The Future of Financial Planning – FPA DFW Seminar

2017 Quarter page flyer

Casey Kupper, CFP®  and Hannah Moore, CFP® are back with another in-person FPA DFW #YAFPNW series session recording. This time they discuss The Future of Financial Planning.

Be sure to join us for the next You’re a Financial Planner, Now What? seminar series! Each seminar covers a different topic that’s of particular interest to those who are looking to fast track their careers and have a passion for financial planning. No reservations are needed, drop in and join the discussion.

Thanks again to everyone that came out and many thanks to the kind folks at The Milestone Group and Bank of Texas Private Bank for hosting us!

“Ten years ago it would have been extremely difficult to communicate the way you do with clients… to communicate what you do and live up to the duties you have to clients by being flexible and able to deliver no matter when or where  you are.”

Show Transcript

Ep60 Transcript


Hannah:               The topic we had was future financial planning. I am curious to hear what your thoughts are Casey, on that.

Casey:                   So, to me … starting with what is financial planning to me. Might help frame my comments. I view financial planning as simply being able to provide services to clients for compensation. Provide what they need. It can be many different forms. No two advisors necessarily deliver advice the same way or about the same topics or with the same level of expertise, nor do different clients have the same needs or receive that information and advice the same way. There’s a very broad breath of ways that the advice can be delivered or received. It’s up to all of us to find where we fit into that mold.

When we start thinking about the future of financial planning and whenever I think about that in a context of what we need to do for our own practice in business, I’m trying to figure out, are the changes we need to make gonna help our clients? Are they going to help us stay competitive so that we can continue to help our clients, or is there just some opportunity for us to just morph? When I think about that concept over time, generally it tends to center around the flexibility of what we do increasing. We could focus more on a niche. We could know who our top clients are very narrowly and go very deep in that, but things could change. We could pivot away from the world being able to deliver advice to that niche in the future, and I don’t want that risk.

Instead, I would rather be able to do a lot of different things for generally wealthy clients, and pivot and change as any business owner would. The future I see with Robo Advice and trends within the millennial subset is that online advice or the ability to give advice any time, anywhere will become increasingly important. How that manifesting for ourselves is currently in staffing, making sure we have flexibility to manage our client base to make sure we have the depth of experience we need for our clients’ needs, and making certain that we have the capacity when clients need things to jump on it, whenever that is.

I know that will change over time because not everyone, especially younger generations, will want to receive things by phone call. We have world role constraints of compliance and how we do things digitally and can’t text message with clients or things of that nature, but we need to continue to push the boundaries to make sure we understand where our lines are today, and where we think it’ll be in the future, try to move that direction.  Just to bottom line my high-level thoughts, it is flexibility, flexible advice, being paramount for the future of a financial planner in delivering advice as the direction I’m trying to push our firm and myself.

Hannah:               Mm-hmm (affirmative). I kind of went with that same idea. What is the core of what we do? Throughout all the change, that’s what’s going to remain.

Casey:                   Mm-hmm (affirmative).

Hannah:               I went back to Wagner’s 1990 article about what it is like to think like a CFP. That’s this huge article that I think changed the profession, basically calling financial planners to become professional. How do we think like a CFP? How do we become a profession? I went back and I looked at kind of what you’re saying, looking at … I’m just going to read a couple of things in here. Looking at the classic professions, law, medicine, theology. Additional ones would be journalism, teaching, nursing, architecture. All of the characteristics of these professions are working with ambiguity. Whatever the future holds for financial planning, we’re still going to be in that space of managing that ambiguity. Of managing that constant change that our clients are in.

You look at what are the elements of what we do. I don’t think that insurance sales or investment management has the ambiguity that financial planning does. Those are two separate things. We can technically analyze these arms of financial planning, but financial planning as a whole, I think that’ll always be there. I think looking for what’s the future of the profession … my hope is that the future is that it actually becomes a profession. One that’s not so … just a couple just quick thoughts on that. I think the public needs to view financial planning as a profession. I know when the CFP came out with their marketing campaign a couple years ago, they kind of met a lot of resistance, but just the awareness that it’s brought, I think is a huge deal and a huge step forward for us. We have to act like a profession. Some of the elements … there’s an esoteric body of knowledge, so you have to be skilled. The average person doesn’t just get to be a financial planner.

I know whenever I say I’m a financial planner, they either stop the conversation, or try to provide advice on something. Here’s what I would say, and the reality is good financial advice isn’t just given off the cuff. It’s not just common rules of thumb that we can just apply everywhere. It’s not … doctor’s don’t just say, eat an apple a day and it keeps the doctor away. It’s much deeper than that.

