Most professions do not know the exact day they were conceived. However, on December 12, 1969, financial planning was created and today in 2019, the profession turns 50 years old.
Prior to financial planning, there were only financial product salesmen.
Salesmanship was born in earnest in the 1880s with the formation of mass manufacturing firms like Kodak, Coca-Cola, and Carnegie Steel. By the 1920s, as author of Birth of a Salesman Walter Friedman puts it, “sales management had ‘arrived.'”
In the midst of this sales culture, the first mutual fund was opened in 1924. For this reason, it is unsurprising that mutual funds were peddled by commission-based salesmen. The mutual fund industry grew to adulthood with the modern salesman as its caretaker.
Then, the stock market crashed in 1929, and it woke people up to the fact that fund salesmen had frequently lied to clients, saying that investments could only go up or that returns were guaranteed.
In response, the Securities and Exchange Commission (SEC) was created in 1933 and 1934. The SEC had two goals: 1) ensure more transparency in financial statements and 2) create laws against fraud in the securities markets. When those regulations didn’t solve the problems, Congress passed the Investment Company Act of 1940, which required disclosures of conflicts of interest.
By 1951, the entire mutual fund industry was still rather small with only $3 billion in assets. What assets it did have, it had muscled into funds through aggressive salesmanship motivated by large commissions.
With the false or misleading promises and advertising of salesmen ringing in their ears, each downturn in the markets shook investors out. As Investopedia reports, “the bear market of 1969 cooled the public appetite for mutual funds. Money flowed out of mutual funds as quickly as investors could redeem their shares, but the industry’s growth later resumed.”
The market had been dropping for 426 days (1.2 years) when, on Jan 29, 1970 it officially became a bear market. It bottomed 117 days later on May 26, 1970 at 69.29, down -36.06% from its prior peak on November 29, 1968.
Before that bottom while the market was still on its way down on December 12 in 1969, “13 men gathered in Chicago and outlined the first steps to further the idea that people could benefit from professional assistance from a profession that integrated knowledge and practices from the many often-fragmented areas of the financial services industry. Resolutions were made to create the International Association for Financial Planners (IAFP) and the College for Financial Planning” (CFP Board’s website ).
From that seminal event came the first graduating class of the College of Financial Planning in 1973; the first index fund, the Vanguard 500 (VFINX), in 1975; the National Association of Personal Financial Advisors (NAPFA) in 1983; and the CFP Board in 1985.
Now, the CFP® certification is the recognized standard of excellence for competent and ethical personal financial planning. The designation requires a higher education degree, at least three years of professional experience in the field, submission to the CFP Board’s Standards of Professional Conduct, passing a 6-hour examination on a comprehensive list of financial topics, and 30 hours of continuing education every two years.
Because of the salesman origins of mutual funds, most of the financial services industry even today is built around products. Many if not most of the Registered Investment Advisors either limit their advice only to investment management or admit that they don’t actually provide advice.
However because of the origins of financial planning, a few financial professionals strive to offer comprehensive wealth management. These professionals find their home among the College for Financial Planning certifications, such as the Certified Financial Planner (CFP®) designation, and as members of National Association of Personal Financial Advisors (NAPFA) firms.
In 2018 and in response the Securities and Exchange Commission’s failure to enforce the law, the CFP Board adopted a new Code of Ethics and Standards of Conduct which became effective October 1, 2019. This holds CFP® professionals to a higher ethical standard and fiduciary requirement than the rest of the commission-based salesmen.
NAPFA, in addition to requiring its members acquire the Certified Financial Planner (CFP®) designation, requires advisors to sign an oath promising to put their clients’ best interests first, provide full disclosure to clients of any conflicts of interest, never receive commissions, subscribe to NAPFA’s Code of Ethics, and have proven competence in designing a comprehensive investment plan.
Because of this two-factor ethical and fiduciary requirements, we believe that a NAPFA-Registered financial advisor offers you the best assurance that the firm you are working with is competent, compensated in a way that helps reduce conflicts of interest, and offers comprehensive wealth management. NAPFA members always act in a fiduciary role, are committed to client-centered relationships, are compensated directly by their clients which eliminates many conflicts of interest, never receive compensation for recommending specific products or services, strive to comply with federal and state investment advisor regulations, have advanced education in the field, and complete 60 hours of continuing education every two years.
While there are more than 800,000 employees or registered investment advisory firms, only around 83,000 financial professionals hold the CFP® certification. This means around 10% of the industry is trained in financial planning. Meanwhile, the National Association of Personal Financial Advisors (NAPFA) has 3,700 members. This means around 0.4% of the industry has subscribed to ethical oaths and business practices to put the client’s best interests first.
Comprehensive financial planning is a great deal of work and a great deal of value. Most investment managers offer little if any of financial planning services. Investment management may be at the core of financial planning, but we believe that by itself it doesn’t represent even half of the value of comprehensive wealth management.
We are very excited to be financial planners, a NAPFA firm, and part of such a revolutionary portion of the financial industry. To celebrate the 50th year of financial planning, we gathered the NAPFA CFP® professionals located in and around Charlottesville for a photo and a lunch.
Pictured in the photo from left to right is:
- Beth Nedelisky, CFA, CFP® of Marotta Wealth Management,
- Brian Carlton, CFP®, LHIC, MBA of Carlton Financial Services,
- Nora Gillespie, CFP®, CFS® of The Wrightbridge Company, Inc.,
- Mark McCarron, CFP® of Bond Wealth Management, LLC,
- Courtney Fraser, CFP® of Marotta Wealth Management,
- David John Marotta, CFP®, AIF®, AAMS® of Marotta Wealth Management,
- Elizabeth Woodrum, CFP® of Marotta Wealth Management, and
- Eric Fitzgerald, CFP®, of Alpha Omega Wealth Management.
As we ate with one another and celebrated the birth of our vocations, you could tell that each professional was passionate about putting the client’s best interests first.
Given the small number of advisors offering comprehensive financial planning, we suggest you limit your search to the small percentage of firms like ours.
Find an advisor at NAPFA.org or give us a call to get started today building your future financial success. We have many clients who live across the state of Virginia and even more scattered across the country in over 20 of the 50 states.
Photo by author Megan Russell.