Dear Financial Planning
You’ve come so far – yet have so far to go.
You had a great premise to help others make sound financial decisions yet stuck them in a lackluster sales role. You said to sell stocks, bonds, mutual funds, and insurance products as the silver bullet to the problems others never knew they had. I guess when you’re a hammer every problem looks like a nail.
Today, you’re old. The average age of a financial advisor in the U.S. is around 50 with nearly half of those individuals over the age of 55 – hardly a youthful profession. Where are all the driven young professionals looking to make a dent in the financial planning universe?
A reluctance to change discourages growth.
Michael Pollan once described this inability to change as imagining your mind as a mountain covered in snow. Each thought, intention, and action can be thought of as a snowboarder coming down the mountain. Over time as you continue to ride down the mountain in the same way those grooves become deeper. The result is your once fresh snow has been carved up repeatedly creating trails. Even if you try to make a new path down the mountain, with grooves so deep, it’s almost impossible to go down a new path without ending up in previously carved trail.
I consider much of the financial services industry as an overcarved and even icy trail. It’s easy to do something the way it’s historically been done because it’s easy. The trail has already been made – all you must do is ride it like everyone else. This fundamentally is the problem, the trail most traveled needs both fresh snow and an alternative way down the mountain.
Time is speeding up. We’re experiencing change at a rate exponentially different from our ancestors even 100 years ago. By way of information transfer through computers, artificial intelligence, supply chain logistics, etc. The world is quickly evolving.
Considering this rate of change, graduating from college, I knew financial planning was what I wanted to do and searching around for a job in the industry reeked of unchanged old-spice deodorant with the slime of a freshly caught fish. I’ll never forget an internship I had talking with an executive at the company who was supposed to be a mentor yet perceived to brag to me that he just sold a big insurance policy to a well-off business owner. Intuitively I asked about the nature of the sale, and he mentioned something I’ll never forget – “The rich just want to get richer.”
Sure, money makes money and hungry capitalists will never have enough. That didn’t bother me (although, maybe it should have – we can revisit that later), what did was the rationale for the sale.
It was in his interest not the business owners.
This transactional irrational exuberance continued throughout my time at that company. It wasn’t the product that’s the problem, insurance is a necessary evil, but rather the lack of logic and intentionality with the sale that was the most disturbing to me. It was then I realized I wanted nothing to do with how that company ran their business.
After some soul searching and more hours of research than I care to admit, this transactional theme was pervasive across many of the larger financial institutions that we have come to know and trust.
Why is this?
The industry is reluctant to change because, frankly, the old-school high-pressure sales business model still works. Like our thoughts making grooves on a mountain of snow, no matter how we go down the mountain we keep getting pushed down the same trails. Financial planning – you’re better than this.
We need to shake the snow globe of financial planning.
What fresh powder brings is advice first. Advice to help you reach your goals. That 6-month sabbatical you’ve always wanted to take but never gave yourself permission because you’re too uncertain of what that means to your financial situation – yup, that goal (& more). Your financial data is curated into your personalized financial plan that drives the decision making. If the plan says you need insurance because there’s a gap of $645,362 in earnings – then that’s a risk to consider covering because the plan said so. Not because my company’s sales quota of my company-specific product says so. See what I mean below:
This was a (once) private conversation between a JPMorgan Chase investment advisor and his manager. Where the advisor was being forced to sell unsuitable products to his clients. This later led to SEC regulatory fines of $307 million to JPMorgan for failing to properly disclose their preference for in-house products. Or consider Wells Fargo whose employees used fraud to meet impossible company sales goals opening millions of fake accounts in customers' names without their knowledge. The SEC later fined Wells Fargo $3 billion.
I wouldn’t confuse the company size or time in business with professional competence or putting your interest first.
Fresh snow brings those who hold your interests above their own – bringing the fiduciary standard to front and center. For the new bread of financial planners - they’re competent. Whether that’s the CERTIFIED FINANCIAL PLANNER™ designation or years of experience – you give advice in areas you’re knowledgeable in. Alvin Toffler has a beautiful quote –
“The illiterate of the 21st century will not be those who cannot read or write, but those who cannot learn, unlearn, and relearn"
Continuous learning is essential to keep up with the changing tides of service required to meet the needs of your clients, like Implementing new ideas that challenge previously held beliefs. 21st century information is giving the financial planning industry new snow. Time to carve a new path down the mountain that better serves a yearning market with advice to questions not products.