I think the minimal education curriculum was part of this article, what he was saying. I think the work that college professors are doing is so incredibly important to our field. Then, advisors have to read that. One of my other pet peeves is how do we incorporate research and all this great work that’s being done out there into our practices? I think that’s … we need to figure out a better way to do that, and I’m sure we’ll get into that conversation more. A sense of altruism. People become a doctor because they want to help people. People become ministers because they want to help people. Once we really start ingraining this idea of financial planning, I want young kids to say, “I want to go become a financial planner because I want to help people with their money.”

Casey:                   Mm-hmm (affirmative).

Hannah:               I think … again, that’s a lofty idea that’s maybe not quite so tangible, but I do think it’s important. Then, a code of ethics, which obviously is very much in the news and things like that. We have a long ways to go before we figure that out. The other sense of calling goes back to this, “I want to help people.” Then, to be a profession, it affects every single person. Whether you have no money, you’re in a mountain of credit card debt, or you have ten million dollars, financial planners should be able to speak to you. Not every financial planner should be able to speak to every group, but we need to figure out how do we serve people who don’t have seven figures? I don’t think that we’ll ever become a profession until we do that.

What’s exciting for me when I think of the future of financial planning is the people who are trying to figure that out. Trying to figure out how to provide financial planning to the middle class and to the lower socioeconomic groups, because only until that happens … only then will we be a true profession.

Casey:                   Yeah. One of the common challenges that I see whenever I’m communicating with clients or just a random person out and about town is they have a limited experience in viewing others finances. Certainly they have a view of their own, however biased it may or may not be.

Hannah:               I’m sure they do.

Casey:                   They may have a view into parents or a few close friends, but it’s a pretty narrow subset. We have a unique advantage in that we get to see many different ways of doing things. Generally speaking, no, there’s not just one way that applies to everyone. Someone that’s successful in life that would be a potential client, they haven’t generally seen other ways to have success. They may not appreciate the risks that they’ve taken to have that success, and they want to apply their experience to others. I did this, it worked. You, your friend, their friend should do the same thing. Conversely, those that are in debt, they don’t have the seven figures, and maybe aren’t the pure target for every single advisor, they’re dealing with such different issues of how do they get out of debt, and they could go with the Dave Ramsey approaches. There’s many other ways you could do it from a math perspective would be better, but maybe behaviorally aren’t. Maybe getting out of debt worked for them. That doesn’t mean it’s going to work for the next person.

That’s a giant frustration for me is that the public in general sees their path to success or out of a problem as the solution, and to be able to accept that there are many different ways is an element of public education or awareness that I hope we see in the future, because that education process stalls the point of either getting the opportunity to give advice, or delays the process of that advice being taken.

Hannah:               Yeah. With that point, one of my other big pet peeves is it’s so easy as a society to measure financial success because there’s dollar signs. There’s numbers. It’s like, an account mind. I can say, “I have a million dollars. I am therefore successful,” but if you look at two people who are graduating, and one chooses to work at a nonprofit versus go into corporate America, they’re going to be on two different financial paths. Which one is more successful? That’s a very hard thing to weigh, and a lot of financial advice only centers around the numbers, and not these bigger conversations. I think that goes back into the ambiguity of it’s not just one direct answer.

Casey:                   Yeah. An area I’m really excited about is that we are now a profession. I’ll call us a profession. We’re certainly an emerging profession, but nonetheless one. We’re one that now has a PhD program.

Hannah:               Yep.

Casey:                   We’re now subjecting financial planning concepts to true research, and we’re vetting it and seeing what the outcomes are, and things that we’ve probably known to be true, some of it won’t be, or it won’t be the best idea or it won’t be the best application. It may take us a decade or decades to get most of the financial planning concepts tested and vetted through PhD type programs, but nonetheless it’s coming. Then, hopefully we’ll be more like the investment world where it’s disciplined, generally people who need and are willing to accept help. Then on the financial planning concepts, it’ll be more tools where we as advisors will be able to stand on the shoulders of those that came before us, rather than having to feel our way around the edges and figure it out ourselves as much as we do today.

Hannah:               Trust our intuition and our instincts.

Casey:                   Yes. Yes.

Hannah:               There’s so much of that going on. Yeah. I think that’s what’s so cool. You look at the future of financial planning, the people who stared it … they went into insurance and investments, and then became financial planners. They went from almost a specialized to this broader … and a lot of it was sales based. I know sometimes that gets a negative connotation, which it is what it is, and I don’t think it’s always negative, but we’re getting a whole new … I mean, I’m one of them where I graduated from a college program where I have an educational background, and that provides me a different perspective. A lot of these new planners are coming up, and they have more foundational understanding of financial planning than their bosses do, and that’s a very hard dynamic to work through at a firm, but it’s … I think that’s going to be what kind of leads some of the shifts and leads financial planning into the future.

