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The Great Divide of Financial Planners

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I am like many other young financial planners. I’m also unique. After graduating with a BA in personal financial planning from Kansas State University in 2001, I joined Sheryl Garrett at The Garrett Planning Network, where I worked with hundreds of financial planners, many of them new to the profession. Then in February 2002, I was featured with two other young planners in Investment Advisor’s “The New Faces of Planning.” That article gave readers a synopsis of the challenges and the rewards facing those who, like me, were just getting started in the profession.

It was only then that I came to fully realize the crisis faced by the financial planning profession. I started to receive numerous calls and e-mails from new or young planners asking for help starting and, more importantly, surviving their careers in planning. Amazed by the number of struggling young planners, I decided to focus on understanding and attempting to solve the career development challenges that new planners face. I listened to the voices of the networks of graduates from planning programs at KSU and across the country, to the folks who contacted me after reading the article, and to the many young planners I’ve met at industry gatherings. Three years later, I’ve come to realize that the career development crisis in financial planning is far worse than I imagined.

Many problems facing young planners today are also faced by newcomers to any profession. The most pressing and singular challenge, however, stems from cultural differences between two generations: the pioneering planners who now run established practices; and the well-educated, well-trained graduates of four-year college CFP programs who are ready and eager to hit the ground running in their chosen profession.

This gap between successful planners and the next generation is wider than most people realize, and it’s