Whether you know it or not, you’re a pioneer—taming, at considerable personal risk, an entirely new business landscape. This has happened more than a few times in America: People ventured out into the Midwest, and then the Western U.S., into howling wildernesses, and constructed crude living quarters with their own hands. Others joined them and built out crude settlements, beat out dirt roads, and created an economic infrastructure of shops, banks and mercantile establishments. After a long time, the railroads arrived, the roads were paved, and the settlements became villages and towns, and eventually cities.
The equivalent of that in our profession were the founders, who broke away from the life insurance and brokerage industry to start independent planning firms. The initial tools they used were remarkably crude by today’s standards—basically a hand-held calculator and paper-printed mutual fund performance tables (remember Weisenberger?)—and the value proposition was sales with a better personalized analysis on the front end. Fee-only came later, as did planning software, CRM programs, custodial platforms and all the rest.
The first pioneers were leading a revolt against the self-interested sales model, staking out entirely new terrain away from the brokerage offices that owned the landscape. We actually used to describe it as a revolution, and I remember old Nick Murray, at a NAPFA conference (of all places)—a person who gave 100 motivational sales speeches a year to brokers all over the country told the fee-only audience that they had won the revolution, and now it was time to invite the brokerage firms back into the new order of things. Fortunately, that never happened, but it turns out Murray was premature in his declaration. The revolution will go on as long as the brokerage firms control large segments of client assets under a model that is essentially predatory.
If you started your firm in those early years, then you’re comparable to those people who erected the first crude huts, and eventually became significant landowners in the expansive farming communities that grew up in the Midwest and West. If you’re part of the second generation, you’re in the process of cleaning up and civilizing the original business model—which means shifting from AUM to some kind of flat fee revenue model, building out client service processes where before there were a lot of one-off activities, and creating ensemble businesses that will outlive the founder, whether the founder is willing to go along with this or not. We are in the village- and town-building stage of the pioneering work, and the stage after that will be a real profession, with universally-accepted professional standards, robust college programs at most universities, a professional regulatory structure that governs who can and cannot refer to themselves as professionals, and a final victory over the predatory wirehouse business model.
My point here is that the hardest work, performed by the people who will eventually be regarded as the bravest, hardiest members in the history of the profession, is nearing completion. The next stage of pioneering, and the stage after that, will be challenging, but not risk-all endeavors, and certainly will not be carried out under the threat of extinction by giant wirehouse firms. And so it may be time for the profession to start acknowledging, not just a small handful of prominent pioneers, but the whole generation of early practitioners who dared offer real financial planning, initially for a commission, later for a fee. And those who came after them should be systematically recognized as well, for turning the brave forays into the wilderness into something far more sustainable and civilized.
I’m not quite sure how we do this, but one possibility is to get a framed photo of the founder(s) of every financial planning firm placed somewhere prominently on the wall, and photos of the early successors to join them. People who walk into a financial planning office in the future should know who to thank that they have the option to work with somebody who is professional, focused on their best interest, and not trying to sell them some piece of crap that came out that morning over the squawk box.
As I said, the revolution is far from over, and the West is far from won. But I think we know that the founding generation gave us enough momentum, enough sweat and toil and care and insight, to eventually erect a profession on this interesting new terrain—and the gratitude should be expressed now, before those people have exited the scene.