Casey:                   Yeah. Absolutely. Another challenge that I see with the future of financial planning … it’s not unique to financial planning or investment advice, is fee compression. Cost. That could take any number of forms, and again, every business faces that. There’s always going to be someone that does what you do cheaper. The process of financial planning being viewed as a profession will also be coupled with known value that that profession provides. I hope that that will ameliorate some of the focus on cost, and instead turn to advisor A versus B. What kind of value they bring to the table. Certainly we try to do a good job of communicating that on our own, but I fear that it comes across as a sales pitch because we’re just saying it. It’s not easily demonstrated.

If I look for tax saving opportunities, well we don’t know what’s going to happen. You may be able to do that better than I as a CPA, but it’s hard to say, “If you work with us, we will be tax sensitive, and that should lead to blank, in terms of better return.” I don’t mean better as in higher, just risk adjusted or after tax and risk adjusted, it will be more appropriate for you. Those are hard concepts to sell a client on. Nonetheless, Van Guard studies, Morning Star studies have suggested they are very real, and where most of the using their terms advisors, alpha and Gamma, where we’re truly bringing value to clients in general. Yeah. It’s a long process to get there. Very long.

Hannah:               Yeah. One of the … at an FP retreat this year, they did a lot on the age of acceleration and looking at how much change our society and our world is going through, and they had … obviously, they’re not going to hear the audio, but this graph where it curves up. It’s such a dramatic and steep curve, and that’s where we are. It’s not that long ago we only had horse and buggies, and now we’re looking at … just the technology that we have and what we’re able to do. I mean, we’re looking at self-driving cars now. That’s crazy. How did humans process change? A lot of what the conclusions were is that humans can’t process change as fast as we’re getting it. We are finding coping mechanisms and we’re not responding as we should, as psychologists would say that we should.

For some people, it’s really terrifying because they’re like, “Financial planning … that just means that all of my services are going to be outsourced. That means that somebody is going to be able to do it for 15 basis points. That means that somebody is going to be able to do it for cheaper,” and all these things, but I think it’s a really interesting idea. Who’s going to help our clients navigate this change?

Casey:                   There was an interesting article that Michael Kitces produced recently or contributed to, but it used the concept of chess to illustrate why robo advisors or technology isn’t really the competition of an advisor. To quickly take you through the main point of the article, you take your average chess player. There’s a scoring system … they’re not very good. As you go to internationally competitive, they’re much better. Then when you start talking about the best chess players in the world on this scale, they’re way off to the far right end. They’re the best that there is.

Now, if you take the best computer programmer there is for it, it’s another 10% better than the best human is at this point. The humans stand virtually no chance at this stage. Some elements of what we do can be done better by a computer than we can do on our own. The repetitive task, considering multiple variables that we or programmers build into algorithms. They can do it quicker, more efficiently, more error free. To suggest that we can compete on everything with technology is just incorrect.

However, if you take really good chess players. Not the best, not even internationally competitive and you pair them with that best computer, they’re about 20 to 25% better than the best chess player in the world. They’re better than any chess computer in the world. It’s focusing the humans efforts around the areas that technology doesn’t consider, recognizing where the traps are with whatever financial planning software we use, what it’s blind spots are. If you use multiple softwares, not just for financial planning but across all the things we do, understanding when to apply one software versus another. Those are the tasks that humans will always have … I say always. This article postulated we’ll always have an advantage over technology because it’s dealing in that world of ambiguity that Hannah was referencing. It’s the thought where we start to take in emotions and behavior and judgment calls that can’t be foreseen be programmed, and you do have to rely on intuition.

Charlie:                 Also, there’s not a winning scenario you could program.

Casey:                   Yes.

Charlie:                 That’s easy with chess. There’s even an AI that beat players at another game where it just learned by playing itself over and over again, but it knew what winning was. This area, that ambiguity, there’s no one winning. You can’t just say, get the client to this number because that’d be it.

Casey:                   That’s a great point.

Hannah:               Really good point. I think there’s a lot of factors. We’re talking about this really big level … like, what is financial planning and … maybe we should stay there. One of the other, looking at age of acceleration kind of ideas is, is WebMD for doctors. That certainly hasn’t taken away the need for doctors, or turbo tax for accountants. We still use that, or legal zoom for attorneys. Maybe we need something like this to help service the demographics that I can’t sit across the table from them profitably and do that. I think there’s a lot of interesting parallels looking at other places of change. Bob Veres came out with an article. Did you see that article? The youth led rebellion brewing in financial planning.

Casey:                   I haven’t read that one.

