Bob Veres, a journalist and writer for Inside Information, has been an active figure in the financial planning profession since 1982. While he is not a practicing planner, he is an expert in the field, thanks to his journalistic mind and firm belief in the power of financial planning in people’s lives. Bob has always advocated for and pushed to move financial planning into the realm of a profession — in league with doctors, lawyers, and other trusted professionals. He knows the profession wasn’t always what it is today, and he’s had a first row seat to the changes in the “industry” over the last few decades.

From Sales to Advice: Changes in Financial Planning 

When Bob first started writing about financial planning in the early 80’s, it was a “sales-based” service. From transactions and commissions to assets under management, he noted that financial planning was often tied to what firms and planners could sell their clients, based on wealth. He notes that, at the time, this made financial planning one of the few services that could answer the question “How much do you charge?” by saying, “I’m not sure, how much have you got?” 

Because he saw the potential impact that financial planning could have, he began to advocate strongly for planners to adapt. He spoke up in his writing and in person to ask planners and firms to provide services and advice that weren’t just going to increase profits, but benefit their clients. It’s been a long haul, Bob shared with us, but he’s convinced the next generation of planners is going to revolutionize the profession for good — and finally realize the potential of the work.

The Next Generation’s Revolution

As Bob explains in this interview with Hannah, he had high hopes that his generation would be the one to change the way things were done in the financial planning world. Unfortunately, he shared, it’s easy to get complacent and to avoid change. When planners and firms have a set client base, a steady service, and a downhill roll to retirement, the drive to change isn’t there. But it is there in next generation planners.

“There are two different revolutions that are necessary for the profession,” Bob told us. “One is that the service model, the value proposition, has to shift from managing assets to giving advice. And the second is charging appropriately for giving advice.” He believes that younger planners are primed for this change because they clearly see the value in their services — and in their advice — and they’re not set in their ways yet. Younger planners are better able to start from scratch, see holes in the market they want to fill, and to charge appropriately for services that address their clients’ needs. 

The Future of Financial Planning

This discussion touches on Bob’s expert insights into the current (and past) state of affairs in the profession, and we even ask him to share some of the trends and potential updates he sees coming down the pike. He explains why FinTech and technology in general are going to play a critical role in the future of the profession — but only if it advances with the times. He also talks about pricing models, AUM, best interests and fiduciary principles, and finding ideal clients. The main thread throughout the entire conversation, however, is that financial planners and advisors are the stewards of the profession, and it’s our job to show people just how much of a difference this work can make in their lives. He also closes with this thought, which we think is such a powerful testament to the work we all do:

“If you’re making a difference, that means you’re adding value. If you’re adding value, that means you’re valuable and you can charge for it. If you can charge for it, you can make a living at this. And if you can make a living at this, it’s a great living.”

If you want to see how far we’ve come as financial planning professionals in Bob’s lifetime, and what the future holds for next generation planners, this is an episode you don’t want to miss.

Hannah's signature

 

What You’ll Learn:

  • How financial planning has moved from an industry to a profession
  • How next generation planners can continue to uphold the profession
  • The importance of value propositions and service in financial planning
  • Why niche-focused advising is the way of the future
  • The role technology will play in the changing landscape of the profession
  • Career paths and finding your cohort for future success
  • Why FinTech needs a facelift
  • The risks associated with generational inertia 
  • How financial planners are (hopefully) living a life of fulfillment 

 

Show Notes:

In this episode with Bob Veres, journalist and expert on the financial planning profession, we reference:

You can also follow Bob on Twitter @BobVeres

 

Show Transcript

Episode Transcript


Hannah: Well, I’m so excited to have Bob Veres on the podcast. And for the listeners who don’t know him, they really need to get to know him. You have been in the financial planning business since the 1980s, I believe?

Bob: 1982.

Hannah: 1982. And you came in as a journalist, which I think is a really cool way of seeing the profession. He’s written the Inside Forum for many, many years. How long have you been writing the Inside Forum?

Bob: Well, it’s called Inside Information. I call it a newsletter, but it’s really an online publication. And then we do the Insider’s Forum conference, so you’re conflating the two. The Insider’s Forum conference is mainly for thought leaders and people who are figuring out how to be really successful, the most ambitious people in the business. We actually have a target market.

Bob: My target market for my newsletter is essentially the same people who aspire to be thought leaders or are already ht.e

Hannah: I think it’s fair to say that you’ve been a strong influence within financial planning for many years.

Bob: I’ve tried. My god, I’ve tried.

Hannah: Well, thank you for being here with us. Over the years, I’ve read a lot of your articles. I know the lady that I first started working for, she was a huge Bob Veres fan. But in reading all those articles, I can tell that this is more than just a job for you. Why financial planning? Why cover this when, as a journalist, you could really cover anything?

