Will There Be Enough CFPs To Replace Those Retiring?


I’m not a smart man but the table and bar graph seem to suggest at least three things to my way of thinking:

Good news for young and/or new CFPs

If you are a young planner or someone who just received your CFP regardless of age, you’re in a great position. Older CFPs who might want to hire or retain you will have to pay up  for your services because there are not of CFPs like you. You'll benefit from salary, or stock, or some other benefits, or some or all of those forms of compensation.

Michael Kitces and others agree. It’s “certainly a VERY good position for any young person coming in today,” Kitces said. “Aging out practitioners means big demand on small young-person supply! J”

And Harry Starn, Jr., a professor in California Lutheran University's MBA in Financial Planning Program and associate director of its California Institute of Finance, had this to say: “One of the thoughts that I pull from the chart is that new planners will have the opportunity to take over existing practices.”

By the way, the median income for CFP professionals is $144,850, according to a CFP Board survey.

For the record, it’s not all that easy for someone in their 20s to get a CFP. Not only do they need an undergraduate degree, but they also need total of three years of full time qualifying experience, or the equivalent 6,000 hours, to satisfy the CFP’s “Experience Requirement.”

There is, however, a larger question to be answered, according to Ron Rhoades, JD, CFP, the curriculum coordinator for the Financial Planning Program at Alfred State College, SUNY. “Will there be the types of jobs that new advisers desire?” he asks. “Most desire to work in true financial planning firms, in which financial planning is done. And they prefer to work in a fee-only or fee-based environment. And new planners desire to be mentored, within such an environment. Right now the number of jobs which offer the foregoing is below the quantity of those desiring such jobs. The ‘product sales’ jobs still dominate, but most new financial planners only take such jobs as an interim measure if they cannot get a job with a fee-only or fee-based firm that actually undertakes comprehensive financial planning.”

Will there be enough CFPs to replace those retiring?

The second takeaway is this: There just doesn’t seem to be enough young CFPs to replace the ones who might be retiring or semi-retiring over the next decade or so. Consider: Some 49% of CFPs, including 153 who are 80+, are age 50 and older. But there are just 45.72% under age 50. (We don’t know the ages of some 3,534 CFPs so that could change things.)

But in the main, it doesn’t appear that there will be enough young CFP professionals to replace those older ones.

Of course, not all agree with this assessment.

“First, many financial advisers never really ‘retire,’ says Rhoades. They retain clients they really like dealing with, and perhaps stop taking on new clients. They may work with a junior adviser, but still handle much of the relationship themselves. Most financial advisers – especially those on the fee-only or fee-based side, love what they do so much, they don’t really want to retire.”

Second, Rhoades says there are more than 100 undergraduate programs with Certified Financial Planner curriculums now. “As more and more students discover the joys of counseling others about financial matters, and the great job prospects for graduates, these programs will continue to grow,” says Rhoades. “In time, we will be graduating from colleges and universities far more financial planning majors than we are currently.”

Others concur. “In our CFP education courses, we are seeing a trend to a much younger student demographic,” says Joyce Schnur, CFP, ChFC, a vice president with Kaplan Schweser. “However, if the needs are to be met, I believe that more advisers need to recognize this profession as a viable option directly out of college.”

And Starn says this: “I think it is positive to see even a small percentage of 20-year-old students entering the field. That percentage will be augmented by a continuation of career transition.”

And three, in the interim, Rhoades says we will still see career changers move into financial planning. “Most new CFPs already have a college degree and take a certificate course of study, in order to sit for the CFP exam,” says Rhoades. “Not only are more and more CPAs are moving into financial planning – but also engineers, retired pilots, and many others.”

To his way of thinking, Starn says the above chart and table reveal the interesting fact that many of today’s financial planners are career changers (2nd or 3rd career). “Thirty years ago financial planning was a start-up profession, and I doubt if you saw many 20-year-old financial planners in 1980,” he says.

For his part, Joe Pitzl, CFP, of Intelligent Financial Strategies, doesn’t' think there will be enough CFPs to replace those retiring. "Based on the current demographics, no, there will not be enough," he says.


