From the September 2007 issue of Investment Advisor • Subscribe!

September 1, 2007

No Rest for the Planning Industry

As the dog days of summer draw to a close, it may seem like a great time for the financial planning community to take a little respite. After all, we're fresh off the FPA's landmark legal victory that will force the SEC to create a level regulatory playing field for everyone who provides investment advice.

That legal win was crucial in making sure that investors' interests have to take precedence over that of their trusted advisors. That's great news for investors and the integrity of the industry. But it is the beginning--not the end--of the need for this industry's continued push for widespread financial literacy. What is certain is that America's need for competent and comprehensive financial advice is increasing. Ensuring that we can deliver that advice is critical.

That's why it's important for the profession to take a three-pronged approach to financial literacy: advancing the profession; educating the public; and growing planners for the future.

One fundamental step to advancing the profession is simple: Planners have to be competent and deliver advice and investments that are dictated by clients' needs, not planners' own pocketbooks or what they're incented to sell. Better advisors know that sometimes the best solutions for clients don't involve a product at all. The Financial Planning Association's new Fiduciary White Paper argues that planners must embrace five basic principles of client care. It says that a planner:

  1. Shall put the client's best interests first;
  2. Shall act with the utmost due care and in good faith;
  3. Shall not mislead clients;
  4. Shall provide full and fair disclosure of all material facts;
  5. Shall disclose and fairly manage all conflicts of interest.

Over time, as a client-centric planning approach bears real fruit, we've seen the planner model pick up tremendous momentum. That's critical as baby boomers and the rest of America realize that they need financial guidance--to maximize their investments and minimize their risks and taxes.

The industry itself is reaching out to more people, too, to help them understand the benefits of saving, investment, and spending plans. In March, in conjunction with the Sidewalk University organization, Citibank, and United Way, planners from the Financial Planning Association of New Jersey spent all day leading high school kids through workshops on investing, retirement planning, managing credit, and starting a business.

To kick off Financial Planning Week in New Jersey this October, our group is offering a $500 scholarship to students at Union County Community College for the best essay describing how financial planning, or the lack of it, has shaped their life. Planners throughout the country have to ask what they're doing to advance our profession and the cause of consumers' financial literacy.

The last tenet of financial literacy is developing the next generation of planners. How do we do this? By ensuring that students wondering about the profession have all the answers they need about the differences between true planning and product sales. And we work with universities and colleges that offer planning programs to ensure they have the instructors and expertise they need. This is a great profession and all that we do to advance it resonates for all of us.

James E. Kearney, CFP, CTFA

President, Financial Planning Association of New Jersey

President, Quadrant Capital Management, LLC

Montclair, New Jersey

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