“The most radical thing that could happen is we’ll become a nation of financial literates. It’s within the realm of possibility.” —Don Phillips
Financial freedom motivates all my writing and professional career and I trace its history. Financial life planners aided this progress with better technology and greater deregulation in a professional society that values the CFP’s education, testing, expertise and fiduciary integrity. Planner pay merits separate discussion in a forthcoming expose.
David Yeske outlined the growth and politics of the financial planning profession, essentially started in 1969, in a “Concise History of the Financial Planning Profession” and then Denby and Oliver’s “History of Financial Planning.” By 1995, the CFP Board became a “professional regulatory organization,” which elaborated “practice standards” for today’s 100,000 advisors. Yet Denby and Oliver refocus: “The financial planning movement started with a clear purpose: to help ordinary Americans gain control over their financial lives.”
20th-Century Financial Planning
By 1934, lifespans had finally risen to around 62 and most people moved off farms, so eldercare became more relevant. Franklin D. Roosevelt forced companies to publish accounting that made Benjamin Graham’s fundamental analysis of Investments possible. His shaky Social Security system then financed retirement that most need to supplement with planned investments or corporate retirement plans that first motivated World War II work forces.
In 1950, Defined benefit pensions, whole life insurance, stock brokering, lawyering for estates and CPA taxes were divergent services requiring diverse licenses. American College Prof. Solomon Huebner’s helped professionalize insurance with “human life value” calculations of the impact of death upon descendants. Chronicler Rich White wrote: “As late as 1960, life insurance was the substance of financial planning. … By definition, a financial planner was an insurance man who offered the public more than money-if-you-die.”
Investment Regulations and CFP Professionalism
The Investment Advisers Act of 1940 manifested federal regulation, education and ethical standards, which led to the1989 Series 65 exam, which CFPs take to legally manage portfolios. CFP designations awarded after challenging exams and master’s degree programs like mine at GGU entrench a synchronizing profession modeled on law and accounting with an ethos of “competence, integrity, relationships and stewardship.”
The Chartered Financial Consultant and Personal Financial Specialist designations, oriented towards life insurance agents and CPAs, compete less successfully with CFP credentials trademarked in 2002. After 1981, computer technology enabled solo financial practitioners to work faster without pen and paper or even Excel—thereafter competing with wire houses and big insurance—and to immediately download portfolio information and tax law.
Investment and Retirement Plan Developments
Philadelphia hosted America’s first stock exchange in 1790, where Ben Franklin helped bring life insurance to America. In 1924, Massachusetts Investors trust created the first open-ended mutual fund with daily settlements, but the 1929 crash slowed investment progress. In 1952 Harry Markowitz established the theory of “Portfolio Selection” embodied in diversified financial plans today. Vanguard’s 1970’s index funds and rockstar investors like Peter Lynch and Warren Buffett gave middling investors diversified stock ownership.
Rising markets, a “Buy Term and Invest the Difference” movement and TEFRA’s life insurance tax discouraged cash value savings. Nearly 37% of Americans own Congress’s IRAs (1974) and Roth IRAs (1997). In 1978, Congress created 401k’s to defer taxation on employer contributions, and they now hold $9 trillion. Planners learned tax for the complicated tax reforms of Reagan, Obama and Trump. Consumers valued the CFP’s comprehensive approach highly.
The Future of Financial Planning
“Internal finance” and personalized service answer cheap robo-advisors and planners who really are investment managers. Mark Tibergien prophesied, “While today’s adviser is ‘investment-centric,’ according to the Pershing report, tomorrow’s will need to be ‘client-centric.’ Managing risk will take the place of managing money. Generating return will shift to balancing cash flows.”
In 1989, Richard Wagner and George Kinder had formed the Nazrudin Project to explore financial life planning. This connects finance to psychology as clients learn more about themselves before bringing numbers into planning equations.
Entrepreneurs, licensed to exclude charlatans, enabled consumer choice made responsible with expertise. They benefitted from deregulation and evaded corporate control. Locally, the Financial Planning Association of Northern California helps the public “recognize the value of the financial planning process as a way to achieve their goals and dreams.”
Robert Arne, EA, CFP, MS, of Carpe Diem Financial Life Planning, gives holistic financial advice as his client’s fee-only fiduciary. He serves mostly Santa Cruz Mountain dwellers. These articles must not be read as personal financial, mortgage, tax or investment advice; consult appropriate professionals. Learn more at www.carpediem.financial.
