[tweet_box design=”box_10″ url=”https://buff.ly/31fjvcY” float=”none” excerpt=”Our legacy is going to be in helping people understand, to engage their purpose and passion into the industry, but they have to know where they fit. – Nathan Harness, Ph.D., CFP® on #YAFPNW”]Our legacy is going to be in helping people understand, to engage their purpose and passion into the industry, but they have to know where they fit. – Nathan Harness, Ph.D., CFP® on #YAFPNW 192[/tweet_box]
Hannah: I am Hannah Moore. I am the host of You’re a Financial Planner; Now What? I’m also a practitioner here in Dallas and have my own practice. I am excited to talk more about these 12 tribes of financial planning. So, our panelists today, we have Luke Dean. Luke Dean is the program director at Utah Valley. We have Nathan Harness, who is also a professor and program director at Texas A&M. And then Craig Lemoine. He is also a program director at the University of Illinois.
Hannah: So I wanted to start with the background of how did this come about? What caused you guys to create these 12 tribes of financial planning?
Luke: This is Luke Dean, I’ll start. So many students come to us as professors and say, hey, I’m looking at an internship or a job offer at this company versus this company. What do you think? And so, we’re put in a position where we have to kind of articulate the difference between specific firms or specific types of firms on a pretty regular basis, and we put our heads together and thought we should come up with a way that we can get this out to students, career changers and academic programs just as a useful resource. I kind of looked back at the 12 tribes of Israel as kind of the inspiration. To someone outside looking in, they would think that those 12 tribes are all the same. But someone in the tribe of Benjamin versus the tribe of Daniel, they knew the differences between each tribe.
Luke: I think for someone looking on the outside in financial services, they think that working at Vanguard is the same as working at a small RIA firm and is the same at working at Lincoln financial or Northwestern Mutual. But people that have been in those firms know that there are cultural differences. So that was kind of the inspiration.
Hannah: So you talked about the benefits for students and trying to understand the career path that they can have. Do you see an application for practitioners in this as well?
Nathan: This just happened to me yesterday. I was talking to a practitioner on the phone and we were walking through the firm that they were currently at, and the opportunity that existed for some students. What was fascinating for me is I’ve been thinking about the start of my career, so I started out as a wire house firm almost 20 years ago when I started my career into financial services. The entry point for me was my lane, and it was the only lane that I knew much about. Even if we look at the evolution of our profession across 20 years, there’s a multitude of new lanes that if you had only been driving in your lane, you may not be aware of across the multitude of different opportunities that are available.
Nathan: So, I think this not only makes a difference for students in making a choice, it helps those who are explaining our profession both to clients and ultimately to those coming into our profession what the different opportunities are. And those within our profession, it helps to come up with, I believe, better differentiation. When we look at how do I differentiate my service model from somebody else, I think it’s really important to understand everyone else and help to see how you fit well into the profession or able to provide holistic or the type of advice that you’re trying to provide to your clients to be able to differentiate from one firm to the next.
Hannah: So with that on, we have the 12 tribes listed on the screen right here. And so what we want to do for the audience, we have a poll question of how many tribes have you been a part of because often people start in one and then maybe transition to others. So looking at these 12 tribes, you have different attributes associated with the different areas. Can you guys share more of how you, how you kind of assign these attributes and the differences that you see in those.
Craig: The way that we look at this financial planning, the way that I look at the financial planning world, these tribes of financial planning, is that I kind of view this as a piece that not only do we share with students, but I also share with parents and with advisors. On the college, share within our campus within our department. I find it to be a really great one page piece. And I’m going to talk about the attributes here in just a second. What I find this to be is when you sit down and talk with somebody about financial planning, they generally think of the bigger name firms that advertise on TV, football games and golf events. And that’s not necessarily the jobs their students are taking. And it’s not necessarily at all the entire world of planning that is available.
Craig: So, when we talk a little bit about the model of these 12 tribes or circle of financial planning, or whatever each of us call it, I think it’s important to realize that students can succeed coming from wildly different backgrounds with wildly different passions. And that’s the conversation I like to have with students, I like to have with their parents, I like to have with our advisors, because we have different kinds of people in our program. We have some who are extraordinarily analytical, we have some who are very visual learners. We have quite a few that are very entrepreneurial. And it’s important that we did this in a way that lended itself to kind of say, well, there’s somewhere on this that you can identify what you’re good at.
Craig: And Nathan, I think I’d like to kick over to you for just a second, you talk a little bit about, what we think your fit is, don’t leave the industry just find another tribe.
Nathan: Yeah, that’s happened with a multitude of students. Again, in my 12 years of teaching at the academy. I’ve had probably in sum total seven freshmen come in to be a financial planner. Still, to this day, our industry is relatively unknown, and I just got out of a conference where we talked about the legacy of financial planning. I believe our legacy is going to be in helping people understand, to engage their purpose and passion into the industry, but they have to know where they fit. And they have to have an understanding of the comprehensive nature and opportunities that exist within our profession.
