Financial Planning From the Beginning

Hoover Financial AdvisorsApril 1, 2016

Financial Planning

Financial planning can be fascinating. More people than ever before are interested in learning about the industry. Dating back, people had savings accounts at banks and opened travel and holiday accounts for special occasions. Eternal optimists took chances on the stock market, while many socked money away in bonds and other types of funds. Investment advice frequently came in the form of suggestions and tips from friends, articles in financial publications or radio or television pundits. The history of financial planning as an industry evolved slowly.

After World War II, some financial savvy individuals created professions for themselves to help struggling Americans. An actual trade didn’t bloom until 1969. On December 12th of that year, 13 men gathered at O’Hare Airport in Chicago to outline the first steps of a new venture. Their idea was that people could benefit from professional assistance provided by an industry that integrated knowledge and practices from the many often-fragmented areas of financial services. Resolutions were made to create the International Association for Financial Planners (IAFP) and the College for Financial Planning.

In 1972, IAFP enrolled its first group of students for the Certified Financial Planners (CFP) course at its college. The following year, the 35 members of the first class formed a membership organization called the Institute of Certified Financial Planners. It was a rather placid time in financial markets in the United States compared to the turbulent years that followed. Political and economic pressures converged in the early 1970s, which deeply affected markets. The decade opened in recession, while the bear market, which had begun in 1967 continued until 1982. The formation of OPEC led to oil price shocks resulting in double-digit inflation and another recession. Watergate hearings, a wage and price freeze, the resignations of President Nixon and Vice President Agnew and the wind-down of the Vietnam War adversely disrupted economic conditions.

After all this turmoil, more than a decade later, after great strides in developing a body of vital knowledge for budding financial planners, it was decided that the College for Financial Planning was not the proper entity to enforce the ethical standards of a growing profession. Thus, in 1985, the college entered an agreement to establish an independent, nonprofit certifying and standards setting organization. It transferred ownership of CFP registered marks and responsibility for continuing the CFP® certification program to a newly formed organization, International Board of Standards and Practices for Certified Financial Planners, Inc. (IBCFP). Today, this organization is known as CFP Board.

The financial planning industry continued to grow and in these early years, advisors seemed to prefer selling limited partnerships. This ended after the Tax Reform Act of 1986 made tax deductions for these businesses illegal. Written reports relating that era indicate that days were dark. Retirement rules were changing, as well. The adoption of individual retirement accounts in 1974 and the 401(k) in 1981 resulted in differences in the way people planned for retirement. Faced with selecting investments for retirement accounts, changes caused by the tax reform act and a soaring stock market, more and more people realized they needed help with their finances.

Financial planning began to develop and flourish. It became less associated with products or particular investments and more concerned with what is best for the individual. Of course, since those early days, there have been rocky roads, such as the Black Monday market crash in 1987, Gulf War I, the 1990/91 recession and other setbacks. Most recently, of course, there was 2008 and all the problems this recession caused. Those crises are behind us and we have learned that markets can’t be timed and what goes down does go back up.

Everything reported here reinforces the importance of having a financial planner with credentials advise people and guide them through good times and periods fraught with uncertainty. Members of The Certified Financial Planner Board of Standards have been doing precisely that for more than three decades. What began as a small educational program has blossomed into a professional certification recognized around the world. The CFP Board celebrated its 30th anniversary last year. As we consider all the changes that have occurred in the financial landscape and contemplate future possibilities, it is important to note CFP Board’s Core Objectives:

Competency – Establish and uphold rigorous competency standards for CFP® certification.

Professional Standards & Enforcement – Protect the public’s interest through the establishment and enforcement of rigorous financial planning ethical and practice standards.

Public Advocacy – Influence policy to benefit the public and increase access for all to competent and ethical financial planning.

Communication & Outreach – Increase public and stakeholder awareness of and preference for CFP® certification as the standard for financial planning.

Sustainability – Strengthen CFB Board’s capacity to achieve its mission.


Information for this blog was obtained from the CFP Board website and Investment Advisor.