However, like Rhoades and Starn, Pitzl says career-changers have been helping with this and will continue to moving forward.


"In addition, as firms continue to develop better ways to bring young talent into firms to support the planning process rather than handle administrative tasks, these numbers will begin to shift," Pitzl says. "There are a lot of larger firms doing this very effectively already, and smaller firms are beginning to grasp this as well. However, it may ultimately require a bunch of younger firm owners to really mainstream career paths to in smaller practices."


Others also see the bar graph/table as a reflection in the growth in career-changers. “When I see (the bar graph/table) it is a logical outcome of the push by the large firms to focus recruitment on ‘career-changers,’” says John E. Grable, Ph.D., CFP, a professor and Athletic Association Endowed Professor of Family Financial Planning at the University of Georgia.

Over the last 10 years, Grable says we have seen fewer large firm efforts at developing young talent. “Rather than spend resources to create clear career paths, the large firms are basically cannibalizing off of each other and other industries,” Grable says. “That makes sense since the job market, nationally, has been so bad.”

But once the job market turns, he says these firms are going to be stressed because they have not spent time developing relationship with universities to recruit the best and brightest students. “The good news is that the small/regional firms have stepped in and grabbed the 20- to 30-year old planner market,” says Grable. “In the future it will be these firms that prosper.”

And then there are those who acknowledge that the numbers in the graph/table may look somewhat distressing, but suggest that they are trailing numbers and do not represent what the future may hold. “Clients are more selective than they were 10 or 20 years ago, and they expect more from their advisers,” says Jim Pasztor MS, MSF, CFP, vice president of Academic Affairs at the College for Financial Planning. “Information is everywhere but what is reliable? Or relevant to a particular client? This argues for a more educated adviser, and the CFP designation is the flagship designation. Even the Financial Planning Association is talking about “one profession, one designation.”  

Says Pasztor: “I think that you will see more and more advisers taking the CFP designation route, realizing that the old model of limited knowledge heavy on sales is not what the marketplace wants.” 


The third point: Will there be enough CFPs in general to meet demand?

Now it might be true that more students will discover the joys of studying for the CFP exam. But at the moment, it doesn’t seem that we are minting nearly enough CFPs to meet the likely demand for advice that will grow over the next 20 or so years as some 5 million people per year turn age 65.

Consider: Right now we have about 67,000 CFPs, about 2,000 or 3% of whom decide to drop their designation each year for whatever reason – retirement, among them.

We also know CFP exam pass rates. Just 3,175 people passed the CFP exam in 2009; 3,240 in 2010; nearly 5,000 in 2011; and (my rough guess) some 4,000 to 5,000 might pass in 2012 (2,000 already have). See CFP® Certification Exam Statistics. According to Dan Drummond, the CFP Board’s spokesman, the number of CFP professionals has risen 22% over the last five years.

What to make of this? Well it could mean there’s not enough CFPs to meet the demand for advice that exists and will continue to exist for many years to come.

Then again, it might not matter.

“Right now consumers look at financial services professionals and largely don’t differentiate between the ‘advice providers’ and the ‘sharks,’” says Rhoades.” “While organizations such as NAPFA and Garrett Planning Network have found their niche in gathering up fiduciary-only, comprehensive financial advice providers, these organizations don’t dominate the marketplace.”

What’s more, Rhoades says this: “While the Certified Financial Planner is increasingly known as a certification in which a level of educational attainment is achieved, all CFPs are not required to be fiduciaries at all times. Until financial planning becomes a true profession – in which everyone who holds themselves out as a ‘financial planner’ or ‘financial consultant’ or ‘financial adviser’ is required by law to act in the best interests of the client, and with a high degree of expertise, at all times, then demand for financial planning may continue to be much less than it would otherwise. But, if all financial planners are mandated to adhere to bona fide fiduciary standards, then demand for financial planners will soar. Thereafter, it may take some time to educate enough new advisers to fulfill the increased demand.”

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