Hannah:               I thought it was a really good article. I think he brought some really good points on it, so I’m just going to read a couple sections of it. One of his points was, “Today the financial planning has simultaneously reached a point of rapid evolution and managerial stagnation.” As with anything, there’s so much change, and there’s the people that are resistant to change, and there’s always going to be tension there. I think we’re coming into that tension.

He leads the article out by talking about how, first sentence, “I’m a bit horrified by what I hear from younger planners today. They say they want to take the next steps in their firm’s evolution. They say they want to bring financial planning to the blue ocean of younger, not yet wealthy individuals, who were ironically the same type of people that their firm’s founders worked with in their early days. They want to implement Robo Advisor technology and change their companies fee structure from the old AMU model to something that matches, but with more precision that fee charge for services, but that’s not what I’m horrified by. I’m horrified by what happens when they propose these ideas to their firm’s founding planner. Too often the answer is a variation of, ‘You can make all of these changes after I retire.'”

I know I’ve seen that. Huge trend. What do you do with that? That tension is going to bring a lot of change. I think it already is bringing change. I think we’re already … I think we’re past the bleeding edge of it. I think we’re more in the … people are adapting this. I think there’s a lot of interesting changes that the profession is going through.

Casey:                   Yeah, and one area where the future is now is the Department of Labor’s fiduciary rule. While we may get another delay on the final implementation or may not, it has brought to the forefront of the public the concept of, is my advisor a fiduciary? What is a fiduciary? I’m sure many didn’t even know, but I’m happy that that conversation is now in the public awareness, and not just because it was being talked about at the law level, but because we’re in implementation. As a certified financial planner, and Susan as well, and Hannah … I guess you will be with the experience. We all have in this room a fiduciary capacity, but not everyone in the profession did prior to the OL. Now, it’s virtually unavoidable unless someone is very, very, very narrow in what they’re doing. To build the public confidence in what we’re doing, that truly we’re looking out for their best interests in some scale, some form, is a critical element to building the profession of financial planning. It’s exciting that now it is happening.

Hannah:               Yeah. I think like … I know a member of NAPFA, so I’m fee only, and I think that that was kind of held out as this holy grail. If you could be fee only, then everybody is going to trust you. The public knows … I’m in several large Facebook groups where it’s like the public talking about financial issues, and PR has some good ones, and there’s some other places out there, so I would definitely recommend just getting in there and just listening. Not that you’re contributing, but just hearing what people are saying and the questions that they’re asking, but it’s always … you can’t trust financial advisors. You just need to find a fee only advisor. I think when we look at the future of financial planning, if we do things right, that’s going to change to where it’s not going to, “Get a fee only financial planner,” it’s going to be, “Get a CFP.”

I think we still have a lot of room to grow. I think that’s for a lot of the discussions and the CFP board’s new proposed rules of expanding that fiduciary responsibility for CFPs. I think those are all really good steps. I think there’s … we still have to see how it plays out, because implementation is hard. They’re not auditing us. They’re not … people who are not acting in their clients best interests right now who are CFPs, are they going to change their behavior? Most likely not. The reality is, the majority of them won’t. How does the CFP board handle that? How do we as a profession handle that? I think we have a lot to prove, but my hope is that in the next decade or two or however many, it’s not, “Go to a fee only financial planner.” It’s, “Go to a CFP.”

Casey:                   Yeah, and the concerns we heard, or I heard leading up to the very stages of DOL … generally it was the older advisor that had their way. The way that they did business. The way that they preferred to. The way their clients were accustomed to receiving investment or planning advise. They were more worried about DOL than younger advisors. Certainly I want to make sure that it doesn’t compromise what I’m trying to do, but I’m still relatively young. I can adapt. As long as the vision behind that is positive for consumers, I’m happy with it. There’s nuances that cause headaches. There’s nuances that, in my opinion, are not in the best interest of clients, but a little bit of bad that comes with the overall good is just something that I’ll have to deal with and happens with every tax law change, every estate planning change, and most anything else that impacts us as a business.

The, “You can deal with it after I retire.” That notion … I suspect that’s where a lot of the clamoring for DOL being bad comes from, because we are an older profession in general. It seems we’re getting younger because there’s new advisors coming straight into the business as opposed to as a career change. Still happens both ways as our room represents, but there still is a very heavy skew toward the older male advisor. It’s going to take 10 years before that turns itself over, and DOL may- may- accelerate that greatly. At which point the profession can start to move forward on the concepts, Hannah, that you positioned earlier. It remains to be seen if that will happen. It was certainly speculated that it would be a strong push to create that, but I haven’t seen any data that says it’s actually happening post June 9th.

