The Future of Planning

In recent years, one of the most important trends in the financial planning industry has been a growing awareness of the planner’s need to stimulate a more rich and personal conversation — beyond the numbers — with clients. In addition, guidelines and training have been developed where once there were none. While most concede that we have turned a corner in terms of establishing financial planning as a profession, there is still much work to be done, both within the profession and with the general public.

I spoke with Carol Anderson, a longtime industry observer and founder of Money Quotient (www.moneyquotient.org), a 501(c)(3) organization that conducts research and develops “life planning” tools and training for financial advisors, to get her thoughts on where we’ve been and, more importantly, where we’re headed.

Marie Swift: Nearly eight years ago, you were invited to participate in a think tank exploring a new trend in financial planning sponsored by the National Endowment for Financial Education (NEFE). What was the conversation then, and how is it different now? Carol Anderson: First, I would like to provide a little background. NEFE (www.nefe.org) evolved from the College of Financial Planning and was the brainchild of Bill Anthes, who served as president of the College from 1979 until 1997 when it was sold to a private entity. At that point, Anthes focused his full attention on leading NEFE and to fulfilling its mission of increasing the financial well-being of all Americans. In the late ’90s, he became intrigued by the emerging concept of life planning and its relevance to financial and retirement planning. In his words, he wanted to find out if it was “more than just a keen idea.” Anthes hosted a think tank in November 2000 in an effort to answer that question. The 15 or so invited participants were, of course, ardent supporters of this more holistic approach to financial planning, but it was still a topic that stirred quite a bit of controversy in the broader financial planning community. Today, the climate is very different — the concept of life planning is much more broadly accepted. The question has changed from, “Is this a legitimate approach to delivering financial planning services and advice?” to “How can I most effectively and efficiently integrate a life planning approach into my client meeting process?”

What do think was the most important outcome of that meeting? For me personally, it was the lively discussion regarding the definition of life planning. It is such a nebulous term, so what is it really? That was the No. 1 task of the think tank participants. With such a wide range of experiences and perspectives represented by this group, it was extremely gratifying that we arrived at a consensus quickly with everyone voting in approval of the definition proposed by session moderator, Steven Shagrin (see sidebar). I believe this definition incorporates the core elements of a life planning approach and has provided a touchstone for the education and research we develop at Money Quotient.

How do you think life planning differs from traditional financial planning?I remember that Bill Anthes was asked a similar question in an interview following his acceptance of the P. Kemp Fain Award in recognition of his many contributions to financial planning (Journal of Financial Planning, November 2002). He replied there are aspects of life planning in the original concept of financial planning, such as the need for practitioners to understand their clients and their goals. He also explained that what we are witnessing is renewed interest in this area and an application that has more focus and vitality. I agree and would add that a review of the CFP Board Financial Planning Practice Standards clearly indicates that consideration of the qualitative aspects of a client’s life is not an optional component of the financial planning process.

That is an interesting perspective. Tell me more about the link you see between a life planning approach and best practices in financial planning.”Gather Client Data” is the second step of the six-step financial planning process. Most of us immediately equate this task with collecting financial information, but the CFP Board wisely makes the point that this is only one-half of the picture. Practice Standard 200-1 states that, prior to making any recommendation, the planner and client will mutually define the client’s personal and financial goals, needs and priorities. The authors go on to explain that, in order to arrive at such a definition, the practitioner will need to explore the client’s values, attitudes, expectations and time horizons as they affect the client’s goals, needs and priorities. And, most importantly, the authors state that this information provides the “focus, purpose, vision and direction for the financial planning process.” To me, this clearly demonstrates that a life-centered, values-based data gathering process is not new or “on the fringe,” but always intended to be an integral component of the financial planning process.

What are your hopes for the financial planning profession over the next five to 15 years?My hope is that the financial planning profession will fully differentiate itself in the financial services marketplace by delivering unbiased, comprehensive and individualized financial advice that unequivocally puts the client’s interests first. Regardless of the outcome of the current debate on what if means to be a fiduciary, each financial planner must independently choose to live by the highest standards of ethical practice and transparency. It is the daily choices of individual practitioners that together form the reputation, potential and the future of a profession.