Updated Monday, December 22, 2014 as of 2:54 PM ET

Planners Blast Industry Leadership

MIAMI -- The financial planning industry faces a number of major challenges -- and advisors are unhappy with the way industry groups are responding.

In a frank discussion at a town hall meeting, and in other sessions at the FPA Retreat here this weekend, planners voiced a number of complaints. Planners are fed up with confusion surrounding labels used to describe what they do, they said; they also faulted the FPA's inability to "draw a line" between planners and salespeople and the lack of support in hiring and integrating the next generation of planners.

At the town hall meeting, one statistic intended as a rallying cry -- the oft-cited need for 160,000 new advisors in the next decade -- became instead a focal point of advisors' frustration. 

Veteran planner Dick Wagner of WorthLiving in Denver, Colo., told FPA board members on stage that the organization needed to stop "muddying the lines" between financial planners and other wealth managers. The number of "advisors" has no bearing on the number of "planners" in the industry, he argued.

WHO ARE WE?

Another well-known industry player chimed in. "Why do we not know our own numbers?" Michael Kitces, director of research for Pinnacle Advisory Group (and Financial Planning contributor), asked the board. "How many people actually practice financial planning?"

Kitces also pointed to the FPA's lack of enforcement regarding the standard of care planning members are supposed to adhere to. 

Current FPA president Janet Stanzak told planners, "we are focused on being the home for the CFP professional, let me leave no doubt about that." Yet she acknowledged that the association has never enforced the fiduciary standard of care and that it has always been done in good faith.  

That may not work so well in the future, Kitces warned: "If we don't enforce the standard of care we abide by, we're setting ourselves up for a big PR disaster down the road." 

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Comments (3)
I was unable to attend this event, didn't have the time nor the money that would have been influencial. If you are a member of the FPA, how can you be called merely a Life Insurance Agent? No one knows the difference?

What is the real issue, membership? creditability?

Most of us in private practice have usually spent many years working as a member of some company's agency field force until the situation became absurd.

I distinguish myself in many ways with securities licenses, and professional designations. I also have 2 graduate degrees in addition to being a clinical psychologist. If a prospect won't give you the "time of day" move on...A.Sickert
Posted by Alexander S | Tuesday, May 06 2014 at 1:09PM ET
Very refreshing discussion, much needed.

The entire industry is focused on product distribution rather than client service, the strength of financial planning. If Financial Planners outsourced portfolio construction and management based on the advisor/planner's collaborative investment strategy with the consumer, a far higher degree of portfolio detail can be electronically managed in real time than is not humanly possible. This is achieved at a lower cost to the consumer and higher advisor compensation and can establish professional standing with an audit path to statute which is not possible in a brokerage or custody format.

Portfolio construction is increasingly a commodity, but financial planning is not as individual facts and circumstances addressed by planning require the integrity and competency of an adept planner.

The strength of the RIA format is the brokerage push back on fiduciary standing which thwarts innovation and modernity is unacceptable--facilitating a far higher level of counsel which is very technologically intensive which is a barrier to entry for brokerage firms. The missing link is large scale institutionalized support for expert fiduciary standing which would immediately clarify and document the role of the advisor and their ongoing responsibilities.

The FPA must be prepared to embrace an objective fiduciary standard based on non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters. Thus the focus should be on elevating the entire business rather than being concerted about offending its general, membership which may not actually be acting in a fiduciary capacity. If not, then provide the opportunity to elevate the role and counsel of the planner acting in a advisory capacity providing individualized advice.

SCW
Posted by Stephen W | Tuesday, May 06 2014 at 2:32PM ET
After 20+ yrs in the industry, I still don't get the discussion of "confusion with labels and lack of distinction". If we expect an industry association or designations to clarify how clients and the public distinguish between financial planners, insurance agents, asset managers, etc., we are going to be waiting a long time. The lack of clarity only worsens as revenue pressure forces banks, insurance companies and asset managements to find new sources of revenue by broadening services. Even a fiduciary standard won't help clients understand the differences.

Personally, I'm don't think the distinction will ever be clear. Knowing that, I prefer to focus my attention on client needs and feedback (what confuses them, where they want help, where they don't want help and how they prefer to receive advice) and adapt accordingly. This ensures clients derive value from our service, regardless of how they characterize it.

The overall challenge is that the industry is focused on revenue models, and simply re-engineers products and services that maintain revenue. There is a model (probably several) that works, but few people/firms are willing to make the sacrifices to get there.
Posted by Duane C | Thursday, May 08 2014 at 8:57AM ET
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