Holistic, Human, and Honest Financial Planning with Cary List

PodcastJune 21, 2021
evolution of man with their respective wants

That’s why if you are looking at your clients from a holistic lens, which is done through employing behavioral economics, behavioral psychology, pairing the human behavior tenets with the use of technology, and you’re always acting honestly and in your client’s best interest, financial planning is a very exciting profession.

– Cary List

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In this episode of The Decision Corner, Brooke is joined by Cary List, the past president and CEO of FP Canada, an organization designed to professionalize financial planning. Throughout this episode, he provides his expert perspective on the changing industry of financial planning. Zeroing in on the transformational power of technology, behavioral science, and improved professional standards, List paints a picture of a brighter future for the field of financial planning. 

Some specific topics of this episode include: 

  • The seismic shift in the financial planning industry from a sales first industry to a people first industry
  • How the pandemic impacted trust in the financial services companies
  • The innovative digital techniques of fintech organizations, and how they may be falling behind the curve.
  • What roles human financial advisors will play in an increasingly automated world
  • How Cary’s “3H model” can transform financial planning into a more holistic, human, and honest profession

The conversation continues

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Key Quotes

“In times when trust is at its lowest, where the markets are at their worst, where consumer confidence is at its lowest, that’s when the true professionals actually are recognized by consumers as something that’s drastically needed.” – Cary List

“If financial planning can’t evolve to a 3H model by 2030, it won’t exist anymore. You won’t need humans because there’s no social science to it. AI will do just fine, and that will not serve consumers.” – Cary List

“There used to be an awful lot of advisors and planners out there who were less comfortable with technology and really saw financial technology as a huge threat to their model. Frankly, it was a huge threat to some, because they didn’t really have much value added to offer other than doing the number crunching and other work that technology could do. But for those that really want to offer value and professional advice, I think technology has been a godsend, and technology has been something that will allow the true professional to be able to serve more clients more efficiently.”  – Cary List

“Humans don’t want to tell a computer their life story and have a computer spit back what they really are looking for. That’s where the social science comes in, and I think it’s fantastic because I think too many people, particularly in the finance world, really struggle with that aspect. They want to figure it out, but they really struggle with ‘how do I ask the right questions?’ and ‘how do I sort through what the client’s answers are to me?’” – Cary List

“It’s just bizarre to me. We expect our furnace guy to not sell us something we don’t need. No disrespect to a furnace technician, but it’s not a profession. We have here an advisory industry who wants to be recognized as a profession that is still arguing against their client’s best interest, which is utterly bizarre. So, I would say in 2030, it’ll be bizarre. But it should be bizarre today, frankly. It’s lunacy.” – Cary List


Brooke: Hello, everyone, and welcome to the podcast of The Decision Lab, a socially conscious supplied research firm that uses behavioral science to improve outcomes for all of society. My name is Brooke Struck, Research Director at TDL, and I’ll be your host for the discussion. My guest today is Cary List, who was President and CEO of FP Canada for nearly two decades until his very recent retirement. In today’s episode, we’ll be talking about the future of financial planning, a vision for the next decade from one of the most important stewards of the profession. Cary, thanks for joining us.

Cary: Thanks very much. I’m glad to be here, Brooke.

Brooke: Tell us a little bit about yourself , your work, and what you’re up to now that you’re transitioning into retirement.

Cary: Sure. Well, as you said, I was with FP Canada for almost 20 years. My background was actually as a professional accountant before I became a financial planner, before I got into education, certification, and leadership. I’ve always had a passion for the public interest and the public good and spent the better part of my career in the not for profit world and really spent since the mid-’90s in financial services trying to see it move away from sales and product to one of professional services, which is I guess a good segue into what we’ll be talking about today.

Brooke: Absolutely. So, a few weeks ago, you published this piece articulating four elements of what you see coming up for the future of financial planning, and you opened the piece with an anecdote about a senior banking executive back in the mid-’90s saying, “Let’s face it. We’re a sales organization first.” To put that cynically, financial plans were the free little goody that clients got in exchange for being sold to. What has changed since that time and what’s driving that change?

Cary: Actually, Brooke, first of all, a slight correction, which is shocking, is that, in fact, it wasn’t the mid-’90s. It was as recent as 2009.

Brooke: Oh, gosh.

Cary: That anecdote was at our very first financial planning symposium of FP Canada, of the predecessor organization, Financial Planners Standards Council. It’s shocking when you think about it. Particularly, at the time, this is why I quoted that particular anecdote in my article, this was the first ever symposium, a truly professional symposium, trying to bring leaders from industry who were supposed to be working towards advancing the profession together onstage in front of not just financial planners, but other senior industry executives, as well as regulators and some government people.

Cary: This individual was a senior executive, and I won’t name the organization, and in fact, that’s exactly right. It was around the question of best interest and he literally got so frustrated with the questions from the audience and the discussion from the audience, which was all about professionalization, that he said, “We are a sales organization first.” I like the way you put it, introducing that anecdote, Brooke, is that up until really the last seven, eight years, financial planning really was a throw-in that, by the way, if you buy these products, we’ll give you this thing called a financial plan.

