by Nathan Gehring, CFP®
I'm still a neophyte in this world. I've been involved in the financial services industry since early 2005 and in financial planning starting later that year. Very early on I asked what I thought was a simple question: What is financial planning? Seven years later, I am still waiting for an answer. Maybe it's my relative youth in the profession, maybe a lack of experience, but I don't think so. I think this lack of answer holds our profession back ... maybe more than anything else.
Can you articulate what financial planning is? And I'm not talking about the financial planning process, yet that's the response I often get.
Me: "What is financial planning?"
Planner X: "Well it's the six steps." (Or five steps or four steps, depending on the year and person asked.)
The financial planning process is exactly that-the process. The process is not financial planning. The process can (and has) changed, but that does not change what financial planning is at its most fundamental level. Other times, the answer is nothing more than a planner's elevator pitch:
Me: "What is financial planning?"
Planner Y: "Well, through financial planning I help you have more money with less effort on your part."
Again, this does not answer the question. Answers like these are generally filled with superfluous marketing fodder. The question lives on.
How can we expect others to know what we offer and the value we bring to society if we cannot do so with clarity and conviction ourselves? How can the media properly portray the value of financial planning if they are uncertain whether it is investment advice, insurance advice, "new-age" life planning or something else entirely? How can consumers have any idea whether they need financial planning when they don't even know what the darn thing is?
The only result we can expect is what we have now-a mess of ideas, assumptions and beliefs. It seems every individual having anything to do with personal finances claims to be involved in financial planning. Investment managers and insurance agents and mortgage brokers and certified public accountants are confused as being engaged in financial planning. We have no clarity, no vision, no common way forward.
We lack this clear "is." We can't explain what we represent and why we are needed. It is holding us back from becoming an authentic profession.
Open and Free Communication
As we are so wont to do in this profession, let's look to the medical profession for guidance. Medicine is defined as the science and art of healing. A doctor or a nurse is a healer. Medical researchers study how to heal. It may be the body or the mind, but it is always about healing.
We must discover our "healing." It's out there. When we find it, we will be stunned by how obvious it was and wonder how we didn't discover it sooner. It won't be an "ah ha" moment; it will be a "duh!" moment.
To find our "healing" we need to start talking about it and doing so in respectful ways. We need to speak with one another openly and freely, irrespective of business model or compensation method or deliverable or independence or any of the other castes that we build into this profession.
We may discover some of those in the discussion are not doing financial planning, but that needs to be a shared learning after we know what financial planning is. How can we exclude professionals before we know what they are being excluded from?
An Answer to the Question
What is our healing? What is financial planning? I have thought about these questions often. I have had several answers over the years, many that I now reject. I do have an answer to the "what is financial planning" question, and I feel confident that my answer has tremendous merit.
Financial planning is about making good financial decisions. Or turning back to the medical field for guidance, financial planning is the science and art of making good financial decisions.
All the projections we put together, the recommendations we make and the education we provide are ultimately designed to do one thing: help people make good financial decisions.
If we provide investment management services, we are helping clients make good financial decisions by having them turn the investment decisions over to us. When we review an over-spender's budget, we are helping that client make good future spending decisions. When we offer tax savings recommendations, we are giving our clients information to help them make good tax decisions. That giant plan some of us put together ... is it anything more than a guide to help make good financial decisions?
And I intentionally don't write "great" or "better" or "correct" financial decisions. "Great" is too subjective. "Better" assumes the people we help were making poor decisions previously. And who knows what's correct? Does the outcome determine correct? I don't think so. We can help people make good financial decisions, but great or better or correct? Not so much.
Helping people make good financial decisions is an awesome responsibility and a highly valuable professional service. It's an honorable calling. It's needed.
People have a history with money that leads them to make assumptions and to learn lessons about financial decision-making. Sometimes these assumptions and lessons can lead to good decisions; other times they can be very harmful.
Financial planning is about helping people make good financial decisions. That's it. That's the goal. That's the value we offer the world. It's not sexy. It's not exciting. But it is a darn good thing to be able to offer people. It is our "healing," and as long as our world continues to use money, it's something that really needs to be offered.
Here Is the Important Part
What are your thoughts? Do you agree with my definition of financial planning, or do you think I am totally off base? How would you define our "healing?" Can you distill financial planning to an even more basic level?
We need to have this discussion to move forward. Let's start right here and start today. Join the discussion now at FPA Connect (Connect.FPAnet.org).
Nathan Gehring, CFP®, is a financial planner and blogger ferociously questioning assumptions, attacking traditions and striving for a better profession. Follow him on Twitter @nathangehring and learn more about him at http://about.me/nathangehring.