Nathan: So when I have students who come out, let’s say, and they go to work in any one of these areas, even within these areas, there’re sub areas, so let’s just pick out RIA, there are a multitude of different types of RIA firms. So you could go into an ensemble firm, you could go into a multitude of different areas. And if that wasn’t the right fit for you, or that company or that particular path or tribe was not the right fit for you, it doesn’t mean that you’re not the right fit for financial planning.
Nathan: When I first came into the industry just referencing back really rapidly, my entry point there were 200 people that started at the firm with me simultaneously. Three still exists in the industry today. So there’s a multitude of reasons for that, but I think part of the reasoning behind that is because of a lack of understanding of where I could fit in, given the gifts that I have and the passion that I have in my area of planning. So what I’m hoping is, we’re helping people understand the map of planning. I always tell my students this, that if you have extreme passion but you don’t know how to engage your purpose, that’s like having a map without a destination. So we’re hoping that people can see the entire map and have a clear understanding how they can get to where they want to go.
Nathan: With that said, just one piece to mute here and an understanding is, this isn’t perfect. It becomes exceptionally difficult to put up walls and even guide rails to define each one of these companies. So if we took any one company, they could potentially fit into a couple of these modular areas, not just one. It’s like going to Walmart and saying, what does Walmart sell? Well, everything, it becomes exceptionally difficult to define that. So we’ve done our best to create some of those key differences between each one of these modular areas so that we can bring definition and understanding. But this is an evolving piece and we’d love to receive feedback from this audience or any audience in continuing to enhance this.
Hannah: So with that, I want to look at the poll question here that everybody’s been answering. And so, it looks like, how many tribes have you been a part of your career? 44% of participants said that they’ve been in one, not changing. 24% have been in two, 22% have been in three. And then a smaller portion in the four or five plus. That alone is interesting.
Luke: I hope it’s indicative that they’re happy with the tribe they’re in because that’s part of this is if you’re not happy, don’t leave the profession, don’t leave the industry, find a better fit. And it seems like just based on your poll results, that people are kind of staying within that tribe.
Hannah: So let’s go to each specific quadrant if we would. And so this first quadrant here is the wirehouse, the P&C, life and disability and then these franchise models. There’s three different quadrants. So, Nathan, do you want to take this one and kind of walk through the different areas and attributes that you associate with this quadrant?
Nathan: Sure, yeah. When we look at the attributes of this bluish or navy looking quadrant, you’ll notice in the graphic that we co-designed here, the graphic doesn’t have a perfect ending either. The color patterns blend from one to the next, meaning that some of these have crossover, that as you move into a franchise or an independent also known as hybrid, that has some key differences than some of the other attributes that are known within this quadrant.
Nathan: So this particular quadrant that we have here tends to be what you would consider high risk high reward, meaning that you have potentially little to no salary coming in and you’ve got to generate your own income most of the time inside of this particular quadrant. It’s going to be based around a big name, typically. So most of the name recognition and most of the students that come to me into our financial planning program, if I just said what is financial planning, the names they would throw out almost exclusively set inside of this quadrant, because they’re national, they have national brand, they’re putting out national advertising. And most of these instances as well, you would think in terms of book of business, meaning that you go and you generate a book of business, that is a clientele that you generate through the sales cycle.
Nathan: When you compare each one of these three quadrants, if I was to make a heat map for sales, this particular area is going to have the higher amount of sales expectations, of business development expectations for students. What’s interesting about, I’ll call them 20 to 25 year olds that come out of our program, many of them are scared of that word sales. As a matter of fact, we’ve had to reframe that word, the courses that we put together, we call emotional intelligence instead of sales. But the reality is they’re still involved in business development. It’s just helping them understand the perception around what that means.
Nathan: There tends to be pretty good mentorship, or maybe another way of saying that is training inside this quadrant. So there’s very formalized training programs, and a lot of the interns that we send into these areas go in groups of 50, 60, 70 nationwide into large training programs. To break down and just spend a few minutes or less on each one of these areas, wirehouse tends to be one of the older areas. So when you hear the term wirehouse, this tends to be the Merrill’s the Morgans, the UBSs of the world. These are full service brokers, or, in some instances, mega firms that are national and in some cases global tend to focus more heavily at least historically on wealth management and having both the broker dealer side, have heavy research analysis involved in trading, investment banking in some instances, and in some instances can provide a wider platform because of that access to credit that maybe some smaller firms traditionally aren’t engaged in.
Nathan: Financial advisors in most of these areas tend to be employees of the firm. So they are considered what’s called a registered rep. This is defined by the Securities Act of 34. They fall under at this moment the suitability standard. I don’t want to get into the long conversation about the difference between suitability and fiduciary. But generally speaking, that is the standard defined by the Securities Act of 34. They must pass in most instances, I tell students, if you’re going to work here, you’re probably going to pass the series license being the 63 or the 65, or the combo, which is the 66. And you’re going to pass this series seven. In most cases, that’s the first set of licenses that are required for you to go to work for the firm. And then you’ll go on, hopefully, and take the CFP exam.
