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Financial Planning > Behavioral Finance

NAPFA, Take 2: Just Say ‘No’ to Politics

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My blog last week, Dear NAPFA: Don’t Take a Position on a Political Issue…, seems to have struck a nerve with some readers. It was about the announcement by the National Association of Personal Financial Advisors that it is reconsidering holding its October national conference in Indianapolis due to Indiana’s recent passage of the “Religious Freedom Restoration Act.” As you may remember, my contention was that this is a political/social issue, and as such, professional and/or trade associations would be wise to avoid taking a position on the issues involved. 

The blog received 13 comments (including responses) but only four of those actually addressed my column: two favorably (thank you); one simply “anti-NAPFA” for taking its political position, and one that “disagreed with a lot” of my “argument.” The other nine were a running debate between a reader calling him/her self Michael Hatem and “Anonymous.” 

I mention this breakdown because I believe that it graphically illustrates my point: political issues are inherently divisive and can therefore greatly reduce an organization’s ability to represent all of its members, and represent those members with regulators and lawmakers. 

The “anti-NAPFA” response came from Charles Nash, who wrote: “This (among a litany of other reasons) is why even though I’ve been a fee only practitioner since 1998, I’ll never join NAPFA. It is a bit ironic that the most discriminatory organization in the planning industry as it pertains to advisors is now taking a stand against discrimination. Now that’s [a] laugh!” 

While I don’t agree that NAPFA is, in fact, “discriminatory,” it is the most exclusive club in the financial planning world. Yet I don’t believe that’s a bad thing. As far as I know, NAPFA doesn’t restrict its membership by race, religion, sex or sexual orientation. Yet it does, again in my view, have the highest professional standards in financial planning. That is a very good thing. 

If not discriminatory, professions are, by definition, restrictive. They set out very high standards of education, training, conduct, ethics and remuneration. Hopefully, they are open to every one who can, and is willing to, meet those standards. And they aren’t bashful about turning away those who can’t, or won’t, meet them.

As a society, we all benefit from professions, because they provide us with a high level of competence and reliability in areas that are essential to our well-being: medicine, law, accounting, academic research, engineering and, most recently, financial advice. We take a very dim view of those professionals who would violate our trust in them. 

Consequently, professional organizations have a high degree of responsibility to the public: to ensure that their member professionals live up to their high standards, so that people can rely on the essential services they offer.

To do that, professional organizations need to serve, support and represent all of their professional members, not just those who happen to agree with the politics of an organization’s current leaders. We don’t see the American Medical Association, the American Bar Association or the AICPA taking positions on partisan political issues—unless those issues directly pertain to their specific professional area and, therefore, are supported by the vast majority of their members. 

In one of his comments, ‘Michael Hatem’ argues that the Indiana law does directly pertain to financial planners. “Except [the law] does affect our clients’ well-being, unless you think there are no LGBT clients. Furthermore, discrimination adversely impacts the entire economy; you cannot have laws that treat a segment of the population as less worthy of civil rights and not have it affect other aspects of the society or economy.” 

Perhaps you see the problem here. While I appreciate Mr. Hatem’s sentiment, his reasoning is so broad that it would support financial planners and their organizations getting involved in every issue facing America today: from ISIS, to nukes in Iran, Russians in Ukraine, Ebola and the current state of our education system, to name but a few. And since most issues these days seem to split down party lines, I fear that the end result would the division of all of the industry’s organizations: two NAPFAs, two FPAs, two CFP Boards, etc. 

This divisiveness would greatly weaken the fledgling profession of “financial planning” (so much for “one voice”), and worse, send a message to the public that politics are more important to financial planners than the financial wellbeing of their clients.

Old-timers like me will remember that the financial planning world was split into two organizations for over 20 years (from the early ‘80s until 2004) between the ICFP and the IAFP. Their merger into the FPA was heralded as a major advance for the profession of financial planning.

It seems to me that the political divisiveness represented by NAPFA’s current position, and illustrated by the comments to my blog, threaten to set financial planning—and the emergence of a true profession of financial advice—back 30 years. And financial clients everywhere will be the big losers.


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