Bob: Well, there’s a couple of reasons for it. One is, being a consumer journalist is kind of boring. You’re writing about the best funds to buy now, kind of crap. But the story, the longer the story is, they made me editor of Financial Planning Magazine. It was called The Financial Planner for about seven months before we changed the name in 1982. And they described to me, here’s what financial planning is all about. And I thought, this is really cool, this is … To take the horsepower, the thought leadership that companies were buying for millions of dollars and applying it to people’s personal lives to help people navigate through the most complicated, god awful mess of a financial system that the human mind could possibly create.

Bob: Then I discovered that in real life, it was all about sales. Let’s just call that a deflating moment, when I saw that everybody was mostly using financial planning to sell. I decided that I would run the magazine as if this was a profession, and talk to my readers as if it was a profession, and write aspirationally, if you will. And for the last 36 years, I’ve been trying to bring- 37 years, I guess, now, I’ve been trying to bring the profession toward that goal. That it would be a profession like doctors, like lawyers, like accountants.

Bob: That’s kind of where the passion comes from because I feel like- I feel like we’re only about halfway there, to be honest. We can talk about that if you want. But there are people who now, many people, who now behave as professionals and give what I would consider professional advice. And that, I think, is huge progress.

Hannah: How old were you in 1982 when you started out?

Bob: 29-years-old.

Hannah: So you were 29-years-old, and you were the editor of this magazine?

Bob: Yeah.

Hannah: So you really understand when people, this next generation is talking about being young and trying to do some big things. That really connects with you, I would imagine.

Bob: Well, at that time, it was almost impossible to get people to take me seriously. And I didn’t take myself very seriously. One of the things I believe in life is that people are pretending to be an adult until about the age of 30. They feel like they’re posers, they feel like they’re pretending to be an adult. It’s hard to establish internal credibility. And until you establish internal credibility, it’s hard to get other people to take you seriously.

Bob: Basically, what I did, my process was, I immersed myself in the profession and tried to understand like a professional would understand it. I learned the nuances, learned the idioms, learned the technical details, try and master the business of it. Once I was able to do that- and it didn’t take that long, I mean, it’s not that complicated. Mathematics is mostly algebra. There’s a lot of legal, technical stuff like trusts and wills, and the provisions you want to put in those, and the charitable stuff. But for the most part, you can master that in a couple of years.

Bob: Once you have that confidence, once I had that confidence, I felt more comfortable telling my writers with some authority what they should be writing about. And feeling comfortable about the material that was put in the magazine, which I imagine is roughly the same as people in the field giving that same information, similar information to their clients.

Hannah: It’s so interesting hearing you say this. And looking at that, even just how you framed it initially was that you decided to talk about it as if it was a profession. I think that’s really powerful. Was that an idea that was shared by a lot of people at that time?

Bob: I’m sorry, I shouldn’t be laughing. I should not laugh at your questions. No, it was not. The idea that financial planning was a profession was mostly ensconced, if you will, in the College for Financial Planning, in the IAFP, which was one of the predecessor- actually, it was more in ICFP than the IAFP. Those are the predecessor organizations to FPA.

Bob: But the actual practitioners were mostly about the money, where was the money? The money was in high commission products, and recommending high commission products. Financial planning was a way for them to kind of get a picture of the finances, so they knew what to say in order to sell this stuff. They called it needs oriented selling, which I thought was a lovely euphemism that I … It’s sort of like fee based, you know? It was a euphemism that communicated that we’re professional when we’re really not, if that makes sense.

Bob: So, no. I feel, in terms of the people in the field, I think I was one of the very few who tried to impose a more professional vision on the profession. I had a platform to do that, I had the magazine. I had writers, I had good writers at that time. So we just kept pounding away at the idea of professionalism, the idea that people’s lives can be affected positively by financial planners, if they give advice. We didn’t have the word fiduciary back then, but we did talk about best interest, and the client’s best interest.

Bob: It took a long time, but I think the more idealistic advisors caught on. They said, “Yeah, this does sound like what I want to do.” The satisfaction of the practitioner would go up the more fiduciary they behaved. The less settling they did, the more they behaved like fiduciaries. The fewer compromises they made with their pawn chips, the more they enjoyed what they did, the more satisfaction they got out of it. I think that was the driving force that we had to leverage, that we had to use. That was the thing that eventually will bring this to a true profession.

Hannah: In your time, at the Financial Planning magazine and throughout, you’ve seen many trends in the financial planning profession and industry. What would you say has been the most impressive changes that you’ve seen?

Bob: The shift from commissions to fees was the major one. I predicted that fees were the future of the profession, gosh, back in the late 1980s, and people thought I was crazy. In fact, I even remember going to a conference and speaking about this. And one of the broker dealer executives, John Keagle, his name was, he was one of the founders, really, founders of the financial planning movement by creating an independent broker dealer. He said, “Financial planning is and always will be associated with sales activities.” And he screamed it, and there was applause in the audience. This was in the late 1980s.

