This post is written by a professional with a professional audience in mind. While you might be a client or general member of the public reading this, I regret to say that this piece is not about financial education or striking a thought-provoking idea into your mind for the week. This is an article about a professional’s concerns with their profession; if you’re interested in learning about what furrows the brow of a financial planner, read on, and if not, that’s alright, we’ll be back next week with more financial education content.
I’m writing this sitting on a United flight to Tucson, on my way to attend the Financial Planning Association’s annual Retreat (“FPA Retreat” or “Retreat.”) I’ve attended the FPA Retreat since 2019, a year after I became a newly minted CFP® Professional. At the time, I went to learn a lot about what I didn’t know. My how times change. This year, I’m attending for three primary reasons:
1st: I find it valuable and important to spend time with the best of the best in my field, learning what they’re doing, hearing their perspectives and takes, and thinking hard about this financial planning thing we do.
2nd: I was asked last year to be on the member taskforce for Retreat, helping select speakers and facilitate the event. It seems only fitting that I actually do that, since I agreed.
3rd: Most importantly, I’m coming to the retreat this year to have a conversation about the Profession. Specifically, how it can grow and thrive.
That last point is the most important to me not only because I passionately care about the topic, but also because it is a topic with a clock on it. There is an “expiration date” to this subject, at the end of which a decision will have been made about the future of the profession, whether consciously or unconsciously. As we sometimes say in financial planning, “those without a financial plan DO have a financial plan; whether it accomplishes what it’s supposed to, remains to be seen.”
The expiration in financial planning that I’m speaking of is an impending cliff in the professional headcount. While the CFP Board celebrated minting it’s 100,000th American CFP® Professional after the March exam cycle, the estimated headcount of financial planners is currently sitting at 330,000, with an expected retirement cliff leaving us short of 75,000 financial professionals by 2033. Even if the board continues to mint CFP® Professionals, bringing more talent into the field as a proportion of those who call themselves financial advisor or financial planner, we will still have less capacity to serve the public than we do today.
So today, I’m sharing some of my thoughts on some of the three most critical areas facing financial planning, and particularly how it onboards new financial planners and appeals to the public as a good career opportunity. Specifically, I’m thinking about education, experience, and the starting compensation for financial planners.
Education
Education is a… contradictory nut to crack. At present, to be a licensed investment adviser, stockbroker, or insurance agent who then may hold themselves out as a financial advisor or financial planner, there is no requirement to hold a formal financial education whatsoever. Any high school dropout may apply. This lack of a barrier to entry is one of the reasons that the CFP Board has long required a bachelor’s degree to be a financial planner, providing a bare modicum of higher education as one of the hurdles to be a CERTIFIED FINANCIAL PLANNER™ and hold out as a CFP® Professional, among the actual specific education requirements to be a CFP® Professional. Herein, we must divide education into two separate elements:
- CFP® Professional-Specific Education
- The Degree Requirement to be a CFP® Professional
First, the coursework required to be a CFP® Professional currently seems… adequate. There are specific areas many financial planners would call out as being under-developed in the CFP® Certification curriculum, such as special needs planning, divorce planning, international planning, and retirement income (as opposed to retirement asset accumulation and retirement planning.) Yet, the education does cover some very broad swaths of finance, such that any CFP® Professional can comfortably discuss the vast majority of personal finance topics, or at least recognize when something is a specific or special topic that might require further training and due diligence. Herein, I have little concern for the most part, albeit a small concern that many students in CFP® Certification education programs don’t take it seriously enough. Still, with a 66% pass rate on the last exam, my concerns might be overblown.
So it’s the second area that draws my closer attention: that of the degree requirement. While a college degree, specifically a bachelor’s degree, is an incredibly common requirement for many professions, herein financial planning finds itself at a bit of a crossroads. An examination of other top-tier professions makes sense for comparison: To become a medical doctor or a lawyer, one must attend, respectively, medical school or law school. Each of these is a graduate-level multi-year education with dedicated colleges within larger universities, with competitive testing and application requirements for admittance, and stringent examination requirements by the end of the educational process to establish minimum competency. In turn, the CPA as a well-recognized accounting license, has taken a strange path in requiring 150 credit hours (rather than the conventional 120 credit hours of a bachelor’s degree). This leads many CPA aspirants to pursue a master’s of accountancy or tax, but it is not a firm requirement of the path.