Nathan: Clients here tend to be viewed by the firm as clients of the firm. That’s why you can see lawsuits sometimes that occur whenever somebody leaves one of these firms and goes to another. But large brand recognition and somebody else is covering your compliance versus some of these other areas you’re in charge of your own compliance and advertising and other pieces. Because of that, again, with each one of these and almost every instance of the P&C, the L&D, the wirehouse brokerage, there tends to be your take home. Let’s say that $1 is generated in revenue, you get to keep on average about 40% of that. The remainder goes to your parent company to pay for overhead, to pay for lights, to pay for compliance and all the different elements that help you run your practice.
Nathan: Wirehouse, P&C and L&D have a lot of similarities in the elements that I just spoke over except for that property and casualty or P&C is what a lot of people in the industry refer to it as. In that area, the focus tends to be more on insurance or protection, sometimes you’ll see P&C and L&D, life and disability firms combined into one. But for the purposes of this conversation, we’ve split them into two. These are big names that all states of the world that tend to be engaged in. Car insurance, in some instances, homeowners insurance. As we move into life and disability and that area, again, a lot of financial planning takes place in this area, specifically for the middle market. These would be the Northwestern Mutuals of the world that tend to have a protection first mindset but still have the opportunity and ability to do incredible holistic financial planning inside of those particular areas.
Nathan: Most of those two quadrant or those two tribes that I just talked about require that you pass that P&C and L&D. Those are licensed at the state level. So you’d have to pass those exams based on the state that you live in rather than national exams. The last piece that I’ll talk about is what I consider personally to be one of the hardest tribe to describe and explain because it contains so much, and that’s this franchise. When you hear this franchise or independent broker dealer, what’s contained in here is two additional pieces.
Nathan: And those two additional pieces are known as duly registered or hybrid firms. I hear people in the industry all the time refer to those to mean the same thing but they don’t. A duly registered firm is different from a hybrid firm. Both of them have an RIA and a broker dealer but when it comes to a duly registered, you’re rolling up under the RIA of a captured parents. So that might be Raymond James Financial Services. Raymond James is going to be my broker and the RIA that I fall underneath versus a hybrid firm is going to have an independent RIA, and a broker through some kind of an independent broker dealer as well.
Nathan: Again in this little area, I’ll conclude by talking about this franchise independent, very similar to full service brokers, but they tend to be smaller. You are not an employee typically of the parent firm of the wirehouse. Many of them are duly registered that I already got into just a second ago. Businesses inside this quadrant typically do business in their own name. So they may be Nathan Harness Financial Services, and then in small print somewhere, where they’ll talk about the broker dealer that they fall underneath. So there is sort of this duality in that you get independence in the naming of your firm while simultaneously having a big brand coming behind you would be one of the advantage of this.
Nathan: Clients tend to be viewed as clients of the advisor, not the firm and I think that’s in part because of that RIA or dual registration element that’s there. You can have a very open architecture. I think one of the interesting pieces of this independent element is you still can, let’s say that you have clients, you purchase a book of business. You can continue to receive the trails off of a book of business that you purchase while simultaneously being able to charge an AUM model underneath the RIA side. So it provides a lot of flexibility in how you do business from an architecture standpoint.
Nathan: But there tends to be a little bit less brand recognition because your name’s on the sign rather than somebody else’s name. Again, series license traditionally would be passed here, plus, you would have the RIA side as well. I think that’s the bulk of what I wanted to say here so I’ll pass it on that back to you to move to the next area, Hannah.
Hannah: Thanks, Nathan. On this next area, Luke, would you want to tackle this next grouping of tribes?
Luke: Yeah. And I thought Nathan did a really good job with a really hard section just because there is so many nuanced differences between each of those places. RIA is very similar in that you could be at a small firm that is state registered or just barely nationally registered with 100 million assets, or you could be at a firm as four billion in assets under management. So we’re just lumping them in one tribe and trying to generalize and characterize that, so it’s hard to do.
Luke: But effectively there, it tends to look a lot like a law firm or an accounting firm where you start in an entry level role, work your way up and take on more responsibilities until you become a partner at the firm. And so, generally, there’s not as much business development professor right out of the gate for a new professional or a student or a career changer. But over time as they become partner, there tends to be a little more pressure on how are you helping grow the firm,
Luke: The focus at a lot of RIA firms is take care of the clients and that will help build the business. If you’re more of a minder than a finder, then this tends to be a good tribe for you. And then I know there’s a lot more to say there but I’m going to jump over the accounting and tax RIA firm. So they’re still RIA firms but I kind of treat them as a separate tribe because over half of accounting firms have started offering financial planning or wealth management services. And that number is growing every year. And accountants have the best reputation in financial services for client trust.
Luke: And so, they already have a lot of clients that they’ve been helping on the tax side that would also like help them comprehensive financial planning or wealth management. So those firms like to hire CFPs. They would love it if you had an EA or a CPA to go with that. But they hire a lot of CFPs. And the focus again, is take care of the client and there’s not as much pressure on building the book of business because most of your clients are referred over from the parents tax company.