Cary: What’s even worse, and I’m talking about what’s changed, a lot has changed, but a lot hasn’t changed yet. The notion of what a financial plan was, even from those that considered themselves true professionals, was a 50 or 500 page printed document that literally came off the printer, was handed to a client with a header that said, “Financial plan for Jane Smith,” and would sit on a shelf. In fact, if you looked at the financial plan document, you would open it up and the first page would talk all about the objective, all about the things that presumably occurred in the client discovery, although many times, it wasn’t capturing what it needed to capture, and then the other 49 or 499 pages really had nothing to do with what the client’s objectives were in the first place.

Cary: So, we have come a long, long way. Unfortunately, there’s still some of that out there. But I think what’s changed, particularly I’d say over the last five years, is there is a recognition out there by employers, by firms that the notion, products are being commoditized and there’s no actual sustainable business model for selling products, human to human selling of products. So, I think I’d like to take all the credit for it, and I’d like FP Canada to take all the credit for moving the industry towards a professionalization model. I think FP Canada deserves a lot of credit for the work it’s done, for sure. But I think it’s circumstance and I think it’s the fact that it’s only when forced to reconsider and look at other business models that sometimes the big guys actually make those changes, and we are certainly starting to see those changes occur.

Brooke: It’s interesting you identify technology as one of the main drivers there. I wonder if you could tell us a little bit more about trust in industry as well. So, when you fact checked my date stamp of my story, that in fact, that happened in 2009, it’s really interesting that 2009 should be that year. Right? Because that’s just coming off the tail end of the worst of the economic crisis.

Cary: That’s right. That’s right.

Brooke:… and getting to recovery. Trust in banks and in insurance companies, large financial institutions, was at an all-time low. Do you identify that trust in those institutions or the employers of financial planners played into that?

Cary: Trust is, one of the most important words in our arsenal in terms of looking what’s wrong and what is needed to right the industry.We actually used the tagline “A matter of trust” with regulators and with governments when we were advocating for a change in obligations of the planners and advisors to their clients and to push that to a fiduciary-like obligation, i.e. an obligation of trust.

Cary: Trust has certainly, or the lack of trust, I think, has certainly played into the changes since 2009, and it’s very interesting. Yes, 2009 was probably the worst year to be talking about e selling your products. But what’s really interesting is if we look at 2009 and we look in flash forward to 2020, FP Canada’s research has shown pretty unequivocally that in times where trust is at its lowest, where the markets are at their worst, where consumer confidence is at its lowest, that’s when the true professionals actually are recognized by consumers as something that’s drastically needed.

Cary: In fact, our studies have shown that CFPs actually do better than ever in those times of downturn and times of lack of trust and lack of consumer confidence because they’re much more able to differentiate themselves. I think that that’s exactly what we saw in 2009. That’s what we’re seeing. Yes, we’ll get into technology, I’m sure, over the course of this podcast. But just in terms of the economic situation and the lack of trust, that’s, I think, exactly what happened coming out of 2009, also helped us in pushing the agenda of consumer best interest and a professional model.

Cary: I think that’s what’s driven a very rapid change over the past 13 or 14 months where again, it’s lack of confidence and lack of trust and how do we actually overcome that as an industry? I say we, I’m talking about employers and I’m talking about the big institutions. So, I think as we just talked about a few minutes ago, change in large institutions usually doesn’t happen out of great visioning of the future. It happens occasionally, you see that people like Ed Clark out of Canada Trust back in the ’90s. But usually, those changes come out of a perceived need to change for survival. I think the other part, Brooke, in terms of trust is the lack of trust, I think, by consumers is not just as a result of downturns in markets, the financial crisis in 2008, ‘9, for example.

Cary: But I think it’s also come out of consumers becoming more savvy. Consumers, maybe they don’t know what they don’t know, but they are certainly more knowledgeable, and we’re also seeing a generational change. Maybe it’s a whole other topic, but the younger generation, much less trusting of their institutions, much less trusting of corporations. So, we’re also seeing that push from consumers to say, “If you want us to work with you, we need to be able to trust you and you need to show us and prove to us that we can trust you.”

Brooke: So, I want to dive in on a couple of points there. So, confidence seems to be something that was obviously very shaken in the financial crisis a decade plus ago now. If we fast forward to COVID, for sure, confidence was once again shaken. But trust maybe is a little different. Trust 13 years ago during the financial crisis was definitely at an all-time low as well because the large financial institutions were very much the drivers of that crisis. Fast-forward to COVID and that’s a little bit of a different situation. Mark Carney had some really interesting thoughts to share on this in his book that he recently published called Value(s).

Brooke: He talked about the change in the financial industry from the crisis 13 years ago until now and talked about how banks were the cause of the problem previously. But when COVID came along, they were actually able to be a really powerful part of the solution in terms of being able to help deploy liquidity and keep markets running. Do you see changes in trust towards financial institutions from the last crisis to this one that we’re experiencing now?