So what does the financial planner, or the CFP® Candidate, require today? A bachelor’s degree. Not a bachelor’s degree in financial planning, finance, economics, business, accounting, or anything related directly to the field of financial planning. A bachelor’s degree of fine arts in sculpting or painting, or a bachelor’s of arts in English or Philosophy, or a Bachelor’s of Science in physics or biology, will do. Now, I highlight the range here not to besmirch any of the Bachelor’s degrees referenced; I hold a Bachelor’s of History and Political Science, along with a concentration in Military Science, all far from relevant to financial planning. I highlight the range to point out that the key requirement to be a CFP® Professional is the part of the degree that says “Bachelors,” not the part that says “of arts, of science, of fine arts, of [fill-in-the-blank-major].”
In turn, no matter how many associate’s degrees or technical degrees you hold, no matter how relevant they might be (associate’s degree of financial planning, associate’s degree of finance, etc.) they are not qualifications for the CFP® Certification or to be a CERTFIED FINANCIAL PLANNER™. 120 credit hours in dance theory and music appreciation? Check. 60 hours of core finance and financial planning education? Unqualified. Seems rather silly, doesn’t it?
The CFP Board has announced that it will adjust the competency standards and announce the updated competency standards by the end of this year. The decision facing them is whether to raise or lower the bar. There are merits to each course of action, and problems to boot. So let’s think about each for a moment.
If the board elects to raise the bar, either by requiring a more relevant bachelor’s degree or by requiring a master’s degree or hours equivalent, it raises the quality of the financial planners who enter the field going forward; at least insofar as their initial education requirements are concerned. Yet, it also creates a number of problems: we are faced with a steady decline in the number of financial professionals over the coming decade, and requiring more education or more specific education chokes the talent pipeline of professionals. Further, it will skew against the already underrepresented population of racial and ethnic minorities in the profession. Keep in mind, that isn’t “woke pandering” on my part, but a simple acknowledgment that college attendance and graduation is higher in the majority population than the minority population, and one that would consequently restrict the candidate population for the foreseeable future. This is further compounded by the fact that there are very few financial planning degree-granting university programs in the United States, and even fewer masters degree granting programs. While these numbers are growing and improving, the current programs do not remotely have the capacity to backfill the current decline in the profession. Further, I do have concerns about moving in a direction that could see financial planners burdened, as doctors and lawyers are, with enormous piles of student debt, where such “piles” are unwarranted or unnecessary to gain the education and proficiencies necessary to do good work.
Yet, the suggestion of lowering the bar comes with its own issues. While it would assuage many of the aforementioned issues, it leads us to a different set of problems. While the current “any bachelor’s degree” requirement seems farcical on its face, there is likely to be a public and employer outcry and skepticism against any adjustment toward reducing the barriers to entry in the profession. On the employer’s side, the CFP Board suggested a few decades ago that it might introduce a “CFP-light” curriculum, which was met with vehement opposition. In turn, while the CFP Board has done an incredible job of promoting the CFP® Marks and the public at large has gotten better educated about the qualifications (or lack thereof) of financial advice professionals in the United States, the public has miles to go before it is fully in a position to feel safe trusting a financial advice professional at face value, and lowering the barriers to certification presents an opportunity for the less-qualified and less scrupulous to exploit the trust slowly built up by the profession over time.
These are issues that warrant further thought and examination, but onto the next area of my concern in the field of financial planning.