Luke: So an example of companies like that are Moss Adams. And then locally in each city, there tends to be big accounting firms that offer financial planning as just a small subset. And so again, really good if you’re a minder and the clients are just kind of delivered to you.
Luke: On the counseling side, there’s a lot of directions you can go with this, from consumer credit to the Consumer Financial Protection Bureau or board, whatever they’re called in DC. One popular one is Zeiders (Enterprises) where they’ve won military contracts to go out to military bases and provide counseling to US military families. And so, they have job offers around the world on US military bases in Germany, Japan, Guam, Italy, and even Hawaii and Kansas and everywhere else. So, they can hire for full time positions, they can also hire for part time or weekend or even just a few hours a week that local financial planners and advisors could sign up for and get paid to go help these military families, and almost in a way feel like they’re serving.
Luke: And then there’s a lot of different channels you can go in with counseling. Tends to be with more lower net worth clients. And the issues are real but deal with a lot less zeroes than what you would typically see in some of the other tribes.
Luke: Moving down to the government, academia and research, I saw that Fran Lawrence was listening in on this call. There are wonderful professor positions around the country, and most financial planning programs are growing and need more PhDs. So we would love for anyone to go finish their PhD and join the ranks of academia. A lot of practitioners join academia as an adjunct later in their career. We kind of joke that in the government, academia, research, and maybe even the counseling portion of this quadrant, you have to take the vow of poverty to enter them. There are a lot of wonderful people in this profession that just want to help everybody of all net worth. And these are tribes where you can find outlets for that.
Luke: We’ve also seen CFP grads go work with government groups just to help with financial planning, financial service issues and try to make an impact and government policy where they feel like my efforts, instead of helping 100 clients, now I can impact millions of Americans. So, I tried to do it quick, hopefully in doing it quick, I didn’t mischaracterize or generalize too much. But you can see that in each tribe, there are hundreds of opportunities. And that’s one of the main points of this is to show people outside of the profession considering joining, supply and demand is beautiful in this profession, and there are so many jobs for so many different personalities that we hope you come join the profession and that you can use this as a tool if you’re a professional to recruit smart people in your communities to the profession.
Hannah: So for this last area, Craig, I’ll let you take this, talk more about this area.
Craig: Sure, happy to. When I look at the navy blue area and I look at that lighter blue, what I think is sort of the past and the current. When I was getting into this profession in the 1990s, the only option was really those bigger navy blue names. They all sort of had some business development issues and most of them had a commission element, if not right away, at least in a few years. And so that was in my opinion, what financial planning was. The roots of it tended to be in a space where as a young person you had to somewhat make a name for yourself, hustle and and and build a book. In fact, my first job out of college was with an insurance company in the dark blue there.
Craig: Now, the lighter blue tends to be where a lot of our students go today from Illinois. And the reason for that I think is the career path conversations they can have with employers. You have a giant sucking sound towards our students today and the fact that there’s huge job opportunities, we have great placement rates right now in this major, all of our programs do. And so, they really want a career path and the RIAs and tax RIA is a really good at having kind of an assistant associate full partner level of things.
Craig: Last, we have the sort of gold area. And to me, this is the future. This is where we go from here. You look at wealth management, you look at fee compression in the investment space, and it becomes very apparent to all of us on this call that eventually financial planners are going to have to stop charging AUM and come up with other ways to get paid because you have these robo tech and FinTech firms and robo advisor firms where you’re just cutting into the cost of asset management and we’re actually starting to leverage these tools.
Craig: And so, I think the robo and FinTech firms, while they’re not really hiring out of our programs now are going to and they’re going to in droves. As you have more big name robo advisors that start offering a la caret financial planning services for higher end clients, it does not strike me as any kind of mystery that eventually they’ll be coming to this program in buckets. So I see the future, the goal there with robo advisors and FinTech is really being a place where our students land. Banking credit union, trust companies have gotten more aggressive and recruiting, offering anything from kind of the dark blue to the light blue spaces.
Craig: But I want to spend a little more time on discount brokerage and product distribution companies. One of the biggest employers of all of our students tend to be the large RIA custodian firms. Schwab, TD, Fidelity, those tend to be hiring CFP, young CFP professionals or people that could become young CFP professionals by the hundreds, not by the teams here. And Vanguard as well and some other the big mutual fund companies, they look to our programs and they’re very competitive in their hiring. They offer incredible packages for students salaries, benefits, pay off the student loans, work life balance, 37 to 40 hour work weeks. And it becomes very compelling for students to head in that direction, salaries also career path.
Craig: And we’ve recently in Illinois become very friendly with a large annuity mutual fund company and the product distribution. And then they want all their internals to have the CFP mark. They like that CFP on internals. And so they look at our program, so you can come out and take that and pass it. You’re close to where Champaign-Urbana is. So we’ve had some amazing luck here. And the thing that I think is interesting about these 12 tribes is when you look at this gold area, this is where a lot of your job opportunities are starting to come from. They’re also pushing the way the other ones look. Because firms like Fidelity, Schwab and TD offer such amazing benefits, salaries and packages, you’re even starting to see some of the dark blue spaces get on the ball with. We can’t just offer someone a commission like we could 30 years ago.
