Advisor Impact, has all but pioneered the process of regularly and systematically surveying clients of advisory firms. Her aim is to discern - precisely - what consumers value and don't value in their relationships with planners. Though it is common in only a minority of advisory firms today, the practice of seeking regular client feedback is increasingly gaining traction.
"Julie was the first to introduce the concept of client loyalty combined with tools that helped run a financial planning practice," says Mark Tibergien, CEO of Pershing Advisor Solutions and a member of Alpha Group, the influential planner study organization. "The insight she has provided to the financial planning profession for almost 20 years [has] changed the way many advisors interacted with their clients."
Littlechild, who estimates she has consulted with several thousand advisors, stumbled into her career after completing a business degree at the University of Toronto in the early 1990s. In her first job, at a small firm, she researched the practices of the top-producing RIAs in North America. This afforded her a window into the operations of top producers in the still-young profession.
"At the time, practice management was a very nascent industry," Littlechild recalls. "Everything was about marketing, but as advisors were growing [their practices], they were asking how do they manage growth. Once I struck out on my own, it became quite clear that they didn't have input from clients.... To me, if you are going to build a great business, you need to build great client intelligence."
To provide that, she started Advisor Impact in 1998. The firm now has offices in London, New York and Toronto, serving both RIAs and broker-dealers. By speaking broadly about her findings and releasing research reports, Littlechild has had an impact far beyond the scope of her own client base, her admirers believe.
One happy discovery of her work, she says, is that most clients are satisfied with their planners. "Often advisors will say, 'I'm thrilled with the results'" of a survey, Littlechild says. Beyond that initial reaction, however, they are often surprised to discover that their clients may not value aspects of their practice - like client appreciation events or fancy websites - that represent substantial investments of time and money.
Asking clients for specific feedback lets planners know where to focus their energy to effectively generate growth, she says. "What's surprising," she has found, "is how much opportunity they uncover."
Tech Innovator Award: Bob Curtis
Making Planning More Intuitive
MoneyGuidePro software was the first to take planners to the cloud, and it aims to make the work process more intuitive.
Back in 2001, the term "cloud computing" hadn't yet been popularized. But that was the year when Bob Curtis, founder of PIE Technologies, which makes one of the industry's most popular planning software programs, MoneyGuidePro, figured out that planners could use the Internet to liberate themselves, and their clients, from the desktop.
"The Windows environment that had evolved around financial planning software was based very much on an old accounting model," says Curtis, whose program would become the first planning software offered on the cloud. "It had evolved into a very complex method of planning and it was not very effective. So we saw the Internet as a way to really change that, to create something simpler, easier to distribute and maintain. The idea was that you didn't have to use it only in your office."
Not that this advantage was an easy sell at first. But Curtis, who had developed his first planning software for the brokers in the B-D firm he used to run, stuck with it. Five years ago, the notion of cloud computing had become more common and helped convince more planners to give MoneyGuidePro a try.
"They had this misconception that it's safer to store data locally," Curtis says. "Now, it's flipped, and if your data is not in the cloud, you see it as a real disadvantage."
The cloud isn't MoneyGuidePro's only feature. The program also alters the planning process for its users by focusing on clients' goals, as opposed to crunching vast amounts of data, much of it based on speculative forecasts.
"We saw the most important factor in planning to be people's hopes, dreams [and] fears," Curtis says. "Our focus has been on goals. So we do far less data, far less complexity and try to engage the client more fully in the planning process."
The ease and simplicity of the program has helped to make it the most popular planning software in the RIA space, with a market share somewhere north of 40%, according to multiple surveys. Though his firm also works with large B-Ds like Morgan Stanley Smith Barney and Raymond James, Curtis says he can't estimate his program's share of those and other markets that make use of it.
"We are not trying as a company to [capture] the biggest market," he claims. "We want the right kinds of customers who believe in our kind of planning and want to have long relationships with us."
To that end, Curtis says the company will continue to refine its program in response to input from planners and other users. Overall, he says, his goal is to make planning more intuitive and even fun. "It shouldn't be like going to the dentist," Curtis says. "It should be an enjoyable process."
Portfolio Innovator Award: Wade Pfau
Challenging a Long-Held Belief
A data-crunching economist has raised serious doubts about the safety of following the widely followed strategy of withdrawing 4% annually from retirement savings.
One of the nation's most influential voices in portfolio innovation right now isn't a planner at all, but an economist based halfway around the world. From a perch in Tokyo, Wade Pfau, a native of Iowa, began two years ago to release a veritable barrage of academic articles about retirement investment withdrawals. Recently, he released findings that the long-accepted 4% retirement withdrawal rate used by most planners today may be "surprisingly risky."
For his data-driven contributions to the question of how to best secure the retirements of older investors, Pfau, an associate professor at the National Graduate Institute for Policy Studies in Japan, is the recipient of this year's Portfolio Innovator Award.
"Wade is a breath of fresh air and a boost to the financial planning profession," says Dan Moisand, a Florida planner who also has written on retirement. "It seemed like much of the research about retirement income had gotten stuck in a rut examining safe withdrawal rates. Wade broke through that to look at the puzzle from different angles - safe savings rates, safe retirement ages and the applicability of utility theory, to name just a few."
