Over the Next Hill

Perhaps because I’m genetically predisposed to be a futurist, I can’t help trying to peer over the next hill in our professional timeline.  And a surprising number of possible shifts are contained right here in this issue.

Start with the idea of professional specialties, board certification and peer review self-regulation.  The lead article in this issue outlines an intriguing initiative that is broader than the planning profession, which could become the model for a more focused initiative in the financial planning world.  I’m co-author of an upcoming white paper on the financial planning firm of the future (with practice management consultant Matthew Jackson), and one key prediction in the report, endorsed by many of the people we talked with, is increasing client specialization.  I would imagine that specializing in the particular financial challenges and common tax issues of real estate agents, doctors emerging from residency or partners in law firms would require a similar kind of focused expertise as a doctor who specializes in a particular part of the human body.  There will always be generalists in our profession (as there are in the medical profession), but increasingly, the more narrowly-focused advisors will be in a position to deliver the most value. 

Meanwhile, board certification and peer review self-regulation might tip the balance for the SEC or states to realize that financial planners can monitor their own ranks—far more effectively, I would say, than the SEC examination regime.  If those initiatives took hold, financial planning could emerge as a regulated profession, which would elevate its status among the consuming public.

On another note, regarding Julie Littlechild’s unique ear-to-the-ground pipeline to what financial planning clients are thinking, I’ve written before about a unique opportunity that sits before the financial planning profession.  There was a time in the 1900s when people with life questions went to their family doctor for answers that were outside the strict boundaries of medicine.  At some point, the medical profession became, sadly, more efficient and profitable, and this meant squeezing the time a doctor spends with patients, and affiliation with for-profit HMOs and hospitals, the paperwork and oversight from medical insurance companies, and generally what we call today the “big business” of medicine.

That coveted “wise advisor to the community” role shifted from the family doctor to the town attorney, who was counseling people not just on how to defend themselves from tort cases, but on how to navigate the complexities that our society imposes on the lives of its members.  Eventually, lawyers began creating a more efficient model, and you don’t see the town lawyer dispensing general advice any more.

What does this have to do with financial planning?  The local financial planning generalist, should people choose that path rather than specialization, has the chance to become that go-to dispenser of wisdom and advice on topics that are broader and sometimes more relevant than how to invest or how much.  If advisors are resisting more-than-professional relationships with their clients, I think they might be missing the chance to play a “sounding board” role in our society that has been abandoned by others—a central role in helping their community make better life decisions.  The pandemic has stirred up a lot of angst in the American population, and advisors are in an ideal position to help people deal with it.

Finally, the article about the planning software called Elements calls into question our whole approach to helping people manage their financial lives.  The traditional planning software has been enormously helpful to the profession; I remember back in the 1980s when advisors first began modeling client financial lives the way corporate consultants projected future revenues and outcomes for Fortune 500 companies.  It was a powerful moment for society as a whole, a chance for people to see the power of better saving and investing habits on their future outcomes. 

But the traditional financial plan, with its projections going out 20 or 30 years based on assumptions about future income, future investment returns, retirement dates, inflation, etc. was (as Harold Evensky once famously put it) instantly out of date the moment it was completed, and (this is no longer Evensky’s quote) probably wrong because there are so many unknown life decisions and circumstances between now and then. 

The concept behind Elements suggests that there might be a better way to help clients recognize the impact of their daily financial decisions, and to give them a better view of their progress toward a financial future whose distant outlines really cannot be modeled with any degree of accuracy.  I see this debate as akin to how life planning finally went mainstream in the profession: planning advice started with insurance agents talking to people about how to provide financial sustainability for their family when they died, to moving the timeline back and helping people provide for their financial sustainability for themselves when they retired (financial planning), finally to providing advice that would help them achieve goals in the here and now (life planning).  Planning software may need to make that proverbial leap from a focus on retirement to a focus on now, on what clients can do to improve their financial health month-to-month.

I see other “futurists” telling us that the profession is rapidly evolving, because more clients are more open to Zoom meetings and will be willing to meet remotely for less-time-consuming planning sessions.  Yes, but that’s a focus on what we can see today.  Over the next hill, I see a much more exciting set of transformations: a coming age of specialization that would make the planning service for specific target clients more valuable and compelling, board-certification and peer review self-regulation which could open the door (finally!) to government sanctioning of planning as a true profession, generalists moving into a central role in their communities, and a shift to greater immediacy in planning advice and modeling.  The possibilities remind us that change and evolution, much as most of us instinctively resist them, have carried the profession a long way forward, and the changes on the horizon promise us more of the same.

Leave a Comment