In financial services, the terms “industry” and “professional” are often thrown around casually and used interchangeably. But in the end, are financial advisors simply part of the financial services “industry”, or do they deserve to be recognized as “professionals” instead? Is there a point at which we switch from one to the other? What does it take to really earn the label of “professional”?
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore the difference between an “industry” and a “profession”, and what this distinction means for those who wish to see financial planning regarded as a bona fide profession.
Because the reality is that there truly is a difference between an industry and a profession. Bona fide professions – such as divinity, medicine, and law – are distinguished from other occupations by common elements, such as having a specialized body of knowledge, education and experience requirements, societal recognition of the “good” they provide, ethical requirements (to which they’re actually held accountable), and control of their terms and labels (and who can and cannot hold out as a professional).
By contrast, the term “industry” typically refers to a grouping of companies focused around particular service or business activities. Industries are also broader in scope than professions. Professionals may work within an industry, but there’s more to an industry than just professionals. Which means it’s not a matter of whether financial advisors are professionals or part of an industry, but that as professionals they would still be part of an industry.
Nonetheless, the question still arises as to whether financial planning itself really merits the label of being a profession… and unfortunately, it appears the answer is “No”, or at least “Not Yet”. Because while many financial planners have voluntarily decided to fulfill more rigorous education, examination, experience, and ethical requirements (such as via CFP certification), the reality is still that anyone can choose to call themselves a financial advisor or a financial planning professional, and the public often can’t tell the difference (at least, not until after the fact).
Which means until financial planning (re)gains control of its terms, the financial services industry will continue to include both the financial advisors who elevate themselves to the standards of a professional, and also all the rest who may hold out as “financial advisors” to the public but who have little actual training as such!