Bob: That is not true today. He was wrong. Of course, he’s not around anymore, so I guess I can’t hold that in his face, but- nor would I, by the way. But I think the movement from commissions freed up the profession from a lot of the conflicts of interest that were addressing … that were compromising their consciences as they were giving advice. And now, we’re in a similar transition from the assets under management model, which is a vestige of the sales model.

Bob: Of course, the reason why assets under management has such a stronghold is that we’re evolving from a revenue model, or a service model, where the value proposition is moving from managing the assets- which, I would argue, it’s very hard to get alpha with almost anything you do. You could get advisor alpha by rebalancing, and by tax loss harvesting. But actual alpha, buying mutual funds or recommending mutual funds that are going to out perform the market is a very chancy activity. But the actual service, the financial planning service, the advice, the being there, helping people make decisions, that’s where we’re evolving the value, too. And for some advisors, that’s where 100% of the value is. But for a lot of advisors, it’s been very difficult to migrate from an asset management oriented AUM revenue model to something that’s more appropriate for giving advice.

Bob: One of the signature lines I give when I give presentations is, no profession, no true profession can have people answer, how much do you charge? By saying, I’m not sure, how much have you got?

Hannah: Are you seeing people really step into that space where they’re just charging a flat fee for all clients? How do you see that evolving?

Bob: Well, the Gen Y people get it. When I talk to Gen Y people and they say, “Would you pay 1% for someone to manage your assets?” They’d laugh at me. I think laughing at me means no, as near as I can tell, based on their body language. So it’s much easier for someone coming into the business as a younger advisor starting fresh to charge appropriately for the services they’re offering, than it is for somebody who’s been charging a limb for a long time, and having trouble changing.

Bob: But the other problem we have, and I just talked to Matthew Jackson who’s the pricing expert in this profession. We were talking on the phone, and he said, “One of the problems I’m running into is that so many- that the center of gravity in the profession right now is people who are saying, why should I change when I’m going to retire within five years?” So the motivation to make changes, needed changes, is not there among a lot of the founding generations of the profession, which is my generation, people I grew up with.

Bob: They’re really holding back what I think is two different revolutions that are kind of- they’re necessary for the profession, they’re linked. One of them is that the service model, the value proposition, so to speak, has to shift from managing assets to giving advice, which is obvious and not being done as rapidly as it should be. And the other thing is charging appropriately for giving advice, and leaving the A1 model behind.

Bob: To answer the specific question you asked is that, the younger advisors have two advantages. Number one, they see clearly the value proposition. And number two, they can start from scratch and charge the way they want to charge, without having a lot of legacy clients who are custom to paying a certain way. And without having some of the danger, the risk of changing a revenue model that’s currently working with their aging decumulator clients.

Hannah: One of the things that I’ve heard in talking with younger planners is this frustration about the retainer models that they’re seeing in firms. That the retainer is really just becoming a disguised AUMV, where the AUMV is similar to that retainer model. What would be your response to that?

Bob: Well, it’s pretty obvious that’s true. The advisory profession, those who move to retainers basically said, “All right, how much should I charge?” And that was a difficult question. That right answer to that question is, what is the value I’m providing? How much time am I spending? What is the internal cost? How much of what I do is relevant to this client? That’s a hard question to answer. What they defaulted to was, how much am I charging currently? All right, I’m going to shift that from an AUM to a retainer, and I’ll continue to charge the way I was charging before, just orderly. And I’ll eliminate a couple of the easy conflicts of interest.

Bob: The problem is, we got really lazy about how to charge. The right way to charge is to know what your value is, and know how the services you’re providing- first of all, how much they cost internally. And second of all, what benefit they’re having for clients. And then calculating that and charging fees for it. Failing that, the very least you can do is price per service. In other words, you can have modular services. This is part of the conversation I had with Matthew Jackson, again. He wrote a really good white paper that basically said, you should have different tiers of clients depending on how complicated they are. And of course, the interesting thing is, you discover that some of your younger clients are more complicated than many of your older clients, even though your younger clients are less wealthy. Because they have more life events happening more rapidly, and because they’re at a more crucial stage, crucial planning stage.

Bob: But we’ve gotten really lazy about how we charge. You have a certain amount of assets, we divide that by 100, and that’s what you’re going to pay. And the profession has been in that bad habit for so long that it’s going to take a long time to figure out, what is our real value proposition? I don’t think my generation is going to do it. I just wrote a column for Financial Planning that basically said that that’s going to fall on the Gen Y planner cohort, because … for two reasons.

Bob: One is, the people I grew up with, the older planners, have too much invested in the current model for them to risk changing. And number two, they grew up lazy about how they charge. They grew up with this mathematical model, which cannot be the way someone charges for professional services.

Hannah: On this idea of the right way to charge, do you see a lot of financial planning firms who are really doing this retainer as a disguised AUM fee, in the future, having to lower their fees significantly?

