Executive Summary
As financial planning fights for its standing as a full-fledged profession, we try to demonstrate its core value to society - that going through the financial planning process has a positive impact on achieving a client's goals. Yet for all we proclaim about our beliefs in the value of financial planning, why is it that virtually none of us think financial planning is valuable enough to pay for it ourselves?
The inspiration for today's blog post comes from a surprising announcement that came across my Twitter feed yesterday from financial planner Rick Kahler, which said in part: "Cancelled my #NAPFA webinar on Thu[rsday] regarding the need for a financial planner to have a planner. No financial planners signed up!"
Commenting on the importance of financial planners having a financial planner is not new ground for Rick, who won the 2008 Financial Frontiers Award for his article "Becoming Consumers of the Profession We Practice" in the Journal of Financial Planning. Yet there is no small amount of irony that the planning community (of NAPFA, at least) was not willing to sign up to hear him discuss the subject, given the incredibly salient point he delivers so well in the closing paragraph of his article:
"When you have a financial planner, it means you believe in your own profession so strongly that you choose to be a consumer of it as well as a practitioner. If we are to realize our dream of becoming recognized by the mainstream as a profession, one of the next steps will be to totally embrace that profession ourselves by becoming consumers of the service we so passionately practice." - Kahler
Few would question the passion that NAPFA planners have for delivering the value of financial planning, and the point of this post is not to criticize NAPFA planners directly for their unwillingness to sign up for Rick's session. The point is broader than that. The point is that for all we proclaim about the importance of planning and its value - in response the perennial client objections "I can do it myself" and "The fees are too high/not worth the value" - it appears that we ourselves still have the exact same objections when considering a planner (and this is well supported in Rick's own research as he discusses in the aforementioned article).
I will grant that there are many legitimate objections and concerns about working with a financial planner when you are a financial planner, and planner-to-planner relationships have some unique concerns above and beyond the typical client-planner scenario. Rick discusses these issues and concerns extensively in his article (yes, this is the third time I'm telling you that you need to read the article!). But the fundamental point still remains: if we really believe that a financial planner provides value, and especially that the financial planning process serves a purpose that is beyond just the collection of technical information used to deliver advice, then why can't we put our money where our mouths are and be financial planners who hire other financial planners to serve our own needs. It's certainly a common model for other established professions; most have heard the quip "A man who is his own lawyer has a fool for a client." Will there be a day when we say the same thing about financial planners, too? Or worse: has that day already come, and we just haven't realized it yet?
I must confess that notwithstanding this discussion, I too am guilty of this same sin of hypocrisy - I do not have a financial planner myself. But I have to admit, I am increasingly persuaded of its importance as I reflect on my own life, and especially now that I am married and must navigate not only my own financial life but the development and pursuit of joint goals with my wife as well. I think our own time as a couple in need of a[n outside] financial planner has come.
And who knows... perhaps over time the planner-to-planner professional will become a niche of its own in our planning world; I know that Rick is already going down that road. Maybe I need to give him a call...
Sounds like a “shoemaker has no shoes” scenario to me.
As a writer I’m prone to thinking I know how to write all of my content. But when I wrote my website I got a couple of outsiders to review it for things that I couldn’t see because I’m too close. It’s always hard to see your own situation objectively.
Michael,
Operators are standing by and ready to take your call!
🙂
Rick Kahler
I am not a financial planner. I am a personal finance journalist. I’ll offer an outsider’s perspective on this fascinating question (why financial planners do not hire financial planners).
The problem (in my view!) is the common misperception (apparently held to a good extent even among financial planners) that the aim of financial planning is to offer intellectual insights. Financial planners can pick those up on their own — they don’t need to pay to find out what the literature says. The real aim of financial planning should be to help the client see where he is deluding himself, to point out to him his rationalizations and inconsistencies and emotional weaknesses.
A good financial planner is as much psychologist and detective as he is mathematician. But you wouldn’t know it from a lot of what is produced and celebrated in this field. For so long as the focus is on the intellectual side rather than the emotional side, there is going to be doubt as to how much planners add over what can be picked up by reading books and studies.
Rob
I am a financial planner who has used a financial planner for the last 15 years. Rob makes good points about the value of financial planning (now you need a financial planner if you do not have the time, the interest, the skills or THE TEMPERMENT to do your own planning). In addition to keeping my head in the game, having a financial planner work with my wife and I means that there is a third party who has a perspective when one of us (me usually) is misguided. Sometimes both of us are too close to the situation to see the clear solution.