Hannah:               Yeah. Well, and it’s such a … there’s so many elements here, and I think as we were talking about financial planners coming into business with already this foundation, this educational foundation, I think that we’re starting to see a lot of businesses being run as businesses. For a lot of financial planning firms before, it was just, “I’m a great sales … I’m the rainmaker. I can bring them in, and I’m kind building up people underneath me.” But financial planners … it’s just like doctors. Doctors make some of the worst business owners. It’s just their skill sets are in two different places. I think what I’m starting to see a trend as well is financial planning firms that are having a business manager. That are having … really approaching it more structurally that way, rather than just depending upon one person or one personality in their firm.

Casey:                   Absolutely, and I suspect a lot of that has to do with the increased compliance … I don’t want to say burden, but certainly it is in some ways. Increased compliance requirements that the industry has experienced over the last decade plus, and as that happens, it becomes essentially a fixed cost with a variable component, and thus the bigger the firm is, the more that you can share that burden, the more effectively you can address it at a reasonable cost. We’re seeing this greatly in all of the RIA aggregation across the industry. Clearly, scale is working. It’s a pitch that advisors are accepting, especially those that are leaving. The Morgan Stanley, the Meryls of the world. There’s a lot of firms, not to pick them out specifically, but there have been a lot of examples where teams are carving out of large broker dealers, bank owned firms, and going to the RA world. It gives them the flexibility to offer clients what they need in a way that’s not restricted as much, certainly by the companies they were with.

Hannah:               I think that’s a huge trend. Moving away from the broker dealer to the RA. I think I’ve had a number of conversations with people at broker dealers where like, “Okay, so why … what’s the value the broker dealer adds?” And I think that there is value. I do think that there is, but I think the trend is going to be the RA route. I’ve had some conversations with people who are never going to leave their broker dealer, but they’re just like, “We’re not going to leave because we’ve been here for so long, and all of our clients are here,” but with all these new rules, aren’t I just operating like an RA but having to jump through all these other hoops that I shouldn’t have to jump through? I think that’s going to be a huge trend going forward.

Casey:                   Absolutely. When I started, the concept of the largest firms versus going to a smaller firm or starting my own practice or whatever, the entire spectrum, the draw of the larger firms was purely marketing. If I affiliate with someone, it’s the most well established brand in financial services, does that make it easier for conversation of whatever perspective client I’m talking to, does it make that conversation to client easier? The concept wasn’t, is their product better? Is their service to me as an advisor better? It was simply, does it make it easier for me to do business? What we’re seeing now is that in a lot of ways, it makes doing business harder because you can’t get clients what they want, the way they want necessarily. Not always the case, but certainly a trend we’re seeing.

Hannah:               Yeah. I do think … there’s some interesting trends. You’re talking about the merging of our larger RA practices and RAs buying out other RAs. I think that goes into a lot of that business side of it, but I’m a small RIA … I think I’m classified as a lifestyle practice right now. I think that’s a growing trend, too. Just with technology and the resources that are out there right now for new firms that want to start up, it’s never been easier, and it’s never been easier to do that and ramp it up at a quick pace. There’s so much I think that’s in favor of that model right now, too.

I know I’ve seen articles saying that that model is going to go away because of all these increased regulatory things, but it’s like, if you make the business decisions knowing the regulatory landscape, you can make business decisions on how to run your firm so that it blends really well with that, and it’s not a really burdensome … everybody is going to have compliance, but it’s not … I think people try to … understanding people’s motives I think is really important. I think a lot of times some of the stuff that I’ve heard about how, oh, you never want to do that because of the compliance burden. It’s like, well you have a very clear motive of wanting to keep people on the broker dealer side, when I don’t think that may be is … it hasn’t been the reality that I’ve experience.

Casey:                   I think you’re living another example of the future is now with at least somewhat a lifestyle practice. Ten years ago, it would have been extremely difficult to communicate the way you do with clients, to communicate what you do, and live up to the duties you have to clients by being flexible and able to deliver, no matter when or where you are. Certainly, there are other examples where they’re truly a lifestyle practice and will pack up the RV and drive around the country all the time, so maybe I’m speaking a bit more to them, but we really are living in an environment now where we can find where we’re unique, where we provide unique value, communicate that, and have it resonate with perspective clients or your current ones in ways that would have been extremely difficult just a few years ago. To conceptualize that and embrace it and come up with my story or our firm’s story, and then put it out there, that’s a process. It’s one that you’ve embraced remarkable well and communicated extremely well, but it is a challenge.

Hannah:               Yeah. In so much the small RIA space, it’s you’ve got to be just confident enough in a lot of things just to get it rolling, and then you can start outsourcing what you’re not good at. There’s so many resources now.

Casey:                   Do you see all of those resources that are available continuing to grow at a quick pace, and do you find that … do you think that the small RIAs will take more advantage of those earlier in the future?