Cary: Yeah. No, it’s a great point. It’s a great point by Mark Carney as well. In fact, [inaudible 00:14:32] it’s bang on that the crisis of confidence during COVID was not a result of institutions, and it’s a very interesting observation that institutions, the banks in particular, were able to be a significant part of the solution. In fact, play a lead role in the solution. I think time will tell, frankly, whether that’s going to be an enduring trust, regaining of trust. But I think it’s an interesting time for financial institutions to play that role because if we look at my comment of 2009 and we look at the financial crisis of 2009 and what institutions have been trying to do, or financial institutions have been trying to do since that time, some more successfully than others and obviously not without ongoing challenges in those conflict, there’s underlying conflicts of interest t … that are very difficult to overcome.

Cary: They’re trying to sell products, frankly. So there’s still going to be those conflicts. But I think the fact that since 2009 and probably more recently, the last six or seven years, FIs in particular have started to embrace, and this is before COVID hit, the notion of providing professional service in the public interest, truly in the public interest and have really been working towards that change. In fact, Brooke, one of the other anecdotes that I haven’t used in some time is when I first started at FP Canada, or FP Canada’s predecessor organization, financial institutions were really seen as the big evil. It was David and Goliath. We were the David against this Goliath of FIs that really didn’t want to have anything to do with what we were selling, frankly, which is what we were selling was trust, and we were selling earned trust, not a word.

Cary: We had no relationships whatsoever with the financial institutions for a very long time. But if you see the last six or seven years, the financial institutions and the large financial services firms have been jumping on our bandwagon, and it’s more than just a bandwagon because it’s not only sustaining, it’s growing. We haven’t changed, and I say we. Hard to disconnect from the fact that I’ve retired from FP Canada. But my official retirement date isn’t until June 30th, so I can still say we until then. But FP Canada really has not changed. It’s still really been pushing, in fact, an even more aggressive position of professional advisor obligations to their clients. Yet, financial institutions have been embracing that wholeheartedly because they see that there’s added credibility and they’re, I think, finally ready and willing to figure out how to manage those conflicts of interest and mitigate the conflicts in the client’s interest.

Cary: So, way back in my early days starting out in leadership, I was at a conference on leadership and came across a book. You know Stephen Covey? Is it 7 Habits of Highly Effective People? I think it’s The 7 Habits of Highly Effective Nonprofits. So, it was a spin on Stephen Covey’s The 6 Habits of Highly Successful People or whatever Covey’s book is called. One of the tenets of that book was that you can do well and by doing good. I was so struck by that statement way back in whenever that was in the mid-2000s that I’ve actually used that all the time within our own organization at FP Canada, but also in trying to push the financial services industry towards building a professional model where they can still do well by doing good.

Cary: There was a great anecdote in that one particular tenet and it was about environmental defense in the 1970s in the United States. They were fighting the war of huge environmental harm being done by the largest of the corporations, and they were targeting the fast food industry, which was just dumping huge amounts of non-recyclable styrofoam into the environment. Anew Executive Director, CEO of Environmental Defense came in and said, “We need to look at doing this differently and we need to find ways of actually speaking to corporations in a language that they’ll understand.”

Cary: They were able to get to McDonald’s, partner with McDonald’s, and basically said to McDonald’s, “If we show you how you can actually be the heroes by saying that you are saving the planet by changing from styrofoam to paper, and show you how you can save tens of millions of dollars a year, are you with us?” That’s how the move away from styrofoam to recyclable paper started, and it was the whole notion that you can do well by doing good. I think the financial services industry started to embrace that notion close to a decade ago, and I think it’s played very, very well as we’ve hit now the COVID situation and as they try to reinvent themselves. Particularly, in light of technology.

Brooke: Yeah, that’s great. I think that really sets the stage nicely for pivoting now towards, what about the future? So, in this piece that I found so thought-provoking, you identified four points, and the thing that really got my brain turning over is thinking about how those four points interlock. So, I just wanted to list those out and then we can run through them in order and talk about how they fit together. So, the four points that you raised are, first of all, the symbiotic connection between AI or digital with human elements and planning. The second is financial planning really broadening out to become a social science.

Brooke: The third was the centrality of what you call the 3H model, holistic, human, and honest planning. The fourth and final one is that this discussion around best interests and around whether financial planning is actually just sales in a fancy disguise, what will sound totally absurd by 2030 once we have the benefit of retrospect. So, let’s go through those in order. Let’s start with something you’ve already been chomping at the bit to talk about in our discussion today, which is really around technology and the way that humans and technology interact in planning.

Cary: Sure. Just before we do, Brooke, it’s interesting to hear you play those back for me. But what’s most intriguing to me, I guess a little bit confounding to me is the extent to which so many people read that piece and said the same thing as you, which is how thought-provoking it was to them, because frankly, to me, this is like two plus two equals four. I guess it’s been my mantra for a long time. It’s been what FP Canada has stood for and it’s really interesting to see just how far we collectively as a society have to go to see it as obviously perhaps as I see it.