Experience
Like education, to be a licensed advice-giving professional does not require any experience whatsoever. You can be sponsored to sit for the Series 6 or 7 by a Broker Dealer, sit the SIE or Series 65 without any sponsor, and while insurance licenses vary state by state, the barriers there are generally even lower. In turn, to be a CFP® Professional requires either six-thousand hours of experience related to financial planning or four-thousand hours of experience doing actual financial planning under the tutelage of a CFP® Professional. Critically, the six-thousand hour path barely requires that the experience be actual financial planning. In fact, it explicitly only requires that those pursuing that route have done only one element of planning in support of only one area of planning. Hence, working in a 401(k) support call center, or as the office assistant of a stock broker, or as an insurance salesperson who explicitly does not do financial planning whatsoever, is qualifying experience. Thus, while the public is regularly assured that CFP® Professionals have no less than 4,000 hours (of real financial planning), any given professional may in fact only have a mere 6,000 hours of answering the phone to perform rollovers or knocking on doors to sell products.
Once again, other professions help us understand how good or bad this standard is by contrast. Medical School students undergo internships, and after graduation move onto residency programs to spend months or years training on how to perform medical procedures or diagnose conditions in their patients accurately. Law students typically undertake summer internships as “clerks” and even post-graduation may go through court clerkships before sitting for the bar exam. Even upon graduation, most will go onto work in a bigger law firm for many years, and for the first several years even as a licensed attorney, are essentially never left without supervision, as it’s understood that while their education teaches them to “think like a lawyer,” it seldom equips them to practice law. Even CPAs must complete 1,800 hours of practical hands-on accounting work under the supervision of another CPA, and within a relatively tight three year timeframe.
To mimic any of these paths could come with pros and cons. If CFP® Professionals were to undertake a “medical residency” path, it would likely demand a substantial expansion of residency opportunities within existing firms. While some bigger names could likely accommodate this path as part of their current career path, many firms in the wirehouse and sales-based channels would have to dramatically rewrite how they worked with CFP® Professionals. To be frank, it seems unlikely that they’d continue to accept them, given how much of an interruption it would present to doing “business as usual.” In turn, while many smaller practices like my own might be able to add on or develop a residency program over time, the likely outcome would be that even today’s limited demand for financial planning jobs would be choked further by the conflict between the businesses’ needs and those of the new hurdles for CFP® Candidates. Further, I am skeptical and concerned about the residency comparison because of the terrible reputation medical residencies enjoy. It is not uncommon for residents, those with a graduate level education, to be paid a mere $40,000-$60,000 for years, while simultaneously being crushed by both student debt and insane hours, often approaching hundred hour weeks, for years.
In turn, the lawyers and CPAs might have this better figured out. Internships and simply “grinding it out” for the first few years of the profession are often excellent forms of building skills. While lawyers don’t technically demand experience to become an attorney, they have a well-established cultural understanding that the field of law is many miles wide and even more miles deep, and that to practice law without the appropriate mentorship and tutelage is a material and ethical risk for their client’s wellbeing. Thus, while some do rarely strike out on their own right out of school without experience, the vast majority at least have internships or clerkships under their belts, and many more do spend years working for more experienced attorneys before practicing independently. As for the CPAs, they simply skip to the point: You must learn from another CPA and actually do the work of a CPA, before you can call yourself a CPA. No muss, no fuss, no ostensible suggestions of grandeur or appeals to tradition. You simply must do the work.
Starting Salary/Benefits
As a profession built largely on the backs of insurance agents and stock brokers, it’s no surprise that we still see far too much “sales” and not nearly enough “skills building” in the early days of a financial planner’s career. While an eat-what-you-kill model is the model du jour for the majority of firms in the industry, this is an unsustainable, and frankly, embarrassing model for the profession to continue. Imagine newly minted oncologists calling up their friends, neighbors, and former classmates to ask if they have any strange lumps or signs of cancer. Ponder the thought of lawyers cold calling businesses to ask if they feel like suing anyone. Sample the idea of CPAs suggesting that solo small business owners get regular audits, or suggesting different corporate structures for your barely-monetized hobbies so they can generate additional return work to be done, and more importantly, bill upon. It is the mark of a profession that the newly minted professionals are not responsible for bringing money into the business, but supporting more experienced professionals in their work, cutting their teeth under supervision, and ultimately in building their skillset long before they ever have to “make a deal.”
