Eurekonomics considers "financial planning" an oxymoron
By Jeffrey Reeves MA
Americans need to know that there are alternatives to the pseudo-planning strategies devised throughout the past 30 years that aim to control their money and their liberty.
Planning vs. Management
The College for Financial Planning and the Certified Financial Planner Board of Standards, Inc. will likely object to a statement that implies that their business is oxymoronic. They might be justified. Let me elaborate.
The Oxford Dictionary defines an oxymoron as "a figure of speech in which apparently contradictory terms appear in conjunction." Claiming that financial planning is an oxymoron, therefore, suggests that the terms financial and planning are contradictory.
The Certified Financial Planner Board of Standards stated mission is to "benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for personal financial planning." The CFP Board's Web site discusses and defines financial planning as "the process of meeting your life goals through the proper management of your finances."
Here's the contradiction. Planning is one thing. Management is another thing altogether. Planning may be a prerequisite to managing personal finances but it is not the process itself.
My intention is not to demean or diminish the good work of those who hold the CFP® designation. My intention is to clarify what has become an extremely confusing labyrinth for financial consumers and -- if I'm lucky and don't get tarred and feathered -- to help insurance and financial advisors to recognize the opportunity participating whole life insurance and other cash-value life insurance products present to them and to their clients.
What planning is and what it isn't
Planning is a map-making process. Map-making is done from an aloof and uninvolved position using esoteric engineering tools to describe real terrain in abstract terms. Managing is what you have to do when you come to the river identified on the map and discover that there is no way to cross the turbulent waters at that particular point because last week's flood washed away the bridge on last month's map.
I contend that financial planning, as described and defined by the CFP® training program, is akin to map-making, since the planner is not actively involved in the "the process of meeting [a clients] life goals through the proper management of [their] finances." The planner's role is to recommend and sell financial products and advisory services that might support the goals of the client during the management phase -- but offer no guaranteed results.
There are, of course, ethical standards to which each CFP® must adhere. There are also practice standards that the Certified Financial Planner Board of Standards, Inc. and other regulatory powers impose and enforce. Add to that the burden of the standards and rules of conduct imposed by bureaucratic regulatory agencies such as FINRA and state insurance regulators, and these collectively impose a set of "established norms of practice" on the planner that often restrict the options the planner may present to the client.
The restrictions may not overtly deny a client the best option, but often direct the options along the "established norms of practice" established by financial planning firms and practices and thereby deny the possibility of other better-suited alternatives.
None of what I wrote above intends to discount either the designation or practices of those who legitimately profess themselves as financial planners. It does intend to clarify that the entire process of planning and managing personal finances is shrouded by an imposing oversight structure, and that this structure does not always provide Americans with the most appropriate personal financial advice or products.
Case in point
Throughout the past decade, I have met with and trained hundreds of insurance and financial advisors when conducting life insurance and Series 6 pre-licensing education, and a wide variety of other continuing education topics including ethics. Here's what I observed:
- Almost every one of these professionals assumed that investing is an appropriate, perhaps essential, part of every American's personal financial program -- an idea that Behemoths in government and on Wall Street slowly injected into the American psyche throughout the past 30 years.
- One-hundred percent of them assumed that contributing to a 401(k) or its equivalent was the starting point for every personal financial management program -- another example of unclear thinking that slithered into our collective consciousness in just the past 20-odd years.
- Fewer than one-in-10 of these -- ahem -- professionals (not referring specifically to CFPs®) understood the most basic concepts relating to participating whole life insurance, mutual insurance companies, or even the life insurance products they sold most often -- universal life insurance.
- Only a handful understood the most elemental economic principles that clearly indicate that participating whole life insurance provides the best and safest foundation for virtually every personal financial management plan.
It may appear that I am speaking ill of financial planners. What I'm doing is discouraging lemming-like robotic adherence to "established norms of practice" that have misled Americans into a financial swamp that consumes both their money and their liberty while denying the validity of more conservative, more viable, and less experimental financial management strategies.
Remember, financial planning is an oxymoron when it:
- recommends risk based investments over risk managing insurance and savings
- denies the use of proven, powerful, versatile, and flexible financial products such as participating whole life insurance
- suggests strategies that have only been tested for a few years or decades and denies planning strategies that have been tested and proven for centuries
- enforces "established norms of practice" that benefit Behemoth financial sales organizations at the expense of secure individual wealth and the liberty that Americans derive from maintaining control of the money that flows through their lives