Cary: I just thought I would throw that out there because every time I hear, and I was looking on social media [inaudible 00:24:01] and I was just shocked at the amount of uptake frankly around the globe, Australia and UK and the US, on what I thought was just such a simple little parting word. So, nice, but somewhat confounding, frankly. 

Brooke: One of the things that you raised in particular is this symbiosis between digital and AI powered stuff on the one hand and human planning on the other.

Cary: Yeah. Know what? That’s a fascinating one, and I think no surprise to see the evolution over the last five years. When fintech, to use the buzzword, first became a thing five or six years ago,you started to see some of these upstarts like the Wealthsimples and some of the mutual fund companies started putting platforms together that said, “Well, we could offer advice through technology.” The idea was that people don’t need humans to get the advice they need and to get their help. They can get it directly from a fintech platform.

Cary: So, all of these fintech firms started by saying, “We’re going to go direct to the consumer. We’re going to put up these flashy webpages, people can log on, it’ll be simple. They can buy their mutual funds, they could get some portfolio advice, they can get diversification and asset allocation and balancing, and that’s all they need. They’ll be happy and they can trust us.” Well, you flash forward five years and what they’ve realized is it’s probably even harder for fintech firms to go B2C without humans than it is for humans to actually be successful without technology.

Cary: So, there’s been a huge shift from a lot of these tech startups to away from B2C and to a B2B model, where can they be the platform to help professional advisors and planners do a better job and can they actually partner with planners to actually be a conduit between the client and the advisor. So, I think that that’s what we’ve started to see. On the other hand, if we look at the human side of the equation, Five, six, seven years ago, there were an awful lot of advisors and planners out there, again, the older guard, who were less comfortable with technology and really saw financial technology as a huge threat to their model. Frankly, it was a huge threat to some because they didn’t really have much value added to offer other than doing the number crunching and the work that technology could do.

Cary: But for f those that really want to offer value and professional advice, I think technology has been a godsend and technology has been  something that will allow the true professional to be able to serve more clients more efficiently. So they can offer lower cost models, which will be able to provide advice and access to a broader swath of consumers, of society, help them do a much better job because the technology can do all of the number crunching far better, can provide much sleeker, much more consumer friendly front end than any human can.

Cary: That leaves the real value added to the planner, to be that true professional trusted human advisor, and I think what we’ve learned and what we’re learning is that Gen Z’s and  millennials still all need human contact and need that human reassurance to gain that confidence. Blind trust of technology is on the wane for sure. So, I really do see it very much as symbiotic, and in fact this is by no means, in my view, unique to financial services, to financial advice, and financial planning.

Cary: You look at the accounting profession. If it doesn’t get its act together soon, it’s going to be gone, because it’s a lot easier as an accountant, as a CPA I can say this, it’s a lot easier to see the value add and the symbiosis between human financial planners and technology than it is human accountants and technology, because technology can do a lot more than accountants or in the accounting space than it can in the financial planning side. But look at other professions. Even medicine, even law. The medical profession in 10 years is going to look a lot different. The human doctor is not going to be that trusted guru who’s going to tell you exactly what’s wrong with you, exactly what to do, and you’re going to take two aspirin and see them in the morning. It’s not going to work that way.

Cary: The medical profession, in fact, is changing in and of itself. In the United States, the medical association is actually now teaching what would have been referred to as the soft skills in the past, but it’s the ability to connect with your patient. So, also, efficiencies. This symbiosis between technology and all the professions makes me look back to my days in accounting, where we used to use the big 11 by 17 papers to do spreadsheets and how Lotus 1-2-3 was a game changer. It’s now Excel, of course. I think we’re into that same revolution now, where we won’t know how doctors or financial planners ever actually were able to do their job without technology.

Brooke: To reel back a little bit there and think about the incursion of fintech into the financial planning space, so the initial threat, if you want to call it that, for the human financial planning model was really around actioning decisions. Once you’ve decided what you want, which assets you want to buy, it’s just a matter of proceeding to actually carry out the transaction. That’s something that technology opened up wide and really democratized for a lot of us. So for any professional who was conceiving of their value add primarily in that kind of transactional way, then that was a major disruption for them. But what was left was all of this space of trying to figure out what the right decision is to go into action.

Brooke: As fintech has evolved, and I really appreciate that you draw the parallel between financial planning and other financial services, and even other professional services, what’s happening is we’re seeing technology more and more informing the decision-making process and not just the actioning process that comes right at the end of that, and trust is a really, really important component in there. I think that that’s an excellent pivot point to the second point that you brought up in your piece, which is this idea that financial planning will really grow out to be a social science, and the reason that that happens is that financial planning becomes something like life planning, just focusing primarily through the financial lens of that. But really, you need to understand someone’s entire life in order to build a financial plan adequately for them.