Bob: No. I think it’s possible to end up raising them, but they’ll raise them … There are some people, they have $15 million under management, and they never call, and you never talk to them. There’s not really much more you can do for them, because their life is pretty much on hold. For those people, yeah, you’re going to have to lower your fees because you’re not adding much value there. My guess is that, if you don’t lower your fees, they’re going to notice and they’re just going to leave. They’re going to go to somebody who’s going to put you on autopilot, and manage the assets in a more thriftier way, and maybe generate some advisor alpha that’ll do that.

Bob: For other clients, for a lot of clients, I think you could be charging more, because there’s more value in the services you’re offering than you’re charging. But this goes back to something else that I think the profession- this is another transition in the profession. Tracy Beckes, who’s a coach, told me years ago that all of the most profitable firms she has talked to serve a niche. I, of course, being the smart former editor of the magazine, and guru well…

Bob: I said, “Well, Tracy, how about if they work with people who are less wealthy?” And she said, “Even them.” And I said, “Well, how can that be?” And she said, “Because, when you work with a niche, you recognize their issues, you know their idioms, you know their jokes. You know the challenges they face, so you don’t ever have to reinvent the wheel. You know them. Marketing becomes easier because they talk among themselves. And people want somebody who’s a expert at who they are, not somebody who’s a generalist, who has to figure them out.”

Bob: Larry Carroll, a financial planner, an older financial planner, once told me he has to charge 10 times as much to give advice on something he knows nothing about, because he has to do so much research. I think that applies to pretty much everybody. If you work with a group that you recognize, you know intimately, then you’re going to be more efficient and more productive, and ultimately, more helpful to that cohort than you could possibly be if you’re working with a doctor one day, and a highly compensated executive the next day. And the third day, a small business owner. You’re constantly trying to figure out, what is it I need to talk about?

Bob: So, I think advisory firms are not only going to be able to charge more giving more value, but I think they also might be able to become much more efficient in how they deliver advice, if they can specialize and understand a particular niche.

Hannah: In looking at the fee conversation as we are right now, one of the things- clients had really been driving the push to fiduciary, you know? The push for financial planning. I’ve seen that in my networks. And I’m curious, are you seeing clients driving this change in the conversation around fees?

Bob: No. I don’t think this is something that … Clients are moving towards fiduciary advisors. Clients are leaving people who have a sales model for people who are fiduciary. And to some extent, I think the Gen Y cohort is moving away from people who think that they’re adding value by managing assets. But I don’t think this fee thing could be solved by clients. I think this fee thing has to be solved by advisors, they have to figure out …

Bob: What’s going to happen is, you’re going to see advisors putting much more precise, much more reasoned, if you will, fee structures out there, and then the marketplace will decide. The marketplace isn’t going to decide in a vacuum, the marketplace is going to have to decide between alternatives. And the profession really hasn’t put enough alternatives out there for the marketplace to have enough decision making power over what happens. Does that make sense?

Hannah: Yeah, I think so. It’s so hard, too. How do you compare?

Bob: Yeah.

Hannah: We’re not making it easy for anybody to compare pricing of one financial advisor to a financial planner.

Bob: Plus, nobody’s working with three financial planners and saying, “I like this one better than that one, and much better than this other one.”

Hannah: Yeah.

Bob: You know, you work with an advisor and then you think everybody is like that one person.

Hannah: Yeah. So you think that we have to figure that out as a profession, and then clients will come eventually.

Bob: Yes. There has to be competition. I think if you’re seeing a lot of that experimentation going on in the XY Planning Network, and in … Sheryl Garrett’s organization. So, there are alternatives out there, but it’s not a high percentage of advisors at this moment. There’s going to have to be more experimentation with a higher percentage of advisors before people feel like they have a choice, and can gravitate. And then we’ll discover, what do people prefer?

Bob: The whole marketplace is a big laboratory of experiments. The marketplace ultimately coalesces around the experiments that work, or the experiments that are most popular. And we’re in the very early stages of doing that.

Hannah: You wrote a book, The New Profession, and you outlined what you call the perfect storm that’s happening right now. You say the best business developers will be retiring in 10 years. The key referrals are also retiring. And then these longstanding, high revenue clients are getting closer to the end of their lives. And firms just don’t know how, don’t have a high success rate of engaging with theirs.

Hannah: So my question to you is, what can we do about that?

Bob: Ultimately, what I’m describing there is a generational shift. When you have a generational shift, it’s not just one age cohort to another. It’s all the preferences, and all the challenges that they bring with them. I talk to a lot of younger advisors who are saying, “I’m not allowed to work with people of my generation.” And I say, “Well, you need to leave them.” And they say, “What do you mean, leave? I’m making a decent salary.” I said, “You have an obligation to your generation to bring financial planning to their lives. And if they’re not allowing you to do that at your firm, you’re going to have to go out on your own.”

