How Financial Planning Has Evolved

Financial Planning has only been around since the 1970s, preceded by banks and insurance agents whose aim was not to provide holistic financial advice. Financial planning services have become sophisticated and technology-driven to meet complex and individual needs of people and businesses. Certified financial planners today are founded on a fee-based, personalized relationship with their clients to help them achieve true financial success.

In the beginning, financial advice was reserved for the wealthy with little focus on long-term planning. Services can find roots back in the 20^th century from banks and insurance companies focused on selling their products.

The 60s and 70s was the birth of financial planning as we know it today. Modern financial planning was first established in 1969 with the International Association for Financial Planning. This was where the groundwork was laid for CFP’s today. The College for Financial Planning was founded in 1971 bringing to the world the first Certified Financial Planners in 1973 providing comprehensive financial planning. The standardized credential of CFP was significant, because those practicing financial planning must meet rigorous education, examination, experience, and ethical standards.

The 80s and 90s were a turning point for the growth of this industry. Mutual funds, 401k plans, other investments, and the need for regulation and standardization demanded more professionals in the industry. The Certified Financial Planner Board (CFP Board) was established in 1985 to mange the certification process and provide an ethical code and standard for Certified Financial Planners.

There has been a shift in the industry from selling products to selling advice. Advisory, fee-based relationships became increasingly in demand, as personal finances are close to the personal lives of the clients. The fee structure effectively integrates the reward system of the client and investor to be aligned. The advisor became incentivized by the client’s portfolio performing well rather than by trades and transactions. This allowed advisors to begin making decisions that had the client’s best interest in mind.

The 21^st century brought incredible advancements in technology that transformed financial planning services. Financial Planning has been integrated with artificial intelligence and data analytics, equipping financial planners to offer more personalized and precise advice. Comprehensive financial plans today offer clients plans that consider many factors, including risk tolerance, life goals, and market conditions.

Financial planning is likely to continue evolving and providing more detailed and in-depth projections for clients. Holistic financial planning considers retirement planning, investment management, estate planning, tax planning, and more.

The history of financial planning has grown over many years to meet the diverse needs of clients. The foundation of financial planning is adhering to ethical standards and professional excellence. The financial planning model today emphasizes a genuine relationship that offers personalized guidance for that client’s needs, challenges, and goals.