The History of Financial Planning

There’s been many changes to the financial planning industry in the past few decades. Financial planning has matured from being simply a stock and bond sales operation to one with deep roots in planning, budgeting and, believe it or not, psychology. Over time there has been an increase in regulation, certifications and standardization. Despite these changes, the financial planning industry as we know it today is not a perfect one. Regardless, there are many benefits and advantages of reaching out to a financial planner or advisor. My only advice is that you shop around as all financial planners are not created equal.

The Fundamental Change

During the 1960s the financial planning industry wasn’t much more than stock brokers and insurance salesman operating their financial planning firms from storefronts across America. At this time only a few planners took the time to determine the client’s goals and objectives, gather relevant data, provide comprehensive solutions and monitor the clients progress.

The fundamental change that took the financial planning industry from simply brokers to "real" financial planners occurred in the 70s. This was the point in time where the public began to realize that financial planning is much more than buying stocks, bonds, and insurance. They were beginning to understand that a comprehensive financial plan helps achieve financial independence more than buying any portfolio of stocks.

Financial Planning Standards

Professions that utilize complex analysis techniques, complicated interactions with many variables, and a variety of assumptions often require a certain level of expertise. Industries that deal with this level of complexity demand validated levels of competency and certification, the financial planning industry is no different.

In the early 70s the college of financial planning designated the first Certified Financial Planners, better known as CFPs. In 1985 the college for financial planning established the Certified Financial Planner Board of Standards, Inc. Today, this organization verifies the competency of all those whom earn the CFP designation.

The Period of Extreme Growth

During the 1990s the financial planning industry grew due to the favorable economy and the entrance of many traditional banks and brokerages houses. During this time the divide between commission-based financial planning and true (fee-only) financial planning grew as well. The banks and other financial service companies began to see the value of using financial advisors to promote their financial products and services.

This shift blurred the lines between the true financial planner and the much large financial services industries. During this time the financial planning industry grew to include a broad variety of insurance, estate planning, investment and tax planning experts. This helped financial planning evolve into a comprehensive personal finance solution.

The Constant Evolution of Financial Planning

As you can probably tell by now that the financial planning industry will continue to evolve over time. This is especially true given the demand for an increase in financial service regulation. To date, it is still unclear what changes we can expect. However, if anything in the financial planning industry is certain, we will continue to seek new and relevant way to help our clients reach their life’s goals and objectives.

I hope this article helped illustrate where the financial planning industry has been and where it is going. Financial planning will help you reach your life’s goals and objectives, so if you haven’t started yet, now is a great time!