Bob: I see some of those people going out on their own way there. XY Planning Network is a really good avenue for people to start their own firms, and be at least self supporting within a reasonable period of time. Others are saying, “Look, I want to inherit a certain kind of firm. And the firm I’m in right now is not the firm I want to inherit.” And they’re forcing change, if you will.

Bob: But the perfect storm really is one generation, which is accustomed to doing things one way, with a generation of clients who are accustomed to being served in one way, are giving way to another generation that has a different way of thinking about the financial planning service model in provision. That means there’s a whole lot of change going on. That means there’s going to be a very significant shift in the way this business operates. I think it’s really the culmination of everything I’ve worked for.

Bob: I think the younger generation is going to finish the job of making financial planning a real profession. They’re not going to sell, they’re not going to charge based on how many assets you have. They’re going to work with everybody, not just an elite few who are wealthy. They’re going to use technology much more effectively, and much more creatively than anybody in my generation ever has. They’re going to have more technology to work with, and the changings are going to be amazing. And in the process, I think they’re going to drive a true fiduciary, true professional way of providing advice and bringing people along in a much more helpful way than we ever have before.

Bob: So I’m kind of excited, I’m trembling with excitement at being on the verge of finally, 36, 37 years later, seeing the culmination of the thing that was obvious back then, that inertia has prevented from happening.

Hannah: You talk about this generational change that’s happening. I’m curious, from your perspective, what are the firms … The firms that are navigating this successfully, what are those keys that they’re doing to really be efficient with this rapid change that’s happening?

Bob: The advice I give when I give presentations- and understand, I’m doing a lot of writing about these subjects, so there’s a lot of nuances, a lot of nitty gritty to get into. But the general overarching advice that I’m giving the founding generation of advisors is, help your younger advisors figure out what firm they want to inherit. What firm do they want to take over and be running? What services do they want to be offering? How do they want to charge? And then give them the project of figuring out how to get incrementally toward that firm.

Bob: That’s the easy answer that I give advisors is that, you’re going to have to turn over some of the decision making power, because it’ll be a lot of the decision making power, and ultimately 100% of it, to your successors. So you make it a project. For example, one project is, how could we profitably work with and deliver a relevant service model to people who are younger and not wealthy? That doesn’t mean just scale down the AUM model, that means giving them advice that’s relevant to their age cohort.

Bob: Michael Kitces just wrote an article in Financial Planning Magazine basically saying you’ve got it all wrong. The people who are younger are more complicated than the people who are older and pretty much ready to retire. And I think he’s right. So you need to have a relevant service model, and you need to create a way to charge for that that’s fair, and takes into account all those things I talked about earlier. You know, what’s the value I’m adding? And what’s my internal cost? And also, how to drive down the internal cost using technology. That’s a project.

Bob: Another project might be, all right, how many clients do we need? And how do we staff up for some kind of a mass market approach, where we give advice through, I don’t know, through an app, for example, or through something where we build up all the knowledge and the costs. Or, how do we create a face to screen relationship with our clients where they don’t have to drive into the office? They can just FaceTime us and ask us questions, and we talk to them for 10 minutes and give them the answer. And they give us some things we need to follow up on, we make that happen. And suddenly, we’re 10 times more efficient than the old model where we meet four times a year in the office for an hour each, and then take episodic phone calls.

Bob: So make these a project. Say, you guys are in charge of figuring out how this is going to happen at our firm. And it should be profitable. It should be relevant to the revenues of the firm. In other words, we’re not going to take on these clients as a lost leader. We’re going to take on these clients because we can serve them, and we can serve them properly.

Hannah: I just had a conversation with some friends of mine who work at an established firm, and they brought in this new model of serving young professionals. They have been very successful in implementing it, but one of the struggles that they’ve been facing is that it is- for the amount of hours that it takes planners to work with them, it is profitable, but it’s not nearly the profit margin of the traditional financial planning firms’ clients. So they’re in the struggle of, it is profitable, but it’s not as profitable, so it’s an allocation of resources. What would be your thoughts to that firm?

Bob: Get used to it.

Hannah: Fair.

Bob: Asset management service was insanely profitable. When I talk to established firms, typically, their profit margin is anywhere from 30 to 70%. I don’t think that’s ever been sustainable. No profession has ever been at a 30 to 70% profit margin. That’ll get disintermediated somehow. And I think the answer is, 25% profit margin is probably more appropriate, or I don’t know. We haven’t yet defined what that new service model is.

Bob: But yeah, it’s going to be less profitable because you have, with assets under management, you have unlimited scale and very little actual responsibility. You know, producing performance statements. Now we just put the performance statements online, and a client bought. We didn’t even do that labor intensive thing anymore. How often do you change the assets? So, yeah, you’re going to get a less profitable model when you’re moving from assets under management to actual advice. I think the wirehouses, for them right now, how are we going to do this?

Bob: We’ve always survived on telling people, hey, we know more about investments than anybody. But when everybody knows roughly the same about investments, then suddenly that model gets disintermediated. Same thing that’s happening with established money firms. I think we need to get used to lower profit margins, I guess, is the way to say it.

