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In Massachusetts, where I work, if you want to be a cosmetologist, you need a license. To get that license, you need two years of supervised work experience, and you need to take a practical exam.
No special license exists, however, for financial planning as a separate profession.
Recently, I and some of my colleagues from the Financial Planning Association visited Capitol Hill in Washington, D.C. and the State House in Massachusetts to advocate for better recognition of holistic financial planning as a profession.
In meetings with legislators and aides, we talked about how the financial planning profession as a separate discipline isn’t well defined. We spoke about how individuals who perform such services are overseen by a number of regulatory bodies. We explained that the public often doesn’t understand that planners aren’t specifically licensed as such.
The legislators were surprised to hear this. And when I’ve raised the subject with some of my clients, they’ve been just as surprised.
People assume that financial planning — in its most comprehensive form, helping clients manage all elements of their financial lives, from budgeting to retirement and estate planning —is governed by formal professional standards in the same way that CPAs and attorneys are.
To be clear, many elements of the financial planning process have notable regulatory oversight. Activities such as providing investment advice or selling insurance or investment products are all regulated.
And on the surface, having a Certified Financial Planner credential would seem to signify that a financial professional is practicing a specific profession, “financial planning.” Most of us in the financial industry, however, know that holding the CFP mark doesn’t necessarily mean that an individual is providing truly comprehensive financial planning for a client. That would require inclusion of all elements of the financial planning process, from goal-setting to implementation to tracking a plan’s progress.
Providing only one or two elements of the financial planning process — say, just recommending investments — doesn’t qualify as full-scale financial planning, even if you have the CFP credential.
I happen to be a financial planner who also is licensed to sell certain kinds of financial products. These are two separate parts of my job. When I’m working with clients, I make clear what “hat” I’m wearing at any given time, whether it is as their financial planner or as their broker. These are not the same thing.
I can imagine this isn’t always easy for my clients to follow what this really means to them. Most people think their financial professional is acting in their best interests. And really, when you are trusting what is sometimes your life savings to another person, why wouldn’t you expect that level of care? I know most of my clients have a high level of trust in me to do the right thing for them.
But being trusted may not be enough; what may be more necessary is to be trustworthy. It means trusting that I will take their best interests first, over my own. I would prefer to be specifically licensed as a financial planner, so when I’m providing comprehensive financial planning my clients understand the differences even better.
So the conversations are getting out there about what can be done to bring better recognition and perhaps regulation of the profession of holistic financial planning. The end goal is to help the public better understand distinctions among financial professionals and empower them to make the choices that best suit their needs.
This is all a work in progress, and I suspect will never get 100% agreement on what’s best for the public. But we have to keep trying so that our clients are well served by a profession they understand to be one.
Stuart Armstrong, CFP, is a member of the Financial Planning Association Board of Directors.