In February 2008, a client took me to lunch to find out why I was leaving my career-long partnership in an asset management-focused RIA to start the first financial planning-focused firm in my area, in Elkhart, Ind. After my story, the rather confused client stated, "Aaron, if someone asked me who my financial planner is, I would say you." I replied, "But if someone asked you what I do for you, you would say something related to investments, right?" The client nodded in agreement. That exchange gave context to the impending trials I was to face. In the two years since that conversation, I have learned that for the genuine practice of financial planning to receive proper recognition, its practitioners and proponents must first settle on a proper categorization of the practice.

Here's my take. To call yourself a financial planner, you must know each client's financial goals, income, expenses, risks, insurance, family issues, estate plan, liabilities, assets and, as a portion of that, investments. Investments aren't an end-they're a portion, a subsection of assets that figures into net worth. You must create a plan that incorporates life and financial goals, revisiting it regularly. If you're not doing that, then you're not planning, you're managing money-which is fine too.

CONFUSION REIGNS

The opening paragraph of the 228-page RAND report begins by demarcating the "financial service industry" into brokers (those who conduct security transactions on behalf of others), dealers (those who buy and sell securities for their own accounts) and investment advisors (those who provide advice to others regarding securities). Planning didn't enter the picture. After untold hours of research, these intelligent people understood the entire financial services industry to consist of agents primarily engaged in securities transactions. So if the people at RAND missed the distinctions between the various participants, why should I expect my client to understand?

Research by Elizabeth Pontikes of the University of Chicago suggests that the market's inability to differentiate is not directly a failure of the profession, but is instead a tenet of introducing new alternatives. Pontikes asserts that when an innovation fits into a broad category, meaning one that does not create strong expectations from the marketplace, marketing the innovation as a new and independent category is ineffective. So what should planners do, if not position themselves against the nebulous categories that already exist in financial services? Pontikes' research suggests positioning within the broad category and then highlighting how financial planning is a better version of other alternatives in the category.

So how does this apply to the profession? First, we should consider the risk of using scarce energy and resources on attempts to define a new category. After 70 years of legal distinction, few people understand the dramatic difference between investment advisors and brokers. After 40 years, neither consumers nor many practitioners seem to be clear about the role and value of financial planners. An independent study documenting how few clients of genuine financial planners are upside down on their house or have a subprime mortgage or other solvency issues might be more useful than any law or regulation. And if the study does not show a drastic difference, a bigger core issue becomes evident.

Proponents of our profession have explained in detail how entities can produce strong expectations and differentiation in their local market. From the moment a prospect walks through the door, the chance to demonstrate the value of financial planning exists. These are divine opportunities for us to differentiate the benefit of financial planning rather than competing on our abilities as money managers. If, as a sheep, wearing a wolf suit attracts potential clients, is there any harm? Yes, if you become a carnivore in the process. That's the issue we face if we don't put the planning process front and center.

Aaron Coates, CFP, CIMA, is a financial advisor with Valeo Financial Advisors in Indianapolis and a co-founder, with Michael Kitces, of FPA NexGen. He can be reached at ascoates@valeofinancial.com.