Financial planning has long struggled with the criticism that it serves only a limited subset of the relatively affluent, and has failed to develop business models that deliver financial planning to the wide swath of "average" Americans with more limited income and resources. Yet at the same time, the reality is that our education as financial planners does not really effectively prepare us for the kinds of "financial counseling" knowledge and skills required to serve those with less income and fewer assets. Which raises the question: is that simply because financial planning hasn't grown far enough, or is the reality that the financial planning body of knowledge is separate and distinct from the kind of "counseling" knowledge needed to help people through the basics of navigating our financial system, from credit cards to credit reports to checking accounts to the use of public agencies? Or perhaps stated more broadly, is financial planning for the mass affluent and wealthy a different discipline than financial counseling for those of more limited means?
The inspiration for today's blog post comes from the Financial Planning Association's (FPA) recent announcement that it will be working on joint initiatives with the Association for Financial Counseling and Planning Education (AFCPE) to, amongst other things, "support and develop the complementary disciplines and professional specialties of financial counseling and financial planning" and "provide specially designed options to FPA members who wish to obtain the Accredited Financial Counselor (AFC) and Certified Housing Counselor (CHC) certifications..."
When the announcement came out, my inbox received a flurry of emails asking whether this means the FPA is further diminishing its focus on the CFP certification as the fundamental standard for financial planning. As one person put it to me, "in a world where consumers are so confused by a dizzying number of designations, why is the FPA endorsing several more of them? Is the FPA losing its focus? What happened to 'One Designation, One Profession'?" And apparently, those questions were directed to the FPA as well, forcing FPA CEO Marv Tuttle to issue a follow-up email to members reinforcing that FPA still believes the CFP mark is the standard of excellence for personal financial planning, and that the goal is to help CFP professionals "expand their education and learn from other allied disciplines."
This last sentence to me is the real crux of the issue. Are the AFCPE's financial counselors engaged in an "allied discipline" of financial planning? It would seem that many financial planners believe that what AFCPE's financial counselors doing is financial planning... which in turn raises these issues about whether FPA is encouraging alternative financial planning designations or losing its focus.
Yet as I've written previously, I think if we take a realistic look at the financial planning body of knowledge, there is a wide swath of Americans to whom financial planning as it currently exists doesn't really apply, simply because their income is so low and their assets are so few that our planning strategies are irrelevant. What's the point of "income tax planning" for the 50% of Americans who don't pay any income taxes? How do you make effective recommendations to buy life insurance, or save for retirement, or establish a 529 college savings plan, for the 64% of Americans who don't even have the financial resources to handle a $1,000 unexpected expense? In essence, is there a minimum below which financial planning is not relevant, where the AFCPE's financial counseling is?
Of course, the terms themselves are somewhat squishy - in fact, I recall reading in The History of Financial Planning that the founders of financial planning considered "financial counseling" as an alternative label - but the real point is the intended focus and content of the programs. If you look at the AFCPE's Accredited Financial Counselor (AFC) certification, you see content that includes topic areas like "Credit Cards; Credit Reports; Consumer Fraud; Using Public Agencies to Assist Clients; Child Support, Alimony, and Repossessions; Housing and Student Loan Debt; and Bankruptcy."
Once you look at this content list, some of the conflict begins to fade away (although to be fair, the content also includes areas of basic personal finance that do overlap the core CFP curriculum). The content areas listed above are not topic areas with which the typical financial planning has training or even familiarity (How many planners know anything about using public agencies to assist clients? Are we ever trained in how credit reports and credit scores actually work?). In other words, programs like the AFC certification really do seem to be adding something to the knowledge base that isn't readily available to financial planners, but that could be helpful to them. (In fact, I've seen many planners become uncomfortable doing "pro bono financial planning" work, because in reality so many members of the public need help with these kinds of fundamental financial and debt issues and we as planners really are not well trained to address them!)
Given who the AFCPE's members are trying to serve - the "average" Americans who cannot afford financial planning, nor for whom is much of our financial planning advice even relevant - I have to admit that the financial counselors (as AFCPE has defined them) do begin to feel more like an allied discipline and less like a financial planning competitor. Yes, I'm aware that there are many who would ultimately like to see financial planning expand its scope to reach far more people up and down the income and wealth scale... but if we want to serve more, first we have to learn how to serve them effectively. From that perspective, one can make the case that the FPA/AFCPE joint initiatives may ultimately help bring the financial counseling knowledge into the financial planning fold, leading the profession to reach the point where its body of knowledge expands, its services broaden, and it does become more relevant for a wider base of people. And certainly, I have to have some level of respect for the AFCPE itself - an organization I'm not very familiar with, but which seems from the AFCPE website to be as interested in raising its professional standards in an area where you don't need certification to practice, as much as we in financial planning have the same goal for our profession.
So in the end, I have to admit that that I'm tentatively encouraged by the FPA/AFCPE joint initiative. I think it's sometimes difficult for us as financial planners to swallow our own professional pride and acknowledge that there's knowledge here about how to counsel the average American that we just aren't well trained in, but nonetheless I think that is the reality right now. That being said, however, I also hope that initiatives like this don't distract the FPA from bolstering its membership with and its value proposition to its core constituency - financial planners with the CFP certification - where it seems to be losing ground in recent years.
So what do you think? Will the FPA/AFCPE joint initiatives be a positive step? Would you consider one of the AFCPE's certification programs to round out your own personal knowledge? Is it fair to acknowledge that financial planners are not really well trained on these "financial counseling" issues? Does the joint initiative bolster FPA's value proposition, or is it a distraction?