Cary: 100%. Look: there’s no question that a medical doctor is always going to need to still have the expertise as a doctor, I’m not suggesting that all social scientists, all psychologists or anything else could just hang up a shingle and become financial planners because they know how to connect with people, and the core technical ability has to be there. But that’s the table stakes. That will be the table stakes. What’s interesting, though is first of all, even as fintech has started to evolve and has gone away from simply selecting the products once you’ve decided what you need, to helping you determine what you need, I would say, so now we’re into what we dubbed at FP Canada “FP tech”: a financial planning technology where they’re actually helping to do some of the sorting through what the client really needs. What are the things that they’re looking for in life? There are some elements of life planning there.

Cary: But humans don’t want to tell a computer their life story and have a computer spit back what they really are looking for. That’s where the social science comes in, and I think it’s fantastic because I think too many people, particularly in the finance world, really struggle. They want to figure it out, but they really struggle with how do I ask the right questions? How do I sort through what the client’s answers are to me? Now, when you get into AI, when you get into FP tech where the technology is doing even more of the sorting through, it becomes easier for the human, for the professional advisor to connect with their client because they have this extra tool to support them in that journey.

Cary: But certainly, what we’ve seen is that at the end of the day, people want people to help them. They don’t necessarily exclusively want tools to help them. Back in the mid-’90s, Brooke, when I transitioned from accounting to financial planning, I was actually running a couple of financial advisory shops and doing a lot of corporate workshops on financial planning. Again, this is another one where I scratch my head and  think “is it only now that people are realizing that financial planning is really about life planning?” What is money for? I think in my comments, I said without really knowing what you want your money for, the money is only as good as the paper or the plastic that it’s printed on.

Cary: Even back then, it was obvious to some, and I know there are people who’ve made careers, extremely successful careers as financial planners because they’ve connected the dots to the social sciences, because they have been really counselors, frankly, and psychologists to helping their clients figure out what they want out of life. If you look at AI over the next decade, it’s just going to explode in terms of what it can do. If you look at what AI can do, if you as a financial planner aren’t interested in connecting to your client on a human level, there’s no profession left. I think that’s the problem with accounting. I don’t want to slide my old profession, but I think that’s one of the problems with the accounting profession. Is it really struggling to figure out what is going to be left for the accounting profession?

Cary: But for financial planning, because it’s really all about what you want to get out of your life, it’s not about how much money you want to accumulate in some vacuum for no known reason. The sooner that the financial services industry and financial advice can recognize that its future lies in the connection between the strong math skills, the strong money skills, the strong money acumen, and the social sciences, the sooner it’s going to be a really strong professional of choice, and it’s going to be a very successful profession in the future. To me, that’s what’s most exciting.

Brooke: Once again, you’ve provided a lovely pivot point to the next element that you talked about, which is this 3H model. Holistic, human, and honest. So, you’ve talked a bit about the human aspect and the honesty aspect, and I’d invite you to explore more there. But one thing that we haven’t really dug into is around this idea of holism. What is it to take a holistic approach to planning and a holistic approach to a client, and how is that fed by the social sciences?

Cary: This has been the foundation of, in Canada, FP Canada’s model for what distinguishes a certified financial planner. Notwithstanding the other H’s because they’re also distinguishing features, but the holistic nature of financial planning performed by a CAP professional has been at the core of what distinguishes a professional planner in our eyes. I can speak, even again, going back to the mid-’90s, from my own experience and watching and dealing with advisors out there on a daily basis about what they’re missing by not getting it in terms of holism. People don’t necessarily know how to articulate what it is they really need. They don’t know how to articulate their holistic needs to their advisors.

Cary: In fact, not only do they not necessarily know how to articulate them, they don’t necessarily know how to connect the dots between one part of their lives and another. So, when they’re thinking about estate planning, they’re thinking only about “what happens when I die and my assets pass on?” Well, there’s so many aspects of estate planning that are tied to tax planning in the here and now where if you do it right, you’re going to save taxes today, you’re going to be able to have more for yourself to live on. But more importantly, thinking about the estate planning piece, has anybody ever sat down with you as the client and said, “How important is leaving the biggest possible nest egg to whomever it is that you want to leave it to vs. wanting to live some life of your own?” How do we as a holistic planner get through to the client to work that through?

Cary: There’s a compromise here. How much money do I want to spend today for my budgeting and my own life spending? Retirement savings: how much money am I putting away for the future vs. how much money I want to spend today? There’s far too much advice given in a vacuum. This is how we’ve always distinguished between a financial planner and generic financial advisors giving one off advice on one particular area. Insurance, another great example. Insurance salespeople, who were calling themselves advisors, were selling their clients on buying $4 million universal life policies because look what’ll happen: if you die, your wife and kids are going to be rich! Isn’t that great? Instead of asking how much money are your wife and kids going to need if you die? What’s the chance of you dying? How much money are you going to have without the insurance when you die, and how much is it going to cost you, and what could you do with that money otherwise?

