The history and future of financial planning

Recently, on an episode of the “Orange Pill Addicts” podcast, I was talking to a financial advisor and asked him the question, “What was the role of a financial planner like before 1971?” Using the history of financial markets, legislation and advice, I examine here how, over the past 100 years, governments have caused monetary mayhem while creating a market for financial planners. I also suggest what the role of a financial planner will look like in a healthy monetary environment.

To understand the history of financial advice, we must begin with a brief history of the markets as we know them. Some early markets appeared in Europe, starting with Antwerp in the 1400s. The port of Antwerp found itself between the Germans, who traded in furs and rye, and the Italians who brought precious stones from the Far East. The city’s innkeepers would provide shelter, while helping travelers trade goods with one another. Over time they began to create exchange rates and by the 16th century they were trading more promissory notes than trading commodities. Then, in Amsterdam in 1602, the Dutch East Trading Company became the first publicly traded company by offering an IPO to “all residents of these lands” inviting all Dutch people to invest.

In 1792, stockbrokers came together on Wall Street to create the Buttonwood Agreement for the Sale of Stocks and Bonds, which would become the New York Stock Exchange. Charles Dow created the Dow Jones Industrial Average in 1896. Then in 1923 Henry Barnum Poor published the pre-version of the S&P (it became Standard & Poor’s after the merger with Standard Statistics in 1941), followed by MFS Massachusetts Investors Trust ushering in the beginning of the modern mutual fund in 1924. As these American markets matured, they remained almost completely unregulated until the stock market crash of 1929.

In the 1920s, if an individual wanted to buy shares in a company, they went in person to a stockbroker for the purchase. It was pretty simple, person A wants to buy shares of company B, so they go to broker C to make that happen. While information traveled much slower back then, unfortunately, it traveled even slower to the mainstream. People closer to the information and printing press of the newspaper were able to act more quickly on advantageous news. The problem was that person D invested information that person A knew about much earlier. This investment landscape would change dramatically over the next decade in response to the stock market crash. In an effort to prevent another crash, Congress passed the Securities Act, which President Franklin D. Roosevelt signed in 1933. It was the first time the federal government passed legislation to regulate the nation’s stock markets. The federal government wanted the law to protect investors, create transparency for companies and their finances, and prevent misrepresentation and fraud.

Following the signing of the Securities Act would be the creation of the SEC (Securities and Exchange Commission), the NASD (National Association of Securities Dealers), and the continuation of legislation over the next few decades. In 1952, economist Harry Markowitz would create “the basis of modern portfolio theory” with the goal of optimizing a client’s investments. In 1958, John Keeble and Richard Felder founded the Financial Services Corporation. Over the next 10 years, they will grow their business to make about 300 financial plans per month. It was in 1966 that Keeble realized that when it comes to insurance and investments, it’s the customer’s needs that drive sales. Less than 50 years after the first piece of legislation, the United States would see the creation of commissions, corporations, corporations, colleges, and new investment strategies and tax incentives as a direct result of federal laws. The creation of new laws, theories and strategies set the framework for the general public’s need for a financial advisor.

On June 19, 1969, a man named Loren Dunton founded the Society for Financial Counseling Ethics. This society recognized people who legally and ethically helped the public with financial advice. Six months later, Dunton met 12 other men in Chicago on December 12, 1969. The group of attendees had primarily a background in mutual funds and insurance and were meeting in the midst of a bad economy. They were looking for positive solutions to navigate the new economic situation. From this gathering was born the International Association of Financial Planning, which was to create the College for Financial Planning (CFP). Within four years, the college released a five-course curriculum and earned the CFP designation for its first class. This certification continues today through the Certified Financial Planner Board of Standards. The “Chicago 13” meeting is now garnering public consensus on starting financial planning as a professional practice.

All this to say that as the 1970s approached, the financial planning bureaucracy was already thicker than mud and the profession itself required more skill. Can you begin to see where this progression is taking you? At this point, the United States was at the height of the Vietnam War and was spending more money to finance the war than the government could justify by what was in the gold reserves. Then, in August 1971, President Richard Nixon dealt the final blow to the gold standard by deciding that he would no longer peg the US dollar to gold.