Hannah: I’ve seen an interesting shift, just in my time in financial planning, from focus on business development conversations, or how to grow a firm, to career path conversations. I’m curious, how is this conversation impacting firn owners? What are you seeing as an evolution of this conversation? What’s next?

Bob: Oh, that’s a big, complicated question. You’ve got a bunch of varied assumptions in that question. Career path is an appropriate conversation for somebody who’s joining an established firm, that has tiered levels of employees or staff. And of course, you want to know how, what you have to do in order to move up that ladder.

Bob: The business development is a more complicated issue. I talk to younger advisors, and they say, “Well, the firm doesn’t want me to bring in people my age, they want me to bring in- I’m 25-years-old, and the firm says, bring in 60-year-old aging decumulators who have more than $2 billion in their portfolios. And they say, “Well, that’s my dad’s cohort, that’s not mine. I don’t know anybody like that, I don’t play golf with anybody like that. That’s not a group of people that you can expect me to bring in as clients.” So, I think we’re stalled a little bit.

Bob: The appropriate thing to do, obviously, is to have people becoming full fledged advisors more quickly, as they work with their own age cohort. And they don’t have to be poverty stricken. You’re not going to the ghetto and saying … finding a homeless person and saying, “I want to manage your assets.” We’re talking about young professionals, people with high cashflow. People who are navigating, they’re getting married, they’re having kids, they’re living in their first house, they’re negotiating their first mortgage. They’ve got all these different challenges. You’ve got to address all those things, and people pay for that.

Bob: Where all that intertwines, where all that intersects, so to speak, is you have an established firm, you have younger advisors. You’re wasting their time if you’re telling them, “Go out and play golf with old people and bring in their assets.” It’s much more viable to tell them, “Bring in people who are really good clients now, and who are going to be great clients as their lives get more prosperous and more complicated.”

Bob: For younger advisors, the way to bring in those clients is to start working with your friends and family, probably on a pro bono basis. Get some experience giving good advice. And then expanding that, their network, to people your age who- you know what their challenges are, you know what they’re facing. And if you have a niche, even better. So the career path becomes similar to what the career path was for my generation, you know? It was, I’m starting out from scratch, and I need clients, and I have friends and neighbors who need advice. And I’m going to serve them and make them wealthy. And as they get wealthy, I’m going to become successful. That’s the model. As they become wealthy, I’m going to become successful.

Hannah: As we’re talking about the future of financial planning, I would be remiss to not bring up the FinTech space. I’m curious, what’s most exciting to you right now about the FinTech space and its role in helping clients?

Bob: You know, I should be more excited about FinTech, shouldn’t I? Because we do work in CNI, do the software survey every year. I speak at G3. I really think that the whole FinTech space right now is similarly in a state of morass, if you will, similar to the founding financial planning firms. We’re doing the same things over and over, a little incrementally better. We’re keeping track of client assets a little better than we did before. We’re generating reports that are a little more interesting and colorful than we did before. We’re grinding up numbers and spitting out a financial plan a little better than we did before, and maybe in a little more interesting format.

Bob: But what I would like to see is an app where you put some numbers in, and you get a quick and dirty financial plan. And then you can call your advisor and say, “What am I doing wrong?” And they say, “Well, go to this area, or this area, and input this and that, and you’ll get a better number.” And really, really leveraging technology so that the consumer … There are some somewhere interesting experiments right now. There’s something called Asset-Map, which allows you to put your entire financial picture onto a mind map. Clients can see their entire financial life, right there on the screen, and how it relates to each other. I think that’s pretty cool. Asset-Map hasn’t gotten a lot of traction, but I think that’s a great idea.

Bob: I think some of these model marketplaces, and the ability to do index replication is giving us a little more advisory alpha, and that’s kind of exciting. But for the most part, I don’t really see financial planning software as doing real planning for people in real life situations. There’s not really very much there that says, you’re going to buy a house, what is the … what does the average person my age buy? And what is the best price I can get? And what neighborhood? And how can I figure that? There’s a whole bunch of issues that just aren’t covered in the traditional financial planning toolkit that I think oughta be.

Bob: So, I’m most excited, I think about it the most. I think it’s great that we have all this software, but I think that software is really aimed more for the traditional way of doing financial planning, which is assets under management. And charging that way, and giving advice to aging baby boomers. And not really relevant to, I think, the next challenge, which is going to be to get into some of the more complicated issues earlier in the lifecycle.

Hannah: It’s interesting hearing you talk, and throughout this interview, it’s come up a whole bunch of times in my mind. Talking about … How do we address the mass market? I’m curious, what are your thoughts on … Look at the Dave Ramsey’s of the world, you know? People who kind of already have that avenue. What are your thoughts on him or those kind of figureheads, if you would?