Cary: I’m not saying there are no circumstances where UL, universal life isn’t a good policy. Canadians are underinsured, so I’m not suggesting that there should be less life insurance sold. But are they getting the right amount and the right type of life insurance? This is where the holistic nature of a true professional who understands all of the pieces, who is acting in their client’s best interest so that there’s no conflict, is always about the client, and who can actually work through with the client links to all of those four pieces. The social sciences come in: how do you connect with your clients to help them with the journey to figuring out their whole needs and all the trade-offs from one component of financial planning to the other.

Cary: That is what financial planning should all be about and that’s why I said in my article that financial planning really is life planning. Without it, can you really be giving your client the best advice possible if you don’t know the entirety of their picture and all of what they may be dealing with and all the trade-offs that we’re dealing with? Life is complicated. Right? And we all need that help.

Brooke: That’s interesting to hear you talk about that and to think about holism with respect to some of the earlier topics that you were talking about, especially around digital technology and AI. Aren’t digital technologies, AI technologies so powerful because of their ability to get to know us? But the way that they get to know us is really through segmentation. Essentially, what an AI engine is doing is just creating lots and lots and lots of different boxes and then figuring out which box to put us in. Then, depending on who’s behind the curtain selling to us shamelessly or doing whatever else that they do with [crosstalk 00:45:28]. But something that’s missing there is that as you pointed out, people don’t know the connections between different things in their own life. AI’s great at finding connections we aren’t aware of. But also, people just haven’t landed on a lot of issues.

Cary: Absolutely.

Brooke: Think about estate planning, the flip side of estate planning is what you’re thinking about is your own death-

Cary: Exactly.

Brooke: … and is our own death not the thing that we spend our entire lives-

Cary: Exactly.

Brooke:… avoiding thinking about?

Cary: Exactly.

Brooke: It’s not just about an AI algorithm figuring out which box to put us in.

Cary: Exactly.

Brooke: We need to figure out which box we want to be in. That’s a very, very holistic and human kind of practice.

Cary: You know, Brooke, I think you’ve really hit the nail on the head in terms of looking at the future. I talked about AI, we can’t even imagine what it can do in 10 years. But I think what it’s going to be, it’s extremely unlikely, if not impossible, it will ever be able to be that holistic coach because every human being is different. So, AI is all prediction machines based on databases of millions of people. When every single one of those millions of people is different, all of a sudden, it’s very, very hard to fit everybody into a holistic box. Easy to do. If you’ve got X number of dollars or your life expectancy is this, or even tax planning. But when you’re looking holistically, I think AI is, certainly not in our lifetime, going to be able to usurp humans.

Cary: That’s why if you are looking at your clients from a holistic lens, you’re employing behavioral economics, behavioral psychology, the human behavior tenets with the use of technology and with the assistance of AI, and you’re always acting honestly and in your client’s best interest, there is a very exciting profession. In fact, it’s one that I kind of wish I was at the beginning of my career because maybe I’d go in and it would be a profession that I would join and have an opportunity to have a very successful career in.

Brooke: Let’s move to the final piece. You mentioned that you still have this energy and enthusiasm that if you were at the beginning of the road, you’d embark again. But you’d embark on the profession as it is now. Looking with your eyes in 2020, you would say the path forward from here is exciting. But not if you found yourself in a kind of situation where it was just like: “go in, build a very single dimensional plan with a client, upsell them on the things that you can upsell them on, and churn them through”.

Brooke: Your final point from your piece that you published was all about that kind of discussion that is still getting hashed out now around that transition from very, very sales driven, product focused, upsell driven vs. delivering high quality service. Looking back from 2030, imagine yourself into the future, looking back in 2030, what are we going to think of those comments in 2009 that we’re just a sales organization, and also, what will we think of the conversation that you and I are having today?

Cary: I certainly hope that your point about how thought-provoking my final piece for the Investment Executive was won’t be considered so thought-provoking anymore by 2030. Let’s put it that way. I certainly hope that everything that I said in that article will become much more the norm. The one piece we didn’t really explicitly talk about is that fourth point, which is the honesty piece, and it’s really whether you call it client best interest, whether you call it client interest first, whether a fiduciary duty of care or duty of care and loyalty to clients, that’s one I think some are still grappling with is that they still say, “This is all well and good, but I need to sell product to make money.”

Cary: It’s just bizarre to me. We expect our furnace guy to not sell us something we don’t need. No disrespect to a furnace technician, but it’s not a profession. We have here an advisory industry that wants to be recognized as a profession that is still arguing against their client’s best interest is utterly bizarre. So, I would say in 2030, it’ll be bizarre. But it should be bizarre today, frankly. It’s lunacy. Now that I’ve retired, I can use more aggressive language, I guess. But it really is. It’s utterly bizarre. So, in 2030, I think that if financial planning, and frankly, even broader financial advice, has not evolved into a 3H model, which means the honesty piece where your ethics are such that you have a professional duty of care and loyalty to your clients, that you’re seeing the client holistically, and that you have those human elements. If it can’t evolve to that by 2030, it won’t exist anymore because you won’t need humans because there’s no social science to be had. AI will do just fine, and that will not serve consumers.

