Will There Be Enough CFPs To Replace Those Retiring?

Friday, October 26, 2012 12:39
Will There Be Enough CFPs To Replace Those Retiring?

Tags: CFP Board

Forrest Gump was fond of saying, “I’m not a smart man, but….”

Well, I'm inclined to repeat that phrase, especially when I look at the table and bar graph below that shows the percent of people holding the CFP designation by age. (See also CFP® Certificant Profile.)




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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.”

Comments (5)

Robert Powell
Editor’s note: In response to the question, “Will there be enough younger CFPs to replace those who are about to retire or semi retire?” Caleb Brown, MBA, CFP, a partner with New Planner Recruiting, said the following. We are publishing his comments here, in part, because Caleb sent his answer after we published the above story.
"The short answer is no, I don't think so in the near future - we are very top heavy. The number of test takers is not reflected in the commensurate growth in the number of programs. I'm guessing we probably need somewhere in the neighborhood of 10,000 people taking the exam per year far from the roughly 5,000 pace set for 2012. The CFP Board is aware of this and have been on an initiative to try and get more people from degree programs to take the exam. Some reasons new grads don’t take the plunge though are they are often fearful of the rigor and commitment, professors tell them to wait a few years to get some experience, join an organization that deemphasizes the credential or disallows it all together. Furthermore, a large percentage of the grads from the degree programs want to go into the Indie RIA space where the credential tends to be more ingrained in the culture, but currently there aren't enough opportunities to go around in this area. And when there is an opening, the expectations are so high that only a handful of grads nationwide can succeed. New planners want opportunities to do real financial planning with clients, work under the wing of a seasoned mentor, earn a decent salary, meet and exceed reasonable expectations set by employers, work with clients in their own peer group, grow their skills, and enjoy what they do. If our profession can't provide that, they will seek it somewhere else and we may never meet future demands."
Robert Powell , October 26, 2012
Robert Powell
Editor’s note: In response to the question, “Will there be enough younger CFPs to replace those who are about to retire or semi retire?” Thomas Warschauer, Ph.D., CFP, Professor of Finance, Emeritus and director of Financial Planning Programs at San Diego State University, said the following. We are publishing here, in part, because Dr. Warschauer sent his answer after we published the above story.
Absolutely I do.
The issue is that of sequencing.
The number of degree programs has blossomed since the CFP Board hired Dr. Charles Chaffin as Manager, Academic Programs. Obviously the new graduates of these programs are not ready to take over practices. But if the profession finds a way to transition the schools’ graduate output into starting and mid-level positions (for graduates of master’s degree programs) the its transition could be smooth. Maybe a little patience is required and the willingness to bring younger less experienced planners to their practices. Given the superior education of this group, everyone should benefit.
Robert Powell , October 26, 2012
Great reporting based on CFP scholar Rhoades, CFP Board stats, and CFP educators but conclusions are off. Advice profession is much bigger than CFPs.

CFA Institute will eat CFP Board's lunch in the long run. IMCA keeps growing, too. That's where many of the young people missing from CFP certificant statistics are likely going.

I agree with Ron Rhoades that professionalism will be the key to success for advisors in the years ahead. But CFP Board has so much baggage it must carry while negotiating a changeover from its sales-dominated history to a professional model. And the two sides -- fee-only versus BD reps -- don't talk to each other. Instead they're lobbying against each other and CFP Board is caught in the middle.
agluck , October 27, 2012
Robert Powell
Editor's note: Mark Tibergien, Managing Director of Pershing, a BNY Mellon company, and Chief Executive Officer and Managing Director, Pershing Advisor Solutions, said this after the story was posted:
At first blush, it looked frightening. But I would guess the boomers will hang in there a lot longer and so the blocks tend to balance themselves out.
It still remains concerning though that there is such a large population of 20 and 30 something's do not see this as a good career choice.  One would think with all the anxiety about how hard it is to get a job or pay off student loans that more people would see this as a legitimate and fulfilling option. Think about it. It's financial rewarding, intellectually stimulating, fosters a degree of independence and you can profoundly impact the lives of others.  What more could one ask?
The other element that offsets the tide is that advisory firms are getting larger. As such, they individually are putting more emphasis in recruitment, development and retention.  At Pershing Advisor Solutions, we see the whole human capital area as a discipline that we can help RIA firms manage more effectively. Many of our white papers, webcasts and seminars have been devoted to this topic and our Relationship Managers are engaged with the firms they serve to help them execute such plans.
Robert Powell , October 27, 2012
Robert Powell
Editor's note: Luke Dean, the Financial Planning Program Director at William Paterson University, said this to me after the story was posted:
We will have more than enough younger CFP(r)'s to replace those that are about to retire or semi-retire.
There are currently over 110 universities offering an undergraduate degree program and over 300 academic institutions offering a certificate or degree program. 
The number of universities registering a program with the CFP(r) Board continues to climb at a fast pace. 
The real issue to me is the extremely slow and hypocritical nature of business schools who have been slow respond to the needs of their students and slow to react to the huge market demand for CFP(r) Professionals.  Business schools teach their students to be quick to react to the market and adapt, yet they continue to teach the same classes and use the same model they've used for decades.  Their graduates are struggling to find jobs, or they're extremely unprepared for the jobs they're getting.  At the same time, students graduating from some of the top Financial Planning programs are receiving more offers than they know what to do with. 
In our Financial Planning degree program at William Paterson University, we have about twice as many job offers each year as we have students to fill them.  We have more paid internship opportunities than our students can fill.  I hear the same things from Texas Tech and Utah Valley University.  While the number of universities offering a Financial Planning degree program registered with the CFP(r) Board continues to increase, it still amazes me how business schools can sit on the sidelines and watch our students get all the job offers.
This is a fantastic profession that a lot of students all over the country want to enter.  What other profession allows you to use your knowledge of finance and applied economics to help families meet their goals and dreams?  Students want to be part of a profession that matters and makes a difference.  They also want to be part of a profession where they can make a good living.  Financial Planning meets both criteria, but if you're a student at a business school sticking with the old traditional model and not training your students towards designations like the CFA, the CFP(r), or CPA, then what are you doing?
In sum, there is no shortage of individuals who would love to get into this profession, and there is great demand for their services....but there is a surprising level of ignorance on the part of business schools who refuse to adapt to the current market conditions and provide the CFP(r) required curriculum necessary to prepare and train these students to enter the profession.  Universities try to train their students to be extremely quick to react to the market, yet they themselves move about as fast as the Rocky Mountains.  Ironic, isn't it?!
Robert Powell , October 27, 2012

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