All Things Financial Planning Blog

The 5 Biggest Changes in Personal Finance over the Last 20 Years

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Personal-DebtMy son recently turned twenty and it inspired me to reflect on all of the changes in his life as well as in my professional life. My son’s progression has gone from being a baby, to a toddler, to a growing child, to a teenager, and finally to a young adult. He is now trying to figure out his professional place in life as he just finished his first year of college. During that same timeframe, I’ve seen personal-finance go through its own five stages of maturity. Twenty years ago it was more about buying a product, being transaction focused, little reliance on technology, running massive volume plans, and focusing just on the money aspects, not health and psychological aspects.

  1. Let’s face it, our culture must sell products and we’re pretty darn good at it. The problem is that the marketing and slick ads of all the things we buy in America today, don’t always match the quality and integrity. I think the biggest move that our industry has made in the last 20 years was to go from selling a product to following a process. The process includes a comprehensive financial plan. The financial plan not only talks about investments but also about understanding debt, figuring out a budget, understanding human capital (what we think of as our skills to make money for ourselves), reviewing your insurance for the major risks in life, and understanding that all of these things are linked together in order to get us all to the finish line.
  2. The transaction focus over the years has ebbed and flowed in terms of the hyperactivity in order to get better performance. Back in the olden days, it was about transactions because that’s how many advisers were paid. It was said that advisers are not in the storage business they’re in the moving business. Today the focus is on asset management for a fee, retainers, hourly fees, and project fees rather than commissions. Although I see a bit of a backlash happening in the last few years where it appears technology is getting ahead of the small investor. The advent of massive millisecond transactions have caused us to doubt the integrity of the system which the world of investments is built upon. We had multiple occasions like the “flash crash” and the search for algorithms giving institutions a major-league advantage over the average investor.
  3. For those who need help with their finances, the place to start your search is to ask a friend if they know somebody that’s good. Yet the next step is to get on the Internet and search for someone that appears to fit your standards. Even though it’s like trying to take a sip out of a fire hose every time you do a Google search people are finding most of their initial information on the internet. Today, I feel it’s much more of a collaborative effort between the adviser and the client. The adviser gathers the information needed to better help assist the client in making decisions. The best advisers these days are more of a librarian than a master of many disciplines.
  4. The financial plans that we put together over the years can be extremely comprehensive and lengthy. The problem with that is that planning by the pound doesn’t always get things done because most people are very busy these days and just want to get down to a summary version. I know that because I do a daily radio show commentary and 14 years ago I had 3 minutes to talk, today I have a minute and 10 seconds. A more modular approach works better because it talks about your specific problem at the moment and how you fix it. I feel that the best plan these days is to have one page versus 100.
  5. Probably the most important change that I’ve seen over the last 20 years is that financial planning has gotten much more holistic. It is about looking at the big picture and trying to incorporate wisdom, along with emotions, as we see the springing up of behavioral economics and why we do what we do. Reading a book like Daniel Kahneman’s Thinking, Fast and Slow (he was the first psychologist to win a Nobel Economic prize) should be mandatory for anybody who’s going to invest or put together a financial plan. It’s really critical to try and take health, wellness, happiness, human capital, emotions, relations, and wealth together as they are all part of the playing field.

The world of financial planning and investment advisory has moved steadily in the right direction over the last 20 years and I hope that it will continue to do so. There is certainly a lot of room for improvement yet I feel that some of the breakthroughs that we’ve seen in healthcare and technology over the last two decades are going to find their way into a simpler, more comprehensive blend of our money and life connections. Robbers used to say, “Your money or your life.” The next phase of financial planning is going to be “Your money and your life!”

Dave Caruso, CFP®
Certified Financial Planner™
Coastal Capital Group
Danvers, MA

Author: Dave Caruso, CFP®

Dave attributes his achievements in Financial Planning and Wealth Management to three core themes: experience, effective communication, and attention to the details necessary to manage money in a quickly changing world. Dave is in his third decade in the advisory business, having graduated with his BA in finance at UMASS Amherst in 1980 and subsequently earning his Certificate in Financial Planning. Through the years, Dave has steered hundreds of clients with hundreds of millions of dollars through two major crashes, five bear markets, three recessions, countless financial crises, and dozens of fads and trends in the investment world. Dave’s professional credo is “to educate and motivate people about money so they can achieve their dreams.” Under his guidance, clients are kept on track to accomplish the things that are important in their lives, such as educating children and grandchildren, retiring, and leaving a legacy to loved ones.

7 thoughts on “The 5 Biggest Changes in Personal Finance over the Last 20 Years

  1. Yes…The next phase is surely going to be just like You said “Your Money and Your life” and we all will have nothing to do but watching.
    By the way, Great Post. I just shared it on facebook.

  2. I go to see daily a few websites and blogs to read posts, except this weblog provides quality based content.

  3. I agree, financial planning has gone through a lot of changes and technology also has a huge influence on it. I am also looking forward to the idea that as financial planning progresses, more people will achieve their goals in life.

  4. It’s very trouble-free to find out any topic on web as compared to
    textbooks, as I found this post at this web site.

  5. Definately agree with number 3. I think it’s important not only for advisers but for all professionals to be more in touch with their potential clients. Just means a better service or product for each client or customer, and better business in return. Great article, Dave!

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