Well, gosh, T. Knotts, I’m glad you asked. Mr. or Ms. Knotts was kind enough to post the following question to my Nov. 15 blog in which I suggested that, considering the history and current state of those who provide comprehensive, independent financial advice to individuals, we should consider a new name for ‘financial planner’ and the profession of ‘financial planning’ itself.
OK…I’ll bite….Other than Financial Planner, what do YOU think would be a better, more descriptive title? I think there are ‘problems’ with all the other choices (wealth manager, financial coach, investment advisor, life planner, etc…).
I agree that there certainly are “problems” with other possible monikers for folks who provide financial advice, but as in most real-world situations, we’d probably do well to focus on finding one with the fewest negatives and the most positives. To give us a basis for comparison, let’s start by reviewing what the ‘problems’ are with the current title of ‘financial planner’ title.
First, as I mentioned in my last blog, while a growing number of financial advisors appear to be delivering what can be generally described as comprehensive advice, a shrinking number of advisors seem to be handing out actual financial plans—certainly not the massive tomes we used to see back in the 1980s. That’s mostly because most clients don’t want them or even read them, and when it comes right down to it, the overall financial plans don’t usually vary very much from client to client.
What’s more, a financial plan sounds like something most of us know we should have, but it sounds way too much like a ‘budget’ to get people very excited about receiving or paying for one. I’m guessing that most of us could benefit from some counseling by a registered dietitian (rather than slapping together our eating guidelines out of tips from Redbook, Cosmo, or Men’s Health). But I’ll bet we could count the number of people reading this who see a diet pro on the fingers of one hand—because ‘diet’ sounds like ‘budget.’
The bigger problem with ‘financial planning’ is that while it might be what makes comprehensive advisors different, it’s still a small part of what they do for clients, and way more often than not, not what they get paid for.
Twenty years ago, I wrote a column pointing out that “the dirty little secret of financial planning” is that nobody gets paid for doing financial planning. The reason for that was and is clear: you can’t sell it, because nobody wants to buy it. I might also point out here that the CPAs have clearly learned this lesson with their PFP program.
The data to support my skepticism is remarkably clear. Back in 2006, the annual Moss Adams study of advisory firms revealed distinct differences in the success of advisory firms depending on what they called themselves: Financial Planners, Investment Advisors, Investment Managers, or Wealth Managers.