So Close and Yet So Far

Journal of Financial Planning: September 2012

Dan Moisand, CFP®, has been a practicing financial planner since 1991. He is a principal at Moisand Fitzgerald Tamayo LLC in Melbourne, Florida, and former president of the Financial Planning Association.

Financial planning is a profession, right now. Financial planning is not a profession, yet.

Either of these sentences can be true depending on your perspective and your definition of “profession.”

If you place a label that says “orange” on a tomato, the tomato does not cease to be a tomato and become an orange. If one brought a tomato to a remote corner of the world where no one had ever seen such a thing, it would still be a tomato, regardless of what it was called or if any name was given to it at all. It is what it is. The label, or lack thereof, does not change the fundamental nature of the thing.

In financial planning, we’ve been arguing about labels for decades. “Financial adviser,” “wealth manager,” “financial consultant,” and “financial planner” are common titles—labels, if you will. Labels that are almost meaningless. When someone tells me they are a financial adviser, I know absolutely nothing about what they do for a living other than that it has something to do with money.

“Financial planner” and “wealth manager” seem to have a little bit more meaning. They usually describe a person who purports to offer a more holistic, comprehensive, or coordinated approach to personal financial matters than one who addresses a smaller subset of issues like investment advice, tax planning, or insurance. However, this is certainly not the case all the time.

What Profession Means to Me

If I ignore the labeling issue and look at the fundamental nature of a subset of those holding out as financial planners, I find a wonderful group of men and women serving clients through what I believe financial planning to be and doing so in a manner that aligns perfectly with my concept of the term “profession.”

A profession coalesces around a common body of knowledge. We have made strides in doing this over the years. The number of degree programs continues to expand, as does the number of researchers looking at personal financial issues. As practitioners and academics interact more, this body of knowledge will expand and a theoretical base can be widely accepted.

A profession establishes criteria to assess whether practitioners have the knowledge and the skills necessary to utilize the knowledge. Earning the right to use the CFP marks is a good example of how this is done currently.

A profession commits to a code of ethics that puts the interests of those served ahead of the professional’s interests. Compliance with the code is monitored and enforced. We have made great progress on these points from where planning started.

Improvement is possible and needed in all of these areas, but the actual work on the ground leads me to say financial planning is a profession, right now, today. Seeing the work my colleagues around the world do, the passion with which they do it, and the positive impact they have on their clients is a clear sign that the profession is healthy and meaningful. I am as excited about the future as ever.

The Importance of Labels

However, I can’t ignore labels. As meaningless as they can be, they can also be important. In some cases labels represent societal agreement. We have all agreed to call tomatoes “tomatoes” to facilitate a common understanding. Doctors, lawyers, and accountants all associate with labels that give the public a basic understanding of what to expect from these professionals and an expectation of competent and ethical provision of their services. The public also knows to expect those who fail to serve competently and ethically to be held accountable.

They have this status not merely because of the label but because the labels were granted more substance via regulation. You can see regulatory references in many of the more heady discussions about the nature of profession. “Is Business Management a Profession?” (Harvard Business Review 2005) is a commonly cited example. That piece claimed professions possess four traits:

  • A common body of knowledge resting on a well-developed, widely accepted theoretical base
  • A system for certifying that individuals possess such knowledge before being licensed or otherwise allowed to practice
  • A commitment to use specialized knowledge for the public good, and a renunciation of the goal of profit maximization, in return for professional autonomy and monopoly power
  • A code of ethics, with provisions for monitoring individual compliance with the code and a system of sanctions for enforcing it

My comments earlier align pretty well with this list. We are doing well and making progress. In addition, I believe we do indeed serve the public good—a broad, society-wide need.

But we also can see the sticking points: “licensed or otherwise allowed to practice,” “professional autonomy and monopoly power” (unauthorized practice is illegal), “system of sanctions for enforcing.” By this definition, financial planning is not a profession, yet.

Regulation’s Role

All of these sticking points speak to regulation. Associations and groups granting designations have codes of ethics, most of which are very similar and generally cover the right things in adequate ways. A few bodies, such as CFP Board, have a system of sanctions for enforcing the rules in the code; they do not have the ability to fine practitioners, compensate victims, or prevent violators from practicing. Only government-sanctioned bodies have that kind of teeth.

I am not a proponent of more regulation per se’, but I am open to different, better-focused regulation. I lost count how many times I have written or spoken about the problems today’s regulation by subset causes for clients. A federal SRO or state licensing for financial planners could serve the public and profession much better.

Sadly, as we saw this summer, Congress does not appear to grasp what needs to be done in the subset of investment advice. They seem to have forgotten that FINRA is the National Association of Securities Dealers. Putting the National Association of Securities Dealers in charge of investment advisers is little different than having drug companies regulate doctors.

Investment advice, of course, is just one subset of financial planning. Even when we were suing them, the SEC itself noted, “… financial planners today belong to a distinct profession, and financial planning is a separate discipline from, for example, portfolio management.”

So yes, we have come a long way and we continue to make progress, but much work remains. First, we have to remind Congress that securities dealers are not investment advisers and that the National Association of Securities Dealers would be a completely inappropriate body to regulate investment advice. Then we must continue to hold ourselves to high standards of competence and ethics and work toward a better structure.

Whether federal or state-based, it need not be particularly scary or onerous. Imagine CFP Board level education, exam, experience, ethics, and enforcement with real teeth. If you’re doing things right, it should be easy to stay out of trouble. For more on what financial planning regulation could look like, I’d refer you to two previous columns of mine: “My Final Exam” (federal) and “The Financial Planning Act of 2008” (state), in this journal’s archives (

Proper regulation could bring meaning to the label we put on what we do, and could facilitate agreement in our society about what to expect. I don’t want more regulation, but I do want proper regulation and I do believe it will come. I believe this because the marketplace is far more powerful than the lobbying efforts of various subsets of financial planning. People go where they are served best, even if it’s hard for them to figure out where that might be.

Maybe someone close to a member of Congress will get a raw deal and that representative will become a champion for straightening out the system and the process will accelerate. “They sold what to my mom and I can’t do anything about it because she signed a disclosure?” It would be better though, rather than requiring victims, for lawmakers to see what the SEC described above and act now.

Congress could authorize an SRO for financial planners that would put planners under a regulatory system specifically for financial planners and not merely for investment advice or, inappropriately, under the eye of securities dealers. The same fiduciary standards investment advisers are supposed to adhere to would remain, of course, and if a planner managed portfolios as many of us do, she would still have to do that properly. The SRO issues the license and requires it of anyone holding out for providing the services. If you don’t have it you can’t call yourself a financial planner. The public could easily see who really provides financial planning and who doesn’t. People in financial services could choose whether they wanted in or not.

Some will say my vision of the future is a fantasy or delusion. Others will say it’s a dream. If enough of us consider it a goal, eventually it will happen. Society needs it to be so.

General Financial Planning Principles