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Financial Planning > Behavioral Finance

Final Thoughts for the Final Column

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As I contemplated my final column in light of my retirement, Janet Levaux, IA editor-in-chief, asked me to make some predictions about the next decade. I begged off predictions, per se, because circumstances are changing so fast.

I especially do not fully comprehend how the coronavirus pandemic, economic disaster it spawned, government response and insecurity of clients will influence how advisors function going forward.

The best I can do is to share some observations about our industry and to encourage members of this profession to organize around some common problems and common opportunities in order to fulfill their vision of what this business and their role in it will be.

Consider these four main areas to make an impact:

1. Needs of the Individual

The vast majority of lower- and middle-class people are not exposed to education, guidance or advice on navigating financial choices.

The absence of financial literacy education is shameful considering how much pride Americans take in our so-called culture of independence, entrepreneurship, accountability and personal responsibility.

It is hardly reasonable for us to expect parents who lack this knowledge to impart key lessons to their children.

Nor is it reasonable to expect woefully-funded public schools to make this information a priority when their communities do not even see it as an issue. How can we help?

2. Needs of Clients

While investment advice has been the foundation of client engagement, financial planning has risen to be a key component of many relationships. The profession has an opportunity to demonstrate the value of guiding clients through complex financial choices beyond asset allocation and ROI.

At some point, the reporting will need to become more standardized around decision-making and impacts, complete with ratios and common-sizing data and benchmarks. Clients want to see how their choices affect their lives, families, work and communities.

3. Needs of the Profession

The financial advice business has experienced material transformation each decade since I started on the periphery of it as a reporter in the 1970s. Yet despite the many advantages of this field, it has lost its luster as a career choice.

Is it the nature of the work, the people who lead it, the environment in which we operate? Or is it simply a lack of awareness or exposure to potential applicants?

After all, we just don’t have a TV show like doctors, lawyers, ambulance drivers and firefighters to prove its value and its ability to produce happy tears.

Ultimately, true credibility will follow when the industry builds momentum from young professionals who experience first-hand how fulfilling financial services can be.

4. Needs of the Industry

While other countries have attempted to harmonize regulation and legislation in order to be more consistent to both consumers and the people who work within the business, the United States suffers from a mishmash of rules, laws, policies and principles.

The need for protection is real, but now is the time for a total review of how the industry is managed, regulated, educated and evaluated.

Even the definitions are confusing. What is the difference between an advisor and an adviser? Or a broker and an agent? A registered representative or a financial planner?

And now that the RIA community has become such a material factor, at what point will we require firms who operate in this business to have financial standards to ensure business continuity, safety and liquidity in times of stress?

See Mark Tibergien’s final column: Exit Stage Right