Hannah:               I think that they’ll definitely take advantage of them earlier. I mean, when I look at the XI planning that works in the things they are doing, when I’m talking to people who are thinking about starting their own firm, they are … they know exactly where they’re going and what they want to do. There’s just so much … when I started in 2009, I remember you could hardly find anything online. It was like, let me get the magazines in the mail. Let me read through those, because there just wasn’t anything out there. Now, there’s so much … there’s a lot more out there. I still think there’s missing elements, but …

Casey:                   The concept that brings to mind is completion. In the investment world, we’ve got virtually every choice. Every way that you could want to invest available and that makes it a complete market, and so the advice spectrum that’s becoming available to the advisors, the consultants that are available, in a way that makes it a complete offering to us so that we can pick and choose what we want and when we need it. I’m certain that there will be more bundled options available as well than maybe there are today, just further completing that marketplace to us as a toolkit. Certainly not on a landscape that I’m very familiar with at this stage in my career, but clearly will place significant roles going forward.

Hannah:               We’re still trying to figure out, what is financial planning? I mean, there’s still these big questions out there. There’s so much … I would say this. It’s like we’re in almost a wild west. If you’re drawn to that, if you’re drawn to that entrepreneur creating something, there is so much opportunity out there right now to really build, I think, the career of your dreams, but I’m a little biased.

Speaker 4:           What are some of the big questions out there?

Hannah:               About financial planning? What is it? Is it the process? Is it the services? How do you deliver it? Do you need to have a six step process?

Casey:                   To me, I don’t even know if I care about those things, other than the public needs to be aware. All I care about is, can I help clients and make a reasonable living doing so?

Hannah:               Yeah.

Casey:                   Can I be there for them over time so that they can continue to achieve their dreams? In some ways, what I do isn’t necessarily financial planning. It happens to be financial planning.

Hannah:               Yeah, and the CFP board just came out with their new … they came out with a new definition. Let me see if I can pull it up here … of what they’re saying financial planning is.

Casey:                   Delivering on two of the six foundational topics?

Hannah:               Well, now it’s expanded though with the new … with their new standards that they came … okay. I have it at home. I’ll put this in the show notes, for the people who are wondering, but it’s like 30 words. They really trimmed it down substantially, but there’s still so much ambiguity about it. We can’t … it’s hard to say this is what financial planning is, how I define it, how Casey defines it, how a Merrill Lynch broker defines it, how Edward Jones defines it… there’s still so much I think undiscovered.

Casey:                   Mm-hmm (affirmative).

Hannah:               Dick Wagner, before he passed away, wrote a book, Financial Planning 3.0, and he wrote … a lot of my thinking here with it … to think like a CFP, he wrote that in 1990 basically calling financial planning into a profession, and then he wrote this financial planning 3.0 of what he sees as a new evolution of financial planning. Financial planning 1.0 was creating the profession, if you would. To think like a CFP. Financial planning 2.0 is like a lot of the life planning that kinder … some of the stuff set in money is doing, money quotient, things like that.

Then, financial planning 3.0 is … I don’t even know if I can do it justice trying to summarize it, but it’s the idea of he has a chart that he would do of psychology and sociology. How they map to each other. Sociology is the broader understanding of how groups of people work. Psychology is more understanding of how one person works. If we tie those down to money, we have sociology ties to economics, right? It’s how do a group of people operate around their money? We don’t really have anything from the psychology to the money. If you think of a two by two chart, there’s nothing in that space. What he proposed is that finology he coined the term, finology would fit in that term of how do we operate and relate to our money?

Casey:                   How does that relate to behavioral finance? To me, that feels like that box.

Hannah:               There is … okay. A couple of things. Some of the critiques that I’ve heard of using the term behavioral finance is we … if a client is sitting across from me … okay. I’m going to say this. I don’t think behavioral finance is a bad term, so I don’t necessarily subscribe to all these ideas, but the critique of it is it’s manipulative. It’s saying, I want you to pick option number two, so I’m going to put option one, two, and three, and then you’re going to … because I know how psychology works. I know how to drive your decision. Where I think finology would be more, how do you approach money? What are the money narratives that we follow, and how do we understand those? Then, once we kind of have an understanding of that, then we’re going to be able to help people more on their timeline versus what I would impose on that. That’s kind of I think …

Casey:                   The difference is the use of the tool set?

Hannah:               Yeah. Behavioral finance I think is all part of that picture, but I don’t think it’s the complete picture. I think this is where a lot of the research and things that are really developing in this field are so exciting for me. One of the things … I will pitch this. At the end … Dick passed away earlier this year, but one of the things he had done was he had proposed, for him, finology would be another major. It would be the study of how money interacts with people. At the end of his book, he has an outline of a course how he envisioned, so Dave Yeske challenged him and said, you want to make this as a curriculum? The intro class, write out the curriculum. So he did. He wrote out the course, so they’re actually at Golden Gate University this fall are going to be … Elizabeth is putting together this course using his outline with some of the … their lineup of guest speakers is pretty incredible.

