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.

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 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.

Financial planning, as described and defined by the CFP® training program, is akin to map-making.  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 may or may not actually support the goals of the client during the management phase.

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 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” and thereby deny the possibility of any other better-suited alternatives.

None of what I wrote above intends to demean either the designation or practices of those who legitimately profess themselves to be 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 on Point…

Over the past decade, I have met with and trained hundreds of insurance and financial advisors in life insurance and Series 6 pre-licensing, and a wide variety of continuing education topics including ethics.

• 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 over 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 idea that slithered into our collective psyche in just the past 20 odd years.
• Fewer than one in ten 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 - universal life insurance.
• Only a handful understood the most elemental economic principles that clearly indicate that participating whole life insurance is the best and safest foundation for virtually every personal financial management plan.

One can more easily grasp the reasons for this strange set of facts when one reviews the history of personal financial management in America since 1974, a history that illustrates the slow erosion of control of personal wealth from the pond of individuals to the oceans of government and Wall Street.

Conclusion…

I am often accused of being “down on” financial planners.  Not true.  I am down on 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 and viable financial management strategies.

Financial planning is an oxymoron when it denies the use of planning tools and strategies at the expense of individual wealth and liberty.  

by Jeffrey Reeves  youBEthebank.com 

Filed under: Ethics and Morals, Money, Personal Economy, Whole Life Insurance, certified financial planner, economics, ethics, financial, investing, investments, liberties, life goals, managing personal finances, Money, oxymoron, personal financial planning, wealth