John
I agree. For some time now, I have wanted to hire a planner. In my case, I’d have to hire an hourly planner because I haven’t accumulated enough investment assets outside my employer plan to warrant an AUM situation…in other words…I wouldn’t meet the minimum requirements most firms have!
I say that in jest but if you think about it…many younger planners…such as myself…are in fact not “qualified” as clients! But having said that, I do know a lot of wonderful NAPFA folks in my area who would work with me on an hourly basis and I actually do have one in mind. I think for me it’s a matter of perspective and…get this…implementation!
Think of it this way…let me take Michael’s headline and twist it…Are We Being Hypocrites About The Value of Weight Loss?
Have you ever seen an overweight trainer? Maybe you have…I have only seen one at my gym. And he doesn’t seem to have a lot of clients. But there is a point here…would you pay an overweight trainer to help you lose weight? Maybe…if you felt that they would empathize with you…but probably not.
The fact that you “see” the trainer’s obvious weight issue and the fact that you are trying to get rid of yours seems…well…somehow hypocritical…yes?
Now, many consumers of financial advisors really don’t know if that advisor has his/her act together finanically, do they? We can of course assume that many advisors make fairly decent livings and are above average wage earners. But, that doesn’t mean that they don’t overspend, get into debt, don’t save enough, don’t get their estate planning done, forget to update beneficiary designations, really understand their insurance policies, and so on.
My point is, I realize that I could benefit from having a financial planner because I do realize that there are areas of my financial life that I know I need to work on but I need a coach to help inspire me to take action. I am being totally honest here. And I think having that coach to help me implement (stop being lazy) is well worth the cost of admission.
And, I think it would help me become a better financial planner becuase I would be able to perhaps better connect with my clients on that emotional level that Rob alluded to.
So, yes, I do think we are hypocritical!
Doug
Susan beat me to it, but I agree it’s often simply not taking the time, or wanting to do the data gathering, etc, they need themselves! Also consider a signifant portion of the net worth of most planners lies in the value of their practice; which would suggest the advice they may most benefit from is a business coach or other type of advisor.
One way I have seen firms deal with this is to offer financial planning as a benefit. Some planners discuss it intrafirm, especially in a partnership scenario. There is another recent post on Alliance of Cambridge Advisors’s blog about a planner who has hired planners. This is a fairly common topic among ACA members, and is encouraged.
I am a CFP professional and have engaged the services of another CFP professional for my family. I, too, thought it absurd the first time or two that I heard it, but after giving it some thought, it began to make sense. Now that I am sitting on the other side of the table, I would never have it another way.
Our firm has 80 client relationships. Prior to working with a planner, my personal financial planning was always priority number 81. I absolutely have all the confidence in the world to do this work myself – that is beside the point. I have all the confidence in the world with my planner as well.
What is compelling about this concept to me is that I know and acknowledge that I can not possibly look at my own situation objectively. Furthermore, prior to making this decision, my wife was very disengaged from our financial affairs. The last thing I ever wanted to do at the end of a day at the office is come home and work on my own financial planning, and I will adamently state that my wife did not care for that either.
If the extent of your service offering and value proposition is simply providing products and quantitative advice, sure, you can do all that yourself. However, the financial planner’s role sometimes involves asking tough questions and holding clients accountable for what they say they are going to do. Without a third party involved, it is far too easy to cheat and/or put off the implementation of virtually anything. My planner ensures that my wife is engaged in our planning process, that her opinions and ideas are heard, and that she understands where everything is and why.
More than anything, however, sitting on the other side of the table as a client provides an unbelievable perspective on the way your services are delivered. Whether you like what you see or not, it is absolutely going to make you a better planner in the end.
Joe Pitzl, CFP
Intelligent Financial Strategies
Great post. I especially appreciate the transparency.
Most planners don’t believe in planning or practice it well. Few have or update a business plan for their own business. Few seek the objectivity and accountability of having someone else occasionally bring a new perspective to our behavior and the priorities we display in our lives (I.e., hire their own financial planner). We’ve also found in our software business that a high majority of planners are afraid to spend money to make themselves more efficient and effective. It is a sad state for the membership of our profession. If we are not successful with money in our own lives and are not comfortable with using outsiders in our own lives, do we really have a right to suggest to our clients that we are the right people to help them with their lives?