In his research, Pfau points out that the 4% withdrawal rate is based on the experience of the U.S. markets during rapid growth in the 20th century. "That's sort of a unique time in world history when the U.S. grew to be a world superpower," Pfau says. "It's based on some rather optimistic assumptions."
Pfau has reexamined the broader conclusions of the seminal study that the influential California planner William Bengen published in the Journal of Financial Planning in 1994. The study produced Bengen's "safemax" criterion of a 4% withdrawal rate from savings in retirement, based on an assumption of 30 years of retirement.
Pfau reexamined this conclusion using data from 17 countries. "From an international perspective," Pfau writes, "the 4% real withdrawal rule has simply not been safe." According to Pfau's research, it would have provided safety for only four of the 17 nations included in the study.
Even Bengen has become an admirer. "Wade's work is, in my opinion, among the best and most provocative in the profession today," he says. "He is continually exploring new angles to the topic of retirement funding and produces eminently useful results."
Pfau, 35, the father of two young children, discovered an interest in global pension plans, like Social Security, in his early twenties. "I just started out with my own curiosity in doing my own retirement planning," he says.
He researched prospective reforms to Social Security, and when he was 24, he did an internship at the Social Security Administration in hopes of one day becoming a government economist. Instead, after getting his doctorate in economics at Princeton, he went into academia and began contributing to the still-new academic field of financial planning. One strategic advantage to this career track, Pfau discovered, is that the peer-reviewed Journal of Financial Planning published his papers in about three months versus a typical wait of one to three years for other academic journals on economics. Now, Pfau's schedule brings him back to the U.S. regularly for speaking engagements. In August, while on vacation with his family in Des Moines, he spoke four times at conferences and universities around the country.
Financial planning "is a newly emerging field and a lot of rules of thumb, like the 4% rule, really need to be under more scrutiny," Pfau says. "It's interesting that there's a hole in the knowledge, and it's really nice to be able to fill that."
New Generation Award: Caleb Brown
Opening Doors for Young Planners
Disheartened to see so many new planning grads leave the field after not finding jobs, one professional is determined to help them stay.
After graduating with a degree in personal financial planning from Texas Tech University more than a decade ago, Caleb Brown used to get funny looks from the older planners at FPA conferences. "People didn't understand what younger people were doing there," recalls Brown, the president of the FPA's NexGen networking group for planners younger than 36.
And forget about the sessions at the conference itself, he says. "There was nothing on career tracks, nothing on compensation, nothing on succession planning or mentoring."
That lack of understanding of young planners propelled Brown to take over NexGen last year. That came on the heels of his founding the FPA Career Day program, which he started at his Dallas chapter and has been replicating around the country. He also developed the inaugural Planning Essentials Track for the FPA national conference and became a member of FPA New Professionals Advisory Council.
"Caleb's work will be integral because he is one of but a few people dedicating his work to the integration of new planners to existing firms," says the FPA's president-elect, Mike Branham. "I personally adopted his structure for the Career Day in Minnesota, which became the second FPA chapter to offer such an event. FPA Career Days are now a viable way for firms to gain access to many young applicants in an efficient manner."
At the end of 2009, Brown ceased work as a full-time planner and co-founded New Planner Recruiting, which helps place young planners in firms around the country. The firm started finding positions for planners in 2010. It's a tough job. The firm has placed just 15 planners so far.
"My clients are entrusting their businesses, careers and lives to me, and this is a responsibility I take very seriously," Brown says. "So I stop at nothing to find them a good fit."
He describes the challenge as follows: "Half of the day, I'm talking to firms saying there are no candidates out there, and the other half of the day I'm talking to candidates saying there are no jobs."
Brown says he remembers how difficult it was for him and his fellow Texas Tech graduates to find work in 2001 and 2002 after the dot-com crash. Brown eventually managed to get a job at an RIA, where he worked for five years. But many of his classmates weren't as persistent. Some left the industry to become teachers. Others went on to sell insurance or to work in banks.
The drain of talent left him disheartened. "I just thought, there's got to be a better way than this," Brown recalls. "I thought, we really should have kept these people in the industry."
Certainly, they are needed. If the 206,800 planners that the federal Bureau of Labor Statistics counted in 2010 were to serve all of the 223 million Americans older than 20, each would have 1,080 clients.
Brown's recruiting firm was born in the crucible of another downturn, in 2009, when the market for new planners wasn't strong, he says. But he believes he's on track soon to increase his placements to one a month.
Audrey Grubman, the founder of Grubman Wealth Planning in Berkeley, Calif., says she was astonished by Brown's patience in finding her the right young planner. Brown persuaded Grubman that she needed someone who was less experienced who could ultimately become a partner in her practice, as opposed to someone who might end up starting his or her own practice in just a few years. Her new hire has been there only two months, Grubman says, "but I couldn't be happier."
For Brown, there's great satisfaction in knowing a young planner has found a foothold and won't be leaving for another field.
Ann Marsh is senior editor and the West Coast bureau chief of Financial Planning.