In our last several posts, we have been highlighting the necessary distinction between truly comprehensive financial planning and product-focused financial planning. We deem it necessary because the term financial planning is often wrongly used, which comes at the client’s expense. The term financial planning is regularly used to represent what is solely product-focused financial planning. We proposed that we are largely stuck in an industry of confusion, and we are having a difficult time moving on from this place. There are apparent yet opaque reasons as to why this is the case. These are contained within an earlier list of systemic factors we cited which have impaired financial planning outcomes and distorted the way in which financial planning is done. 

Let’s return to the medical analogy. Imagine being a patient with an illness

A patient would never want to go to a doctor who has a drug or pill already identified and evaluates the condition of the patient by searching for ways to use that drug or pill to treat the patient. Instead, a patient would want a doctor who evaluates the medical situation with an unbiased lens and only uses a drug or pill if it is the most effective way to treat the identified condition. Isn’t that the way you would want your financial life approached as well – to have someone look over your entire financial picture (including your values, goals, dreams, concerns, fears, etc.) and advise from that perspective instead of looking for a way to sell a financial product?

Within the medical context, think about what may be missed and how often the product (drug) would be the wrong form of treatment! The patient is seeking a service, not a product. The product is a potential outcome of the service, but it is not what the patient or client pursues. If so clearly a problem within a medical context (or almost any other professional context), why does this phenomenon of product sales disguised as financial planning remain so apparent within the financial services industry? Sure, financial products (insurance and investments) will be part of most financial plans; however, they should only be used when designed to meet a specific need identified through a comprehensive and unbiased financial planning process. If the product (drug) comes at the expense of a comprehensive evaluation, it compromises the best interest of the patient…or, in this case, the client. 

Why is this happening?

It is the tethering of product sales and commissions to a "financial plan" which is at the core of the challenge. This persistent culture of product sales paraded around as financial planning is a systemic issue. The prevailing practice and system around “financial planning” has weakened the full potential of the financial planning profession. Tragically, for clients, this dislocation has weakened outcomes for the humans we are attempting to serve humanely. The focus needs to be directed squarely on service, not products. While this right move seems obvious, there are many weighty systemic issues woven into the culture of financial services that make this move extremely difficult. The list below identifies the most significant anchors working against a migration to something better, and we are going to use upcoming posts to focus specifically on each of these: 

• Business models of financial planning firms 

• Compensation structure for planners 

• Role of incentives 

• Career status and prestige based solely on sales achievements 

• Measures of success and effectiveness tied to a book of business 

• Conflicts of interest that are not transparent 

• Academic preparation, credentialing, and pathway to a profession in financial planning 

There is much talk in the financial services industry about the term and concept of “fiduciary.” Besides being an odd word and slightly fun to say, what is it? The CFP Board defines fiduciary through the lens of the interaction between a financial planner and a client. Its fiduciary standard of care “requires that a financial adviser act solely in the client’s best interest when offering personalized financial advice.” Think about that for a second. Who else’s interest would they be serving when they offer advice? The very fact that a fiduciary standard is required reveals the problematic state of the industry. We can and simply must do better. 

Ryan Halley, Ph.D., CFP® is Director of Planning Practices and Research at Human Investing. He holds a doctorate in Personal Financial Planning from Texas Tech University and an MBA with a concentration in Finance from The Ohio State University. Ryan has his CERTIFIED FINANCIAL PLANNER™ certification. Dr. Halley is also a Professor of Finance and Financial Planning at George Fox University, where he directs a CFP® Registered Program located near Portland, Oregon. He has co-authored a book and has numerous peer-reviewed journal articles. Additionally, he has been an invited professor and lecturer at various universities in the United States, Canada and China. 

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