One nice thing about the Financial Planning Association’s annual retreat is that it lets advisors get away from their day-to-day concerns and focus on long-term issues affecting the profession.
During this year’s Retreat, held at a resort outside of Houston, I sat down for a chat about the planning business with the FPA’s three top honchos–Chairman Guy M. Cumbie, President Robert Barry, and President-elect David B. Yeske. Much of the discussion centered on ways to define the profession. Following are excerpts from the discussion.
ON CRAFTING A GLOBAL DEFINITION OF FINANCIAL PLANNING
Cumbie: Bob and I just returned from Tokyo from a TC 222 [a technical working group] meeting on this. There is about to be a global definition of financial planning.
Barry: The Japanese government is already giving statutory recognition to three levels of financial planning. One of the keys to having financial planning recognized is when it’s regulated as its own practice. Part of the ISO [International Organization for Standardization] debate will be a global definition of what financial planning is.
Yeske: It’s about helping clients achieve their goals. It’s about strategic planning. How to arrange their lives.
Cumbie: The FPA is actively engaged, in concert with the CFP Board, with the U.S. Technical Advisory Group. The work has been going on for a year and a half. Something is going to come out of it in a couple of years. This is like Underwriters Laboratories. The largest users of ISO compliance will be planners who want to access the corporate market through human resources departments and work through requests for proposals. Some will only work with you if you are ISO-compliant.
ON HR 2269, A BILL THAT WOULD ALLOW THOSE PROVIDING RETIREMENT PLANS TO DISPENSE INDIVIDUALIZED FINANCIAL ADVICE.
Barry: In an ideal world, if you took our board and the CFP Board, we could craft much better legislation. But that is not going to happen. This isn’t an ideal piece of legislation, but it’s as good as we’re going to get. The Enron debacle [and its effect on the company's 401(k) plan members] showed that some advice is better than no advice. Will corporate employees get some advice [as a result of the bill]? Yes. Will this be as good as hiring Harold Evensky or Ross Levin or Bob Barry? No.
Yeske: So much of what we do in the organization is highly idealized. In the real world, there are compromises.
Cumbie: In an ideal world, we wouldn’t be thought of as investment advisors. Our planning role is really the point. The SEC, in its regulatory zeal, is going to continue to see us as investment advisors, but this is not necessarily how we see ourselves. But this is our baggage; it’s a huge part of where we came from.
Barry: I wish the focus wasn’t on investments and investment returns. The shift will come when we are regulated like other professions. But will it come the way the shift from commissions to fees came about–in a pretty short time?
Yeske: If you are truly putting financial planning first, the mode of compensation fades into the background.
Cumbie: The fact is that from a regulatory point of view, they are going to home in on your day job.
Yeske: Yes, that’s true if someone is paying for financial planning, but there is the perception that they’re paying for something else.
ON HELPING ADVISORS PLAN THEIR OWN CAREERS
Barry: We have come to the conclusion as an organization that career development is a cradle-to-grave issue–it’s not just for “baby planners.” We have started a whole new practice services group. The majority of small shops in this business don’t have businesses–they have jobs. And there is going to be [profit] margin compression unless you can differentiate yourself as a business.