Casey:                   That’s a wonderful tribute and legacy.

Hannah:               Isn’t that? Yeah. Really neat way of doing that. They’ve started a Financial Life Planning Masters or PhD program. I can’t remember, at Golden Gate and this is the intro course to it. If you’re interested in this, you can go audit it, or look at their program even more. I mean, it’s … I’m tempted to take the class, because it’s like the all stars of financial planning are the ones who are doing it.

Speaker 4:           Is it only live, or can you do it online?

Hannah:               It’s all online.

Speaker 4:           Oh, it is online. Okay.

Hannah:               Yeah. It’s online. The registration is open now. I know they’re sending out emails trying to get people to sign up for it. A really interesting dive into this … I don’t know, I think a lot of the future of financial planning is going to head that way. I think it’ll inform planners significantly with how we interact with clients on a personal level.

Casey:                   Mm-hmm (affirmative).

Charlie:                 It’s an academic discipline.

Hannah:               Yeah, an academic discipline.

Charlie:                 From Psychologists to counselors … there’s overlap. One’s going to be working more towards trying to help you change something about what you’re doing, and the other person might be diagnosing. Both are useful. Both sides are very useful to each other, but here at the finology would be a discipline of study and not just looking for outcomes.

Casey:                   Right.

Hannah:               Yeah.

Casey:                   We probably all do elements of both sides of it, just as you announced it. All based on intuition and learned experience, which doesn’t get us there as fast and probably not as well.

Hannah:               Yep, but … yeah. I don’t know. I see that a lot as the future.

Casey:                   Mm-hmm (affirmative).

Speaker 4:           What about single practices versus ensemble? Will there always be those, or is one going to dominate in the future? Does it even matter?

Casey:                   I would imagine that comes and goes over time, depending on how much regulation there is and generational trends, but like with investments, there’s room for stocks, bonds, alternatives. You name it, there’s a way to invest in it, down into derivatives, because individuals are at different stations in life, at different ages with different career paths with different goals, it stands to reason that there will be different types of firms that are more appropriately structured to serve those clients. I think that manifests itself in room for the entire spectrum of firm models or practice models.

Hannah:               Yeah, I tend to agree with that, and I think there is going to be a pretty heavy weeding out process that we’re going to see in the next five, maybe even sooner years. I think a lot of it is going to go back to, what’s your value proposition to clients? I think that … number one, I don’t think most advisors can articulate that. I know I struggle with that sometimes, but if we can figure out what that value proposition is … it’s a value proposition like we were saying earlier. It’s investments or all of these other things, those are the people who I think are in danger, and I think those are solo planners. I think those are ensembles. I think those are some of the big firms out there. I think to me, that’s the difference of who will be able to stand at the end.

Casey:                   Yeah, and those that will be able to stand at the end, like any industry or profession, the businesses that can reasonably see what’s coming, whether it’s proactive or reactive, realistically assess where they’re at and what they’re trying to accomplish, pivot change, take advantage of the landscape, or just take the necessary steps to survive … those are the ones that make it. The ones that can just look at a situation, assess it, and react, whether it’s proactive or not.

Hannah:               I think so much of it goes back to … a lot of people I listen to … the people I know and have conversations with, they’re either starting out their firms or they’re probably ten years into the profession, and they’re still trying to figure everything out. They’re highly adaptable to change, and wanting to pivot and do these things. Now that I have an established practice that’s successful and paying my bills and I can kind of sit back a little bit, I find myself … I’m very adaptive on certain elements of it, but there’s some level where I don’t have to adapt. I mean, I don’t have to be on that cutting edge of it.

Speaker 4:           If it’s not broken, don’t fix it.

Hannah:               A little bit of it’s not broken don’t fix it I think, but what I’ve realized is I think the key is listening to your clients. Engaging with your clients of, what’s invaluable? Having those ongoing conversations I think is what separates the firms who are going to be successful from those who are not, because there are some clients … some of my clients have … I don’t think they care how they pay for me. They have to have me. That’s a different relationship, and it’s making sure that I’m in tune with them and with, “Would this make more sense?” And then asking them.