Bob: I’ve been fighting the guru moniker all my career. Every time somebody calls me a guru, I shudder. And the reason why is because, inevitably, people who become … who gain credibility for the wrong reasons, who gain credibility because they know the easy answers, tend to do more harm than good. So when we talk about mass marketing, or somebody having an enormous audience of people, that enormous audience is made up of individuals. Every one of them has individual challenges and circumstances that the mass rules of thumb, so to speak, are not applicable to. So I’m immediately suspicious of any guru who’s managed to give advice to a large number of people, because I know that advice is not customized to, in an appropriate way, to those people.

Bob: I think the profession is going to deliver services to the mass market, but it’s going to have to be customized. I’m happy you don’t call me a guru in this podcast because I think that’s a harmful designation. If we start giving out guru awards, I think every single guru is going to be discovered to have done more harm than good.

Hannah: We’ve talked a lot about, and you’ve hinted at a lot of things that excite you about the next generation of financial planners that are coming into the profession right now. So, I’m curious, what excites you? But I also want to add to this, what scares you or concerns you about this next generation of financial planners? Or what do we need to be worried about?

Bob: Oh, worried about. Well, what worries me more than anything else is that the inertia of my generation is going to carry over to the next generation, because I think when you become successful at something, that becomes your biggest enemy, right? You’re good at something, therefore, why change it? Things are going well, why change it? We’re profitable, why change it?

Bob: What worries me a little bit is, I see people being absorbed into established firms, and buying into a way of doing things that probably isn’t going to work in the future very well, but it’s working very well right now. And the fact that it’s working very well right now can lolly you into thinking that you don’t need to make those changes that I was talking about.

Bob: So, what excites me is … The people who excite me in this business, I have to tell you, are the really active successors. The successors who have been bold enough to propose projects, and get approval for projects, that will transform the firms they’re working at. That’s not a high number of people. A higher number of people are the people who are going out and doing on their own, and starting from scratch. They don’t have all this legacy inertia that they have to overcome. They can say, “I’ve got a black sheet of paper in front of me, what kind of advisor would I want to work with?” And then they can become that advisor. That advisor is going to inevitably win market share over advisors who are still chasing the again baby-boomer.

Bob: You know, we’re going to be gone sooner or later, us baby-boomers. It’s going to take a while, and we’re not retiring quite as quickly as I think some people would hope. So, what I think is going to happen is, we’re going to have this inertia influencing the profession for quite a long time. And it’s understandable inertia. It’s inertia, why should I change when things are going well? Who are you, Bob, to tell me I should be changing? And they’re right. If things are going well, fine, then don’t do that. But that’s not the future. Don’t confuse what’s going well now with what’s going to do well in the future, because the two are going to be very different things.

Bob: From this generation, the people excite me. And probably all the advisors who have been meeting me over the years, who have established firms are going to hate me for saying this. But if there’s too much inertia at your firm, I would start your own firm. The people who excite me tend to be the people who are running their own firms. The people who are starting from scratch with that blank sheet of paper, and starting that laboratory experiment all over again. Some of them are going to fail, and some of them are going to come up with models that don’t work very well.

Bob: But if they’re attune to the marketplace, they’re going to adjust what they wrote on that blank sheet of paper to what consumers want. And they’re going to give those alternatives that people will ultimately gravitate toward. And that will make the profession … That’s how people will vote, with their fee, to make the profession better. Because people will be attracted to certain types of models that evolve more rapidly, I think, out of the new firms than the established firms.

Hannah: I look at the past generations- I say past, they’re still here. And seeing their role in-

Bob: That hurts a lot. I’m hurt, but continue.

Hannah: Well, it’s okay. This audience is new planners, so …

Bob: All right, fair enough.

Hannah: But I see their role in building up this profession, and I can see these big milestones that they’ve done. They helped create the CFP designation, and really create the profession. And creating these shifts that we’ve talked about on this podcast. What is it that my generation needs to be known for, if we’re going to see financial planning truly recognized as a profession?

Bob: Well, you’re right. You have to understand, the baby boom generation was probably the most unlikely group of people to succeed of any generation in history. We invented pot smoking, we invented LSD. Our slogan at the time, as we were going through college and entering the workforce, was tune in, turn on and drop out, which is not a corporate slogan that I’ve ever seen from any major Fortune 500 company.

Bob: The youth of my generation was very, very optimistic, very idealistic, and very dysfunctional. We kind of had to figure it out as we went, and we did. The idealism really helped in the financial planning world, in that we created these structures and models that were necessary for financial planning to become a profession. And we followed our consciences and migrated about as far as we could toward a model that is very satisfying, very personally fulfilling, and very helpful to clients.