The financial planning industry was now in full swing. In 1974, the rate of inflation was 12.3%, down from 5.6% in 1969. America’s printing press was printing money faster than ever, and the US dollar was no longer a safe tool to store money in. richness. The more inflation raged, the more there was a need for financial advisers. Moreover, the more the number of laws passed, the more complex the work of financial planning became. So, due to inflation, the public needed financial planners, and as the field became more versatile, they couldn’t do the job alone. Whether intentionally or not, the government created a problem (inflation and complex markets) while creating an industry (financial planning).

In the early days of financial planning, the role was different than it is today. Investors focused less on stocks and more on real estate, limited partnerships and annuities. Beyond that, financial planners have done more tax planning than anything else. Inflation, taxes and interest rates were high, so these investments were the best relief. The stock market has done so badly for such a long time that investors didn’t want it. As the United States entered the 1980s, households realized they needed a financial planner due to new tax laws, the 401(k), and a stock market that finally started to take off again. .

So, does Bitcoin solve this? The answer is yes. One of the main reasons gold has failed as a currency is that it’s hard to keep safe and hard to split. The most common solution is to use a bank to store the gold and then use bank certificates to show how much gold one party is transferring to another. Over time, these certificates became what we now call the dollar bill. Thus, when Franklin D. Roosevelt signed Executive Order 6102 that “all persons are required to deliver no later than May 1, 1933, all gold coins, gold bars, and gold certificates in their possession currently at a bank, branch or agency of the Federal Reserve. , or any Federal Reserve member bank,” the only legal choice for US citizens was to trade in dollars.

This law gave the government the ability to print as much money as it wanted with virtually no liability; the Nixon Shock finally revealed this issue. Bitcoin solves this problem with its fixed supply, easy and secure self-custody, and ability to send large or small increments between two parties; it excels in areas where gold has failed. With Bitcoin, the general public can again use the currency as a store of value.

Should financial planners be worried about Bitcoin shutting them down? In the Bitcoin Magazine article, “The Role of a Financial Advisor in a Hyperbitcoinized World,” Trent Dudenhoeffer explained that financial planners will not lose their jobs, but the evolution of money will redefine their responsibilities. This change will be a direct result of the evolution of the incentive model, as Bitcoin will repair money. The need for financial planners will diminish as the need to beat inflation diminishes. When people need less time with a financial advisor, the meeting becomes a more holistic strategy session that only happens every two or three years.

Additionally, in Dudenhoeffer’s article, he claims that financial advisors will be the ones to onboard large numbers of people to Bitcoin in the future. This answer will be mainly due to the fact that the advisor is the custodian of most of the client’s assets. He discusses these specific situations that financial planners will help clients in the age of bitcoin: Does it make sense for clients to take out a mortgage using some of their bitcoin as collateral, will the client need help with multi-signature setup, which mobile and desktop wallets will best suit the client’s needs, and whether or not clients should participate in peer-to-peer lending protocols to earn additional return. Fortunately, the dawn of this era may be closer than we think with new products from Watchdog Capital, Swan Bitcoin’s “Swan Advisor” and many more hitting the market.

Certainly, many financial advisers are already in the business for altruistic reasons and seek to help those who come to consult them. Unfortunately, red tape or negative incentives from the government or their headquarters often prevent these CFPs from serving their clients well. The hope for these counselors should be that in the future they would be able to take on fewer clients in order to maximize the care and attention they give to each individual. As seen in the more than 50 years of financial planning history, financial planners learn to adapt to market demands and clients will always need help with basic financial responsibilities like budgeting, taxes, health care and long-term planning. In today’s investing, advisors must build portfolios to beat the cost of inflation or they are not protecting the purchasing power of the investor. However, when customers hold bitcoin, they will only invest if they can beat the appreciation in bitcoin’s purchasing power. A Bitcoin standard will completely overturn investment strategies. The future of financial planning is in the hands of those who adapt to the coming monetary revolution to better support their clients.

This is a guest post by Brian. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.