Last Fall, my old friend Bob Veres did a rather common thing, which yielded some uncommonly interesting results. Veres asked his newsletter readers to identify the issues that “all advisors everywhere should be paying attention to.” He boiled down the results to 12 issues that were largely the usual suspects. Then he asked for
live feedback on the issues at a NAPFA meeting in November, at which, he wrote the “audience immediately locked onto one of the issues…which they clearly believed was the most important one for us to be talking about.”
The issue? “How can true professional advisors communicate the value of their services, and distinguish themselves from the competition?”
So it seems there’s another side to the fiduciary-duty-for-all-advisors debate that has been raging in Washington for the past six months or so. Many observers, myself included, have been heralding the best opportunity in 70 years to legally give all financial advisors the duty to put their clients’ interests first. But it seems that many advisors who already accept that duty aren’t so sanguine about mandating that other advisors rise to their standard.
These advisors are asking, of course, exactly the right question. It’s the right question now, just as it’s been the right question for the entire 40-year history of the financial planning movement. Unfortunately, none of financial planning’s leaders–not the CFP Board, not the FPA, not even NAPFA–has been able to provide a satisfactory answer. In my view, that’s because each has been far too limited in their scope: The Board focusing on the financial planning process; the FPA on an “open forum” for all advisors (to their credit, they did finally ask the B/Ds to leave on grounds of irreconcilable differences); and NAPFA on what seems to be a moving target–first fee-only, then competence, then fiduciary. What’s missing is a bigger, broader answer. Seems to me what’s needed in the advisory world, today more than ever, is a true profession of financial advice, what I’ll humbly suggest might be called the profession of “independent financial advisors.”
The problem here is that we’re continually focusing on the trees rather than the forest. The big picture is that we (meaning real financial advisors, financial consumers, and the country as a whole) need a genuine profession of financial advice.
I’m talking about a profession based on such clear, client-oriented, and inflexible standards that if Wall Street and other sales-oriented institutions were to adopt them, they’d be forced to give up their self-serving sales practices, and actually work for the benefit of their clients. If they didn’t, they wouldn’t be able to compete for clients with those advisors who did.
The Signs of a Profession