Craig: You’re really starting to see evolution. I think a lot of it’s fueled from this gold sector, and more and more of our students seek out these jobs every year.
Hannah: With this, one of the questions that we, I know when we were talking about, we wanted to ask the audience again, there’s a lot of biases that come into this. And so we were curious, when thinking of hiring an employee, would you be less likely to hire someone from a specific tribe or company? And so, we’ll put this out to the group and see what the results are on that. But as we continue, there was a question from Catherine that says, with limited sales experience, is there a tribe that someone in the process of getting their CFP certification should lean towards?
Luke: I’ll try starting and then Nathan and Craig can help me out. So the beauty of being at a tax firm or a bank or credit union or a P&C place is that they’re already feeding you clients from the tax side of the business, from the bank and the credit union. They have customers that have $2 million in a CD making half of a percent. And so they’ll refer those people over to you and say, you ought to go talk to Catherine, she’ll help you do something more with that $2 million than leave it in the CD that’s not even FDIC covered. Or the P&C companies where they have compulsory clients that are required to come in because the state requires car insurance and their lender requires some insurance on their home.
Luke: If sales experience is a hard thing for you and you might not be great at building your own book of business, you want to look at tribes like that or even the discount brokers where they just have so many clients at Fidelity and Vanguard and Schwab and TD and E-Trade, that they just need people to help take care of the existing clients. There’s your start, Craig and Nathan, you have anything to add to that?
Craig: This is Craig, I do, and then I’ll get out of your way, Nathan. One of the things we found that’s pretty successful is that model of independent broker dealer model or even independent insurance agent model where you’ve got multiple folks in an office, let’s say you’ve got an Ameriprise Office of four agents in Chicago. We see this a lot in our program. They are producing agents and they they’re a BD channel. But what they want is somebody to come on and help take some of their smaller clients, some of their newer clients, someone they can kind of mold and train and teach and mentor. And so getting on board with a group like that could also be very successful.
Nathan: The only other thing I would add is any one of these particular tribes would potentially hire somebody with limited sales experience. Every student I send into the industry that comes out of an undergraduate program has limited sales experience. We all ultimately end up in some form of sales, whether you think you do or not, I always explain it to students this way. If you’ve ever had a boyfriend or girlfriend in your life, you’ve been involved in sales. If you’re like me, you’re pretty good at sales because my wife’s way better looking at I am. The reality is you’re going to go to work for these companies, and as you have passion, that passion becomes infectious. And that makes you a gatherer, you gather people to you.
Nathan: I think maybe what the underlying question is, is there a place in here where I can be mentored so that I can grow into my best me? And I think the answer is every one of these areas. I think the key for you is going to be asking the right questions to the firm that you’re interviewing with to figure out what the opportunity is that exists for you to go to work there. So in any one of these areas that I’ve sent students into, there is an opportunity, let me just pick on sort of my quadrant for example, if I’m inside the wirehouse brokerage, if you look at wirehouse brokerage traditionally, a lot of the runways that you have there is between 18 and 36 months, where you’re going to be on a draw or a salary for 18 to 36 months as you begin to develop your book of business.
Nathan: However, I also send students into warehouse teams, where they go to work on a team with no business development expectations. And frankly, in some instances, no business development expectations for their entire career as long as they stay in the role that they’re in. So, it really varies from one channel or tribe to the next on the team or group that you’re going to work for. Even in the quadrant that tends to have or the area that tends to have very high sales expectations, let’s look at life and disability. I have a student who went to work here locally for a firm that tends to have very high business development expectations on the role that they have, but this student, their role inside that entire office is to run financial plans for that office.
Nathan: So it’s an insurance company traditionally or protection first mindset, but we have a student in there who has zero business development expectations because their job is to in essence be something similar to a paraplanner for all the individuals inside that office. So their salary is paid for by the members of that office. So it really varies significantly from one firm to the next. I think the key is to ask the right questions to determine what your role would be inside each one of these areas, and then to match up who you are with the quadrant that you think is going to be long term the best fit, not just short term, not just where’s the best fit for me today, but across my career, what would I like to do?
Hannah: We’ve talked about the students and the practitioners, and I’m curious how have companies responded to this as you guys have put this out and continued to talk to more people? Does this resonate with the companies out there?
Craig: Sure. This is Craig. I’ll just give two little stories. We’ve done this presentation a few times now and one of the first time we did it was at CFP boards meeting and DC. We got the opportunity to present this to the room, and I don’t know, probably a few hundred people were there. And one being a very well known RIA nationally who’s won some awards and stuff. And without adding them, we gave this presentation and we talked about these different groups that did planning, we go the hallway. And he’s this red in the face, right? This guy’s just lit. And he comes up to me and he goes, “You guys know better, we’re the only ones doing planning and the rest of it’s blah, blah, blah.” But he was very, very, very, very agitated. And I just remember thinking man, we’ve struck a chord here.