And yet. For a profession that deals solely with the subject of money, all too many of us have a chip on our shoulders. “New people don’t pay for themselves.” “I got in by cold calling and door knocking, so should they.” “I don’t have the time to train new people, someone else can do it.” And thus, we have a problem: The average financial planner is over the age of fifty and retiring in the next decade. While the age trend is going downward, that is less because there’s an overwhelming volume of new young planners and far moreso the byproduct of the retirement wave. We’re removing more elderly planners, not adding more youthful planners to replace them; and in this dogged and stubborn perspective on bringing new financial planners into the field, who is winning? It’s not the planners and it’s not the public. It’s those firms. You know the ones. The ones you take clients from and get mad when you see their statements and policies. The ones you scoff at when they politely say they’re financial advisors while networking at the chamber of commerce and rotary events. The ones you roll your eyes at as they excitedly promise the world to people on TikTok. Don’t those people know any better? Shouldn’t they know that I, that WE, are the real financial planners?
And yet. Ask a well-known financial planning firm owner what a new financial planner should be paid, and don’t be surprised if you hear the same attitude about those firms extended to those new planners. Don’t they know how lucky they are? They should be grateful to work for $40,000 a year. Benefits and insurance? Humbug, those are expensive and they are lucky to work here. Lucky, fortunate, grateful. That’s how they should be, right? Never mind that the call center at Fidelity is paying $10k more, plus full benefits, and no production requirements. Never mind that Vanguard will pay for their CFP® Certification classes and exam fees. No, these new folks are lucky to work here, and maybe if they bring in enough clients and new business, we can talk about a promotion. In a few years, of course.
This is a problem. In a field facing down five-digit declines in its headcount over the next nine years, we are in a serious competition. Not just with other firms for clients, because frankly, there are more clients than there are qualified people to serve them! No, we are in a serious competition with other opportunities for the talent that will carry and burn a brighter torch for the future. It should go without saying that we’re in desperate need of more financial planners, and ones that came come up with more opportunities than those before, with greater skills and experience than those that came before. But so long as we expect them to eat what they kill and pay for their own way, we will continue to see a field dominated by kids from upper-middle class families with connections. We will continue to see it be more male, and more white, not because of any sort of hiring discrimination (though there’s plenty of that), but because of survivorship bias. When only 14% of new financial planners in an eat-what-you-kill model survive the first four years, it’s going to skew towards those who already had connections with wealth in the first place, and wealth is still poorly distributed in our society.
So we need to provide opportunities for new planners. Does that mean we need to adopt medical school style residencies? Maybe. Does that mean we need to hire people and pay them to grind out hours of work under a CFP® Professional’s close supervision? Perhaps. Should we be doubling down on internships and internships-to-hire as part of our development path? Almost certainly. Yet as a profession, we have to sort ourselves out. Much as many of us would love to live a lifestyle practice and spend all our free time bemoaning the state of the profession, we have an obligation, whether personal, professional, or financial, to help make a difference in the world.
In Closing
A few weeks ago, an episode of Kitces and Carl dropped. In it, they discussed a question from “Daniel” (hi, it’s me): “Do financial planners have an obligation to create opportunities for others to become financial planners?” They were bearish on the idea. They had lots of good ideas and thoughts to share on the topic, but mostly came away saying that there wasn’t an obligation. While I could nitpick greatly at some of the subpoints and arguments they made in the conversation, I don’t really disagree with them. Still, they called it something that I do want to carry forward: “Daniel’s Obligation.” I haven’t spent this flight and all these words to convince you to do something. I have as much an inner Ron Swanson as anyone to say “I can do what I want.” Yet, I think we can as a profession, agree that there is a problem here. Not everyone, not even the majority of us, will work to solve it. It’s not in our interest, we haven’t the time or energy to do so, etc. But it warrants thought and consideration. Some of us will do the work. I hope you’ll join me.