Cary: Society has a way of evolving to meet the needs of its citizens and I think that I’m really heartened, I mean, I’m really, really heartened. The new CFP program at FP Canada is built on 3H. There’s a new advanced certificate in 3H financial planning for people who already have their CFP. It’s being embraced and I’m heartened to see the big FIs saying, “This is what we need.” So, I not only believe, and that’s why I finished my piece by saying I have no doubt that the future is bright because FIs want to survive, the financial advice industry wants to survive, there are a lot of human advisors out there and a lot of people wanting to get into this business, and I think they’re wanting to stay in the business for the right reasons.

Cary: People are wanting to get in the business for the right reasons, and that’s all of those, the 3H side, not the selling side, not the math and finance guru side, but the true, holistic, honest, human financial planning side. I think by 2030, we’re going to be looking back at this podcast and saying, “Wow. These guys were real visionaries and they had it down pat. It’s come to fruition exactly as they said in this podcast.”

Brooke: So, let’s embark on that road towards 2030 now. What are the next steps that different people can take, different actors can take to start moving in that direction? So, maybe let’s start with fintech. How does fintech lean into this kind of opportunity to have a strong symbiotic relationship between the products that they’re developing and a human planner who’s going to be partially involved in delivering that service to clients?

Cary: Yeah. We’re seeing already, we’re seeing some segmenting in fintech. I think we’re seeing fintech moving in two directions. One is stripping out any notion of providing any form of advice. You look at now the Wealthsimple cryptocurrency, Wealthsimple no cost trading, and all of these platforms to say if you’re truly a do-it-yourselfer, and you just want a good solid platform, we’ve got it for you. But the other side is we’re seeing a lot of, whether it’s existing fintechs or startups saying, “We want to provide tech tools that are going to be fantastic front ends, conduits between the planner and the client,” That is going to help the planner get things more right quicker, provide better solutions. But it will be a three-way partnership between the tech, the client, and the advisor, and we’re seeing that happen already.

Cary: I don’t want to name specific names of products, but I know a number of the FIs have either developed their own, which are designed to do exactly that, or are now adopting and adapting existing platforms for that very purpose. So, I think fintech’s already, it’s already well on its way, well on its way, and I think what we’ll see next, Brooke, is with the constantly improving AI algorithms, is that we’ll see more and more ability for those products to do more heavy lifting for their advisor, not for the client so much, but for the advisor, to help the advisor do an even better job for their client.

Brooke: So, maybe that’s the next complementary question here for planners. What’s the next step for them to evolve along this trajectory?

Cary: I think for advisors, the future is in planning. There’s nothing left, I think, for one-off singular advice, frankly, in the future, and I think that that bodes well for things like CFP and the new QAFP certification from FP Canada. I think the future is in planning. But for existing planners out there already, I think that we’ll see those maybe that have been around a long time and have struggled through tech already through the pandemic maybe deciding it’s time to exit the industry sooner. So, I think we’ll see some consolidation of clients. We’ll say maybe some fewer people in the industry in the short term.

Cary: But those that love what they do and still see a long career ahead of them, I speak with planners every day, love what they hear at the FP Canada symposiums on these subjects andhe 3H advanced certificate. I think you’re going to see more and more embraced by planners. How do I learn this? Because this excites me and I have the technical skills. How do I learn more of the social sciences side of things? How do I learn more behavioral economics? How do I gain more on the holistic approach to my clients? That’s where 3H financial planning comes in, and I think that’s what excites me most is that I see the advisory industry more broadly embracing 3H financial planning in its future. There’s going to be an awful lot of continuous professional development needed to bring the existing contingents along, and I know that there’s a very willing contingent out there that wants to get there.

Brooke: That’s interesting. It raises an idea that’s been gestating in my mind for quite a while now. I was talking with a group of financial planners and they said at a certain point, you reach an upper limit of how many different asset types you can be clued up on that you can help your client to consider. I wonder if that kind of asset selection is something that’s going to be much better done by a piece of technology. Does the portfolio of knowledge then have to shift where you say it’s not about learning about assets anymore that I can help my client to think through, it’s actually about learning about what different financial technologies are out there so that in this tripartite relationship of me as the planner, my client as the individual that I’m serving, and these different pieces of technology that are out there in the ecosystem is my toolbox or my repertoire of things that I can deploy. You need to know that toolbox really, really well if you’re going to be able to do that. Have you seen anything evolving along those lines?

Cary: Yeah. I think it’s happening. I’m not up on what is out there in the toolkit in terms of the financial asset selection, etc. But I do think that there is going to be a place, whether it’s technology or whether it’s humans, for real specialization. So, I think in some ways, you’re either going to find the human advice to move to the holistic financial planner, more generalist, more social science, or some people are going to say, “You know what? I really love this asset selection piece.” Again, the whole CFA question of the sustainability of a chartered financial analyst because technology may do it. But I think there are going to be niche markets for specialists, but they’re not advisors or planners. They’re specialists in particular areas, and they’ll probably have to compete with technology, and it may be more challenging competing with technology.