Bob: So, yeah, there’s a lot of credit to be given. And I don’t give that credit very often because I’m focused on a future, so that’s in the past. What the hell, you know? Yeah, you guys did great, but what are you going to do now? And that’s been my orientation. What excites me about the next generation is that this process is stalled. We went from commissions to fees, largely. We’re taking market share away from the brokerage farms. The CFP designation is becoming more stronger and more powerful. It’s not anything like the MD yet, but it’s moving in that direction. But I don’t think we’re making tremendous progress now toward completing the job, if that makes sense.

Bob: What excites me, as I said before, what excites me about the next generation who I wrote about in my column was that, I’m going to live to see the next generation finish the job of creating a true profession that charges the way professions charge, that has a value proposition that’s comparable to what other professions offer in terms of advice, and in terms of expertise. And that will specialize, have the specialization that most professions have, so that you get advice that’s catered to your particular needs.

Bob: And as I said before, I don’t think that’s a mass market thing. I think that’s a one-on-one, you sit with somebody, your you get on a screen with somebody, and you help them change their life in beneficial ways. You give them great advice, you help them navigate through what is definitely an unnecessarily complicated financial world, and make it work. The more people we make work- I said in my book, I think we’re at the threshold of a new society.

Bob: The way I say it in there is, we had people building canals along the Nile River. And there were people up in the hills who were living a hunter, gatherer lifestyle, who were looking down at the people who were building canals. And the hunter, gatherers were working maybe four, five hours a day to satisfy their nutritional needs. They had the world at their feet, that they could go anywhere they wanted, they could do anything they wanted. They had a rich, easy life that had been going on for literally millions of years, if you go back to other hominids. They’re looking down at the people who are building these canals, digging these canals, and sweating, and eating bread rather than the meat and tumors they’re gathering, the hunter, gatherers are gathering. And they’re saying, “What have these people done to offend god so much that god would punish them with this lifestyle?”

Bob: I think we all know why people chose the urban and agrarian lifestyle over the hunger, gatherer lifestyle. In the back of their minds, they were thinking, sooner or later, we’re going to finish the job of building enough civilization, if you will, we’re going to finish this thing we started. And people are going to live not a life of drudgery, but a life of fulfillment. The interesting thing, I think, is that we are on the very edge of achieving that ancient goal. 5000, 6000, 10000 years later, we’re there. The problem is that nobody knows how to cross that threshold and actually live a life of fulfillment.

Bob: Financial planners, if they’re doing it right, are the closest people on the planet to living a true life of fulfillment. They’re getting paid to do something they genuinely enjoy, and getting the satisfaction of helping people every single day. And their job now is to help their clients live that life of fulfillment, to find out what they really want to do, and find out how they really want to do it, and navigate through things. And live that dream, that ancient dream that we started when we started this thing called civilization.

Bob: I think that’s the thing that I’m likely to live to see. That’s what this next generation, I think, is finally going to achieve. And it’s going to be an amazing thing. The last thing I was thinking about that is that, people are going to say, when they see somebody living a fulfilled, happy, prosperous life, the first question they’re going to ask is, who is your financial planner?

Hannah: I love that.

Bob: Kind of exciting.

Hannah: I’m curious, you’ve had a long career in financial planning. You have so many thoughts, and you’ve been leading the profession in so many different ways. What is it that you want your legacy to be?

Bob: You know, I don’t really care that much. I’m supposed to care, right? Wait, hold on. Let me start working on my caring muscles here and see if it works. I don’t think anybody who gives benefit to the social order does it because they’re hoping that people will trace it back to them. I think they do it for the fulfillment of it, if you will.

Bob: But I think a different way of answering your question is, I think I’m going to be remembered as somebody who helped shepherd the profession forward from, really, a dark time to a very bright future. And it’s been a very, very long trip. And much slower than I would’ve imagined. When I first saw the promise of financial planning, I imagined that financial planning was going to be this glorious profession, and it was going to help people, and people were going to benefit. And people did benefit, but not as much and not as quickly, and not as well as the original vision promised. We still haven’t achieved the original vision.

Bob: If we do achieve the original vision, maybe, if I’m lucky, I’ll be remembered as one of the people who was involved in that long process of bringing us there. But there are an awful lot of other people who were involved in bringing us there, and I don’t think I’m going to stand out particularly in that field. There’s an awful lot of folks who are … Especially the folks who are actually doing it, who are actually doing financial planning the right way. They should get the credit because they’re the ones who actually made it happen, manifested it in the real world. So my legacy should be, probably, at least one step behind theirs.

Hannah: Any finals words of advice that you would have for new financial planners?

Bob: Yeah, get out there and make a difference. That’s really it. If you’re making a difference, that means you’re adding value. If you’re adding value, that means you’re valuable and you can charge for it. If you can charge for it, you can make a living at this. And if you can make a living at this, it’s a great living. That’s really the sum total of the advice I give. There’s a lot of nuance to it, I provide 16 to 20 pages in my newsletter every month on the nuances, but that’s really the bottom line to it.

Hannah: I love it. Well, thanks for joining us, Bob.

Bob: Oh, I’d hope I provide some entertainment.

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