Journal of Financial Planning: February 2013
Vern C. Hayden, CFP®, is president of Hayden Financial Group LLC in Westport, Connecticut, co-author of Getting an Investing Game Plan, and contributing editor to TheStreet.com.
This column is filled with prejudice, pride, and an impressive lack of objectivity. It’s based on personal experience and preferences. It is also not politically correct, and I speak for no one but myself.
After 42 years of experience in various facets of financial planning services, it is hard not to look back. First, I was a financial planning life insurance salesman, then I was a financial planning tax shelter salesman, then a financial planning financial plan salesman, then I was a financial planning get-assets-under-management salesman. More recently, my goal simply has been to be a financial planning professional.
Somewhere along the way I got “true religion,” and I don’t mean the new, hot fashion statement. What I mean by true religion is that I changed my seat at the client table. I became an ally instead of an adversary. My table went round instead of a square or a rectangle. I actually wanted my clients to win the insufferable “money game.” I wanted their lives and lifestyles to be enhanced by my advice and planning capability. I wanted my bias eliminated. I wanted the money incentive to be subordinated to truly helping clients. I wanted to say to a client, “I am a fiduciary working on your behalf.” I wanted to be professional. A lot of controversial issues are embedded in these “I want” statements.
Evolution of the CFP Certification
Looking back at my own history, I see an evolutionary thread. The thread started its weaving with the simultaneous knowledge of a new mark called the “Certified Financial Planner” (CFP) and a new association called the International Association for Financial Planning (IAFP) and later the Institute of Certified Financial Planners (ICFP). As a life insurance salesman from 1968 to 1971, I had won a lot of free trips and too many television sets. Around 1972, I became aware of a new and innovative approach to meeting clients’ more comprehensive needs. This awareness evolved as I started attending IAFP chapter meetings in the North Bay area of San Francisco. I felt like a single product drug salesman morphing into a pharmacy where I had shelves of different kinds of health supplies to sell along with giving advice on the side.
At first, I rejected the CFP certification because it sounded like one of those diploma mill operations. That feeling was reinforced when I was privately offered a fast track way of getting it. So I sat on the sidelines and watched it evolve, becoming friends with many of the earliest CFP practitioners. By 1978, I was convinced the certification was an important stepping-stone to becoming a real financial planner. By the end of that year I was a CFP practitioner.
In those days, the CFP designation was owned and granted by the College for Financial Planning. It wasn’t until 1985 that the president of the college, Bill Anthes, Ph.D., and his board created what has become CFP Board, transferring all rights to the CFP mark to that board.
It is ironic that I was on the board of the College for Financial Planning from 1990 to 1995. During that time, Anthes created the idea of the National Endowment for Financial Education (NEFE), which would become the parent organization of the college. Those of us on the board heartedly endorsed the idea and NEFE became a legal entity. I was fortunate to be voted its second chairman for a two-year term (1994 to 1995). Coincidentally, I was on CFP Board’s governing body for three years during part of that time (1994 to 1996).
Defending Financial Planning
Other than trying to reinforce my ego, at the age of 76 why do I mention this stuff? When the CFP designation was born, no other designation represented this new discipline called financial planning. It took a lot of courage and commitment to pioneer this designation. The insurance industry detested “us” financial planners in the early days. In fact, they rejected financial planning. I know because I have been a member of a local chapter of the National Association of Insurance and Financial Advisors (NAIFA), previously known as the National Association of Life Underwriters, for 42 years.
Around 1975, when I became president of the North Bay IAFP chapter, my local NAIFA chapter in Marin County, California, discussed whether they should terminate my membership. From their perspective, I had sold out and gone to “the dark side.” One of their members wrote a letter to the editor of the local paper, The Independent Journal, explaining that financial planning was a “euphemism for selling tax shelters.” This led to an interview by the newspaper during which I explained that a financial planner was like an orchestra leader who tries to harmonize all the components of a client’s financial life into a unified whole. I further explained that the whole is the sum of the parts, but it is the interaction between these parts that will determine financial success. I made it clear that insurance planning was a critical component that always needs to be included and coordinated. Part of my explanation of how important an insurance specialist was included in an explanation of The American College and the CLU designation. The American College was the only esteemed source of academic professionalism to train and charter life underwriters.
In the late 1970s, I gave a presentation to the annual Southern California IAFP convention in San Diego. After my presentation, an academic faculty member of The American College asked me to have lunch with him. He said that they were working on a project and gave me several pages of a curriculum, explaining this was a course leading to a new financial planning designation. The curriculum looked really good to me. I asked him a one-word question. “Why?” He asked me what I meant.
My comments were candid as I explained The American College is indelibly branded as the go-to place for insurance professionalism. Its pedigree for that, going back to the Wharton School and the founders, is impeccably clear. One profession and one designation—life insurance and CLU. You could not be an insurance professional without being a CLU from The American College.
Then I suggested to my new academic friend that an attempt to rebrand The American College with a new financial planning designation (it obviously became the ChFC® designation) probably would not be successful in the mind of the consumer and would cause a lack of focus and purpose in the insurance industry. My suggestion was that The American College fully support the CFP designation. He looked at me and said something along the lines of, “But Vern, you must understand we are the insurance industry and our people need their own designation.” I tried to make it clear to him that the ChFC designation will always have the insurance “cloud” over it because it is trying to serve two masters and that it will confuse the public. I added that it also would confuse a lot of its own constituents.
The Role of Insurance in Financial Planning
The life insurance industry lost its focus and undermined its own strength. Its strength lies in being the master of all life insurance products and services, and where that area of expertise critically fits into the holistic financial planning spectrum of an individual’s life. The insurance industry decided to be a generalist instead of a specialist. It wanted to lead the orchestra rather than be a critical instrument.
In the many times I’ve been interviewed by CNBC and Bloomberg, it is always emphasized that I am a CFP practitioner. When Bill Griffeth started the CNBC program “Power Lunch” he had a five-minute segment at the top of the show for financial planning. He had me on as his first guest because I was the CFP practitioner he knew best. As far back as 1995, a leading financial journalist said the CFP designation had won the media war.?
As a financial planner, I use an insurance specialist with my clients. It is his only specialty, and he stays abreast of all the complicated issues of life insurance. He has no desire to be a financial planner. By using a specialist, I don’t let a critical segment of clients’ lives fall through the cracks.
Back in 1966, anthropologist Robert Ardrey wrote the book, The Territorial Imperative, which was his personal inquiry into the animal origins of property and nations. In this book he outlined how animals defined their property. Among other things, they marked the perimeter so other animals would not cross it without being challenged. There is very definitive turf for the one designation that represents the financial planning profession—the CFP certification.