Craig: When you talk about how do other companies react to this, how do companies react to this, I think they look at themselves, and naturally so, well, I do financial planning this guy doesn’t. I do financial planning, P&C doesn’t. Just because P&C doesn’t necessarily lend itself to CFP doesn’t mean that P&C agents aren’t doing some element of planning. I spent a decade in other designation worlds where we hit P&C agents, and they do a process that is financial planning, but they just don’t hold the CFP.
Craig: You get into this world of what is planning, we do planning, you don’t do planning, you don’t do it. You charge differently. And I think to answer your question, we all think we’re doing it. And if financial plan is defined as a process of identifying goals and then meeting and treating those goals, I would say that’s the reason everyone’s in the circle. But you have some very passionate strong opinions and industry about who’s doing it and who’s not. I was surprised at how passionate those turned out to be.
Luke: kind of the characterization from firms that heard about themselves, they said, “You’ve kind of labeled us right but you weren’t mean enough to our competitors.”
Nathan: Yeah, the only other thing I would add too is it has to do, I referred to this I think we gave the presentation at FPA National, if you look at how our profession has evolved, I think the first time I’ve heard this before is my friend Dr. Vickie Hampton, she said, “We’re the tree that grew backwards.” When you think about our profession, most professions form from generalization to specialization. Medical field general practitioner into all the sub disciplines as we’ve evolved and grown. Financial Planning is a tree that grew backwards. We all were specialized, and you almost see it to some extent on this chart right here. We all have our specialized areas that tend to be our anchor, that we say is what we’re identify with. But we see the value in generalize to holistic financial planning.
Nathan: The problem becomes that everybody tugs towards their specific area in saying this is the best portion of generalization rather than we all have the generalized nature to do holistic financial planning inside the model that we set in today. So I think as we evolved and we grow into what financial planning is becoming as a profession, we get some real complexities, as each one of these firms has a strong opinion, individually speaking into the amalgamation of each one of these areas to say, what is generalized financial planning.
Nathan: If I put out a financial plan to any, if I put out one financial plan and I gave it to somebody in every single one of these areas, I’m quite certain that the result would come back different from each one of these areas. If I gave a financial plan to one of these paths or one of these tribes, but a multitude of firms the results, would come back different. And that’s okay. In part, we are an art and a science combined, but this also lends itself to a unity problem. We’re not looking for uniformity, however, we need to find greater unity that is in how we view or how we broadcast to the end client ultimately what the profession of financial planning is.
Luke: I think Nathan makes a really important point there that you see companies running ads basically attacking other financial advisors or how they approach the business. We’ve got to realize that there’s a whole ecosystem where financial planners are already on the lower end of trust in financial services. It doesn’t help if we just vilify the other tribes publicly or privately because it erodes that trust in financial advisors in general and it behooves the whole profession to either adopt a fiduciary standard or a higher standard of professionalism because if consumers trust advisors, there will be more clients for everybody across any type of approach to financial planning.
Hannah: This conversation brings up an interesting question of, talking about financial planning, can you talk more about how financial planning looks different in these different areas or tribes or casts, or what we’re calling them?
Craig: Sure. I’d like to kind of take a shot at it. I think we define financial planning as a process based approach to defining in meeting and treating financial goals of a client and implementing, following up, monitoring, those things. So I think in their core, those that engage in financial planning and not just product sales tend to follow a process, the CFP process or similar process. But you do have auto and homeowners in the P&C line where we’re just selling products. You’ve got the products distribution model, where really they want someone with a CFP background, it’s not really what you’re doing every day. You’re going to be supporting agents that call in but you’re not necessarily a frontline planner.
Craig: So, it is very institutional, it is very different. If you go to work for somewhere that’s a call center, let’s say that you have people call in all day with financial questions, it typically is rather scripted, rather monitored. What you say does come off of certain paths that kind of give you some suggestions of language. And so that’s a different type of financial planning than if you just sit with me in a conference room and we sit down and I get out a yellow pad and ask what’s keeping you up at night. Those are both financial planning that you may work as an employee at Fidelity, Schwab and you sort of have a script for Collins or if you’re dealing with somebody one on one at a table.
Craig: They are however wildly different in how you deliver it, in what you’re even allowed to say to people. So I do think there’s pretty big differences but we kind of go back to a common process which to me is what got everybody in the circle to begin with.
Luke: So, at trust companies, they’ll have a heavier emphasis on estate planning. At tax firms, they should have an advantage on doing quality tax planning for their clients. The robos will probably have an advantage on reaching the mass market, the lower net worth. And then at life and disability insurance companies, even if they reward financial planning, there still will be a strong culture of a lot of your compensation is based off of which products you are selling. Differences within each like RIA firms, you can find RIA firms that are heavy investment-focused, heavy retirement-focused, etc. What were you going to say, Nathan?
