People who can afford financial plans don’t need them, while people who need financial plans can’t afford them.
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The grim reality of this observation struck me while writing my column for Financial Advisor in April
. While glib, this realization is mostly unsettling.
It’s no secret that CFPs has a difficult time making money on writing financial plans. Most CFPs use a financial plan as a loss leader with investment management services, charging nothing or a deeply discounted fee for producing a comprehensive plan for a client. A work product of the CFP is not one that CFPs
As a result, other professional designations are making inroads in places where CFPs were expected to dominate. About as many Chartered Financial Analysts are now annually moving into advising individuals on personal wealth matters as there are new CFPs, and the CFA designation has a global reach and is growing rapidly.
In addition, the Investment Management Consultants Association, the licensing body of for Certified Investment Management Consultants, recently created a new designation, the Certified Professional Wealth Advisor, for giving financial planning advice to high-net worth individuals.
All this raises questions about the viability of the business model for financial planning professionals.
Is it incorrect for CFPs to assume, as they have for 40 years, that the mass affluent—households with a net worth of $500,000 to $1 million—need financial plans?
Is the market for financial planning limited to the high-net-worth individuals with $1 million to $5 million of assets?
Let’s hope not.
The financial planning profession depends on the mass affluent embracing it. If individuals with less than $1 million of net worth are generally not going to spend the $1,000 or $2,000 that it takes to create a financial plan, then CFPs have a fundamental problem with their business model.
You can argue that CFPs earn a living advising on investment management, insurance, taxes, estate planning, and retirement, and that “modular” planning services focused on just one of these topics allow CFPs to make a living. But that is not how a financial planning professional is supposed to conduct himself.
A CFP is supposed to be the quarterback for all of the other disciplines. In fact, the reason the financial planning movement got started in the 1970s was because insurance agents and brokers came to believe that their clients needed holistic advice across a spectrum of different areas. That is the CFP’s value proposition.
Financial planners, especially during a recession, must be able to make the mass affluent understand the value of financial planning and be able to provide comprehensive financial plans cost-effectively.
The CFP Board, however, does not do enough to support that objective.
Correct me if I’m wrong please, but the CFP Board requires just 30 hours of continuing education credit every two years (corrected an earlier version) to maintain a CFP license, and the 30-hour requirement has been in place for many years. That’s not good.
The 30-hour CE credit requirement was created in an era when you actually had to travel to a place, perhaps in another city, to attend a CFP educational event. But that is a relic of the past.
Now, you can fax in a quiz, submit an online form, or request CE credit by email, and you never have to go anywhere.
Moreover, the information revolution keeps making knowledge obsolete over a shorter time frame. To not make the professional education requirements more demanding in this dynamic environment makes little sense.
Since the body of knowledge required to master financial planning is changing at a faster rate and professional education is more accessible now, adding 10 hours to the CE requirement for CFPs is only right. The CFP Board, which is supposed to have the public’s best interest at heart, has not done what’s in the public’s interest by maintaining a 30-credit educational requirement.
In light of the speed of changes that affect financial planning, the improved accessibility of educational programs, and the serious business challenges CFPs are facing, the CFP Board should not only increase the CE requirement to maintain a CFP designation but it should establish a practice management curriculum. CFPs could be required to take 10 hours additional of educational credits every two years about how to make their businesses more profitable.
Under current rules, the CFP board gives its licensees no CE credit on courses that deal with marketing, sales, and technology. With the business challenges CFPs are facing, that‘s unwise. Why not require CFPs to learn how to make the offering of financial planning services more profitable? That would benefit consumers as well as the profession.
CFPs need to get some help from the CFP Board with creating a successful business model that works for the profession and for consumers.
What can you do about it? Tell the CFP Board that you believe CFPs should be required to take more CE credit and that you want CFPs to receive CE credit for learning how to run their firms more profitably. You can email for the Board of the Directors of the CFP Board of Standards at