Casey:                   Yeah, I think that’s absolutely brilliant. One thing that’s common in our industry is that clients are sharing intimate things with us, maybe things they don’t share with anyone else other than hopefully their spouse if they have one. They are putting great trust and confidence in us, but it’s fairly one sided. If we can turn that around and put some value in their opinion … true value. Not just asking because we want to appear like we care what they think, but truly probing and asking, “As this firm changes over time, what would be helpful? What would you want from us?” What Hannah suggested, “What do you find valuable now?” To help understand over time is what I think is valuable, what the client thinks is valuable. Involving them in that discussion in some way could be critically important to developing the relationship so it’s not just take, take, take, it’s a true two sided relationship.

Hannah:               Mm-hmm (affirmative). I think people have client advisor boards. I haven’t done that yet. I feel like it’s something that I should do, but I haven’t done it yet. That’s a risky thing because they could say things I don’t want to hear.

Casey:                   Right.

Hannah:               That’s part of it, but I had a client who … she just transitioned beautifully from selling her home to an advance retirement community. I mean, I was like, how did you do it? I called her up and I asked if I could interview her, and just talk to her about what that was and can you walk me through what that experience was for you? She was thrilled. When we were talking, she talked a lot about the idea of legacy and she was like, “Even you asking me to do this, I realized is part of the legacy. Something that I can give back.” It was such a neat experience, and what was even better for me is I got to hear how she reflected on her relationship with me throughout the process, and I learned so much about what she valued, what I thought was important that she didn’t, and it just opened up this really … I learned so much by just asking. I don’t know. I always say my clients are my greatest teachers, and I think we can really take much more advantage of that than we do.

Casey:                   Yeah, and can and should. It’s something I think about all the time and rarely do. It’s just on that long list of things in my mind or on paper that I know I want to accomplish and want to do, but we have to pick and choose where we spend our time. It’s real world allocation of our time resource, but aspirationally, it’s very, very high on my list. I just haven’t taken that step.

Hannah:               Yeah. Do y’all have any thoughts? I know we’ve been talking a long time.

Speaker 4:           No, I found it very interesting. I guess I am curious what more specifically what you found your clients appreciate the most? What surprised you about what they think is relevant and important versus what you would have thought?

Hannah:               On my website, the guiding wealth website, I actually did a series of blogs about that conversation. I don’t tell my clients this, but when clients engage with me, I want them to think and operate around money differently when they leave my financial planning process. I don’t say that to them, because I think that’s kind of a weird thing to say, but that’s what she reflected a lot on. She’s like, “I used to think about money this way, and now I think about it this way. I used to do this, and now I do this.” I was able to see a lot of things that worked, and how she paraphrased some of the advice that I gave her. I’m like, “You picked up on that!” A lot of the number stuff, the projections, the things like that, she found them valuable, but it was not … it was almost an afterthought to her.

Casey:                   Mm-hmm (affirmative).

Hannah:               It was all of the other things. Another thing I thought was very interesting, if you do a lot of the life planning stuff, they’re like, “Ask about their family.” I’m always like, that’s kind of cheesy, but she started out the conversation by walking through how her grandmother handled the transition, how her mother handled the transition, and how she’s like, “I don’t want my granddaughter to handle the transition that way, so I’m going to change this.” It really brought in this idea of legacy that I had never thought of before. Obviously, I think about it in estate planning. You know, legacy in that traditional sense, but the work we do as financial planners, it changes clients lives, but it literally changes generations of families.

Casey:                   Mm-hmm (affirmative).

Hannah:               I think that’s a very, very powerful idea. You don’t get outsourced for that. That’s something that’s very fundamental.

Speaker 4:           You don’t outsource empathy. That’s a big thing in financial planning.

Hannah:               Yeah.

Casey:                   True.

Speaker 4:           I think that’s what’s bringing more women into the profession or making women more valuable.

Hannah:               Yeah.

Casey:                   No doubt.

Speaker 4:           The soft skills.

Hannah:               Yep. Yeah. That’s a whole other topic about women in the profession, getting them in and how do we keep them in. Yeah.

Casey:                   I would imagine that part of the future of financial planning, as every model or firm has it’s increased role with public awareness heightened, I would imagine the flexible arrangements could solve some of the challenges that women face in the industry. If there is the ability for a segment of women, you don’t have to step out of the profession for X number of years if you want to raise a family and be there, if you can scale back what you’re doing and have a flexible arrangement. That makes sense. We have the technology now to allow that to happen. That would be positive for the impacted employee. It will positive for the families. It will be positive for the employer to have that continuity and not have to have the turnover. It will be positive for clients. It’s a no brainer in my mind, but again, it’s like most things because technology has progressed, it’s more possible now than it was a few years ago to be done well. That will only be enhanced in my mind.

Hannah:               Yeah.

Casey:                   All of these things are contingent on creativity and willingness. We will have tools at an ever increasing rate that solve our problems. How we choose to deal with them and how we choose to use them is limited by our creativity more than anything.

Hide Transcript