Nathan: Well, I was just going to say to me in some ways, I hope, this may be a bit of rose colored glasses because I love this profession so much. It’s like asking what’s the difference between the Nationals and the Astros. If we put a poll out on that, I can guarantee you’re going to get a lot of feedback, you’re going to get a lot of opinions on the difference of these two amazing teams that found themselves in the World Series. There clearly are differences but they’re both playing baseball. They’re both incredible at baseball. They both have the same game that they’re playing. I don’t know that we are that far along in financial planning, but that’s the vision. That’s where we’re heading, I hope.
Nathan: One of the things that Luke said earlier when he was talking about his quadrant of that government, academic and research, and the reason that I’m passionate in that particular area and say that we need continued need is we still struggle with normative practice. If you go to a doctor in one city and you go to a doctor in another city, your end diagnosis is going to have a little bit of differences in the particular pills that they may prescribe or the routines that they may prescribe. The process of identifying the problem is relatively similar one to the next. The vision and I hope where we continue to head as a profession is our diagnosis is very similar, that we have a foundational similarity between each one of these tribes, and that the end function is that they all want to be in the World Series. They’re all playing the same game. They just play it a little bit differently. And that’s how they got to the big game, the big dance, ultimately in the end anyways.
Luke: Hannah, can we return to your poll question because for us as professors mentoring students, and I see Setu Mazumdar on there, he mentor students, and Fran Lawrence at the University of Missouri. It’s important for us to know because students come to us and say, “Hey, if I go intern or take a first job at one of these companies, is it going to taint me? Or will it make me more attractive down the road?” That’s something we as professors need to know from the audience.
Hannah: And so looking at this poll question, again, when thinking of hiring an employee, would you be less likely to hire someone from a specific tribe or company? 21%? said, yes. 26% said no. And 50% said it depends.
Luke: Looking at that, that tells me almost 75% are saying, perhaps. There may be a company or tribe that might make us at our tribe less likely to hire them. That’s important for us to know as professors because we’re counseling students that are starting in one company or one tribe and perhaps later in their career will be at three or four different places. Michael Kitsis has publicly said, it’s your third job that matters in financial planning. The first two are just preparing you to succeed in that third job.
Hannah: As an employer, that’s frightening. So I’d be curious if the audience has any thoughts on that, especially people who replied with it depends, had any other thoughts or any color they would add to their answer. So another question from Ross that just came in, it said, do you think it’s more valuable to seek out mentors from within your tribe or outside of your tribe?
Craig: I would think a little bit of both. If there’s a day where I moved from academia and open a wealth management firm, and every time I see yall’s cards at conferences I get that much closer to it. That’s something where of course you want people in that space, but some of my biggest mentors, one of the gentleman that helped launch my career and one of the best financial planners I know process wise is square in the life insurance space. I love connecting with him from time to time and catching up. I’ve got another very strong mentor in academia, another very strong mentor who is an independent broker. Any of these are very strong people in my life that have helped shape it and gotten me to where I am today.
Craig: So to that end, I don’t really even think I’ve tried as much with the mentors in my life as far as where I’ve gotten. By all means, I would look for people in the space that want to be successful and mirror their processes and see why are they successful. But at the same time, I kind of have developed these mentors over the last few decades and I really think those are the ones I go to tribe aside.
Nathan: I recommend for students specifically or really anybody that’s in the industry, it’s a requirement and coming through even our coursework, when you get to capstone, you have to have a mentor. CFP board clearly sees value in this so they wouldn’t have created the entire mentor program and ultimately the ability to work through in a quasi-apprenticeship model to expedite your CFP. There’s value in it. And I think there’s value both within and outside. That’s also where I see the value of industry organizations, so trade organizations, specifically the one that’s allowed us to have this conversation today because it allows you to meet people who have the same shared passion as you and can help you understand financial planning through their lens.
Nathan: I think anytime you can get together and do that, it’s a win. So I encourage people to have both first and foremost within your own company. Secondly, within your own tribe, and then thirdly, within holistic financial planning. Just encompassing any one of these individual tribes. I think that’s a win if you capture all three of those.
Luke: I’m amazed from watching FPA New Jersey and FPA Utah and DFW, as I’ve seen different chapters around the country, how generous your competitors are at sharing with you. It’s a very good profession. The people in it are happy to help their own competitors know how to do business better.
Hannah: We have another question here from Kate. And her question is what do you recommend to employers within each tribe to make sure that they are hiring explicably versus hiring homogeneously simply within their tribe?
Luke: Employers can’t be picky right now. There’s so little financial planning talent relative to how many professionals are needed that employers I think are willing to reach across a lot of different places. So, for example, we have a lot of students that start at Fidelity’s call center, and there are employers from all of the other tribes happy to steal them from that call center after two years of answering calls.
Luke: So, I think just supply and demand has made it so that the tribes don’t become insular and only hire from each other. They’re trying to steal quality talent from wherever they can find it.