Cary: I think if it’s not there now, Brooke, we’re going to see much more of exactly what you’ve described where there are going to be specialized tools for plugging in the information about the type of client you’re dealing with and identifying what are the best combinations of assets that may work best for them? You’re seeing it all already. A lot of advisors are using portfolios where they may have a dozen different portfolios, and they’ll slot their clients into one of the 12 portfolios based on the type of client. I think with technology, you may start seeing instead of a dozen, it may be a couple of hundred or a couple of thousand different portfolios, and it may be very much more customized because you’ll have a much broader database of the type of client and instead of fitting into one of 12 categories, you may fit into one of 200 categories.

Brooke: So, let’s move to the FIs now. We’ve got this situation where the planners are pivoting into their much more human, holistic, and honest role, accompanied by more and more powerful technology that helps them to execute and inform decisions and perhaps drive them in the direction of new questions to help to serve their client better. Where does the business model need to go for financial institutions in order to facilitate that kind of ecosystem?

Cary: I think the biggest challenge for the business model is to figure out a profitable model. How do we make money? FIs are not, they have not been set up to bill on a fee for service, on an hourly basis. It’s completely foreign. So, if we’re moving to a model that is a professionalization model where all of the employees are literally professionals, professional planners, how do we actually make money, I think, is the next big challenge. I don’t think any of them have really figured this one out yet. As long as you’re making money on products, even assets under administration, there’s a challenge.

Cary: So, there’s got to be a way. If I had figured that one out, I’d have a lot more money than I do today. I think that is a huge challenge. But I think it’s coming. I think they will figure it out. It may take a while. We’ve seen the elimination of deferred sales charges. We’ve seen a move to 0% front end load on mutual funds. We’ve seen a reduction in percentage of assets for assets under administration. Where it used to be the norm would be 2%, we’re down to .7% in many circumstances. That’s going to continue to be driven down by ETFs and by robo-platforms that are pushing that down to as many as 25 basis points.

Cary: So, we’re seeing that change. I think going back to where we first started this conversation, Brooke, around where financial plans and financial planning was seen as a throw-in for the product that you bought because we made so much money on the sale, FIs have to figure out how do we demonstrate that it’s value add and how do we build in a fee structure that makes it worth our while to do this kind of work? I think again, technology holds the key.The mass market doesn’t need hundreds of hours at $450 an hour. They need some basic hand holding and some good, strong technology behind it. So, with the advent of QAFP, with the advent of technology, I think you’ll see the costs driven down and still models that can be quite profitable.

Cary: So, I think that’s the next step is how do we pay for it? How do we make money while serving our clients? That’s going to be the big one. I hope that the acknowledgement that we always are going to have to act in our customers’ best interest, put our customers’ interests first, I hope that one’s already accepted. They’re not there yet, but they’ll get to that one sooner than they’ll get to figuring out the business model in terms of profitability.

Brooke: All right. Cary, this has been fascinating. It was an absolute tour de force going through this and helping us to think through what is obviously a very complex interconnection between these four pieces that you raised. Thank you very, very much for speaking with us today.

Cary: Thanks for having me. It’s been a pleasure. I love talking about this stuff. It’s an exciting world ahead for the financial services industry, for sure.

Brooke: For sure. Before we log off, I also want to say thank you for the great work that you’ve done with FP Canada over so many years to get us to the point that we are now, and we look forward to what the organization, what the institution will help to develop for Canada and for financial planning as an industry in the coming years.

Cary: Well, I appreciate that very much. I know that FP Canada’s in good hands and I think the industry’s in good hands.

Brooke: All right. Take care, Cary.

Cary: Thanks, Brooke.

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About the Guest

Cary List

Cary List

Cary List is a leading financial planner, columnist, accountant, and certification pioneer who works to make finance serve the public good. Recently retired, he served as the CEO and President of FP Canada since 2006, where he drove forward their innovative approach to financial certification. FP Canada is a national professional body dedicated to the financial wellness of all Canadians, setting rigorous, nation-wide certification standards for financial planners. Cary was a key player in developing these standards, as he led the establishment of the Financial Planning Standards Council, as well as oversaw the implementation of the CFP certification as a national standard. Cary is also respected internationally for his financial planning work, as he was key in developing the international competency profile used by over 175,000 financial planners worldwide. List commandeered FP Canada’s impressive growth from a small service firm to becoming the premier financial services professional body in Canada. 

About the Interviewer

Brooke Struck portrait

Dr. Brooke Struck

Dr. Brooke Struck is the Research Director at The Decision Lab. He is an internationally recognized voice in applied behavioural science, representing TDL’s work in outlets such as Forbes, Vox, Huffington Post and Bloomberg, as well as Canadian venues such as the Globe & Mail, CBC and Global Media. Dr. Struck hosts TDL’s podcast “The Decision Corner” and speaks regularly to practicing professionals in industries from finance to health & wellbeing to tech & AI.

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