Financial Planning Industry Headed in 'Right Direction,' Longtime Planner Says

But now we have sophisticated knowledge about taxes because there isn't anything in a client's financial life that we wouldn't also look at through the lens of tax planning.

This is what I mean by "a natural progression."

How do advisors help clients maintain their standard of living — the issue they're most concerned about?

By understanding what their values are, what they care about. That determines how much risk you want to take in the portfolio and with insurance and how you handle your human capital.

Please talk more about the importance of risk management.

I don't know that you can tell someone, "Here's a good portfolio for you," if you don't know whether, say, they have disability insurance, or life insurance if they have financial dependents.

When you're doing true comprehensive planning, you're addressing risk issues before you jump into the portfolio because you have to know who the person is: What's going for them? Where do they have risks? What's their preference for how much you protect against that risk?

What else is critical to understand about the use of insurance?

It something pops up that gets you off track, insurance will go from being an expense to a source of funds.

Insurance has always been important, but even in the fee-only community, in which I was very big, there was a distaste for it and, I would argue, not enough knowledge about it.

But now, it's just like [in the case of] tax planning. How can you talk about a client's portfolio if you haven't already protected the places where they have risk that need to be covered by insurance?

It would be nonsensical not to think of [doing] that. But our industry is [finally] evolving toward it.

Before you sold your practice, you worked with immediate annuities, but you no longer use annuities at all. (Creative doesn't offer them.) Are there solutions that afford clients similar benefits?

You can use the more traditional ways of staying on a smooth course with reserves, appropriate debt, insurance, and proper tax and estate planning.

What prompted you to start your own firm 31 years ago? You had little experience as a financial planner.

I had a bee in my bonnet and a vison of what I wanted to do. We opened with index funds, and that was very unusual.

I wanted to be on what I felt was the right side of where the industry was going — and I wanted to see if I could make it work.

We did a lot of life-cycle investing. There was a moment where you could actually implement life-cycle investing in a purely academic way, but that moment has passed.

In the meantime, I believe the industry is moving toward [the life-cycle approach], and Creative is doing it.

Why did you choose Creative Planning to acquire your practice?

Once I knew I was ready to move on because of changes in my life and in the industry, I hired an investment banker. We looked at a wide range of firms and narrowed it down to probably 20 that we did some phone interviews with.

Then I personally visited with more than a dozen and talked to senior management and middle management, and walked through the back [office]; sometimes we had further interviews.

At that point, I felt I had a really good sense of the state of the industry and that Creative was the obvious place where we would find our home.

How did your business model or the way you ran your practice change after you became part of Creative?

It didn't change very much. The first thing was that as founder, I had to give up the ownership responsibility. I did a lot of work in my head to make sure I was ready to do that — to be a good team player somewhere else.

I wasn't sure how long I would stay with Creative because I'd never been an employee except for less than a year at banks [including the Bank of Boston, on the investment side].

I thought I could commit to Creative to 2020. But here it is 2023, and I'm still having a great time!

Pictured: Paula Hogan