Craig: I would add on to that that one of the things about hiring equitable, it really goes to the culture of the firm. I think we’ve seen lately with some of the Fisher comments, is that a culture where my kids want to work or my students want to work, or I’ll even encourage an interview? Of course not. We’ve had a student interview there recently and they couldn’t answer one question about some of the things he said.
Craig: My point being that like, culture wise, when we as program directors look at culture of firms, that really matters a lot. So as far as homogeneous and having a diverse culture who, who’s in partnership roles? Who’s at the top of the firm? Who are the ones meeting with clients? Do you have a culture where you’ve got mostly older white male partners and everyone else is just advisors or do you actually have ownership and equity and stake for everybody? And I think we look at that when we evaluate firms and we look at where students want to go. So it really doesn’t matter. Culture matters and that does to some extent dictate and flow into hiring.
Nathan: I think it’s to your mission. I was sitting in a conference this last week, and it was on ultra high net worth family governance. So the concept was building, some parts of it at least were building a family mission statement. And there was a question from the audience that really struck me when it was asked. The question was, when you develop a family mission statement for your clients, how do you memorialize that? It never dawned on me. And the speaker kind of fumbled it a little bit by saying, well, it goes into the document.
Nathan: I think it’s more than that. If you want to imbue who you are into who you want, it’s got to be crystal clear and a part of culture, maybe even taking on a physical presence inside of your particular tribe. So, if you don’t want to be homogeneous, let your passion bleed through to where you are heterogeneous around passion. A lot of people have passion. They’re trying to find how their purpose fits your passion, so be super clear on that. As you begin to bleed that across and is invasive within the culture of your firm so that everybody is, for the Jim Collins model, everybody’s on the right seat on the right bus. People want to come to work for you.
Nathan: I see that in my students and it doesn’t matter what the tribe is, they want to be a part of purpose. And the second element is they want to know that what they do, influences the overall mission of the company. There’s a lot of research in that space, showing that companies oftentimes don’t do a very good job of showing how your direct role impacts the mission of the company. So if you can do that well, I think you find your hiring to be a whole lot more heterogeneous, and the opportunities become transparent and amazing for all people within the organization.
Hannah: So we have one final question here, and I’m going to take on another question, we have four minutes left on this. Are you finding that getting a master’s in financial planning rather than just a Bachelor’s of CFP lands better jobs for graduates of financial planning programs. And the other piece that I would love to add on to this is hearing more of your guys’ thoughts on this changing landscape of, just the jobs that are available for the students and kind of, you guys alluded to it as well, but how that changing landscape within the supply and demand is impacting our profession?
Craig: Just to two cents quickly on the change. I look back to my first interview in Odessa, Texas 1998. And I drove to an office of an insurance agent. I went upstairs, I got my financial planning degree from Texas Tech, and at the time family financial planning. I was going to graduate that semester. And I sit down with this guy and he looks at me and he has a yellow pad and he says, “Well, son, Who’s your daddy know?” That was the job interview, that was the entire job interview in financial planning.
Craig: And today, that kind of garbage is unheard of. And so, when I look at the industry and the shift and the change, thank goodness we don’t view the world who’s your daddy know anymore, right? But I really see these firms with structures and career paths and I think the future of our industry is very bright. I think the future of it tends to be structured, tends to have work life balance. Tend to be able to look down the road five or 10 years if you work hard, you know what’s going to happen.
Luke: The asker of the question is interesting because he has an MD CFP, which is a unique combo. Broadly, the more credentials, the more knowledge you have, the better able you can demonstrate that you can serve the client’s interests. So whether that’s a master’s in financial planning or a PhD or an undergrad degree in financial planning, or a CFP, AIF, CFA, EACPA, name your designation, credentials and licenses do demonstrate to the client that you have some competence. And the more the better. It’d be cool if we all had as many credentials as Michael Kitsis. But wherever you’re at, decide what would be the next best thing for you, whether that’s graduate degree in financial planning or another specialized credential in divorce planning or settlement planning or something like that.
Nathan: My opinions a little bit different probably than the two of you. Generally speaking, I’m not a huge promoter of a master’s degree in financial planning if you already have something at the undergraduate level. If you’re coming from outside field, so you have undergrad in Ag Eco or even finance or an area like that, sure, a master’s in financial planning makes a lot of sense to go ahead and capture the educational content necessary to sit for the CFP.
Nathan: My personal opinion, this is one person’s opinion is that a CFP is in many instances the equivalent of going getting a master’s in financial planning. So I probably wouldn’t add a master’s in financial planning on top of already having a CFP because in most instances, not all, but in most instances, I don’t think you’re going to extend your network, your knowledge or your education in a way in which justifies the cost associated with that.
Nathan: With that said, I loved what Luke just said. If I was to do it over again and stay in the industry, I would get additional designations, EA being, if you want to get into the accounting world, and I’m seeing a big trend is becoming an enrolled agent to be able to add some tax value. So it’s where can you add value to your clients. I think if you want to go into that [inaudible] that we talked about, sure, a master’s, PhD makes a ton of sense.
Hannah: Great. Well, thank you gentlemen for joining us and for the audience as well.