Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Monday, August 31, 2020

Reading Along With Ryder Part 3: Financial Planning Degrees

Cleaning all of these magazines off of my desk is hard for me, because I don't want to miss out on the knowledge they contain. To alleviate this, I will summarize one article from each magazine as I clear it away. Click here for the last article I read.

The bright color drew me in to today's magazine, beckoning from the stack on the floor. Financial Planning focuses on advisors, but this article on the education is relevant to anyone who engages with a financial planning professional.

For a little background, there is really not much to calling yourself a financial planner. While dealing with investments is a fairly well regulated industry, simply providing financial planning or advice is not. Neither the law nor customers necessarily have a hard and fast rule for what you do. As an investment advisor, I am regulated by FINRA and the Securities and Exchange Commission. I am also a CFA charter holder, which is a high standard for ethics and professionalism in the finance industry. Financial planning, however, doesn't have the same trappings of professionalism.

The CFP Board is working to change that. They administer the Certified Financial Planner certificate which involves a well rounded curriculum of personal financial planning topics. They also endorse college programs that help prepare a student for a financial planning career. The article notes that there are about 145 different baccalaureate CFP Board registered programs and asks if the lack of a standard financial planning degree is hampering the growth of the profession.

If you want to be a doctor, you can take pre-medicine classes, and go to medical school, if you want to be a lawyer, you can take pre-law classes and go to law school. If you want to be a financial planner, well, there are apparently 145 different endorsed programs you can enter around the country. Is this a problem for the profession?

The article speculates that the lack of standardization in education is what prevents people from seeing financial planning as a profession. I think not. The personal finance industry gets a bad rap from a lot of bad actors, high fees and bad service. That is changing a lot, thanks in part to the CFA Institute's insistence on high standards in wealth management and the CFP board's growing visibility as a comprehensive standard. While a financial planning degree might be nice, there are probably far better things to learn in college. A financial planning degree would likely prevent a future planner from having the sort of broad education that lends itself to looking at a client's entire financial picture.

Absent comprehensive regulation of the profession, these certificating bodies have an authority that elevates their own members.

I do think certification matters. Excellent financial planners can come from all walks, with diverse education and life experience. Having a certificate shows that you also have the comprehensive knowledge to address clients with great and diverse needs. I am also a fan of broad liberal arts education and believe that individual clients would be well served by someone who has a broad education and life experience themselves. The way to ensure that financial planners are held to a high standard is through a certificate that is a high standard - not a single minded education track.

I say all of this never having done the CFP curriculum. Generally the CFA is a higher standard (albeit for different audience), and they make it easy for CFA charter holders to obtain the CFP certificate. However, as our firm grows, having advisor candidates from a broad range of backgrounds will be important.

The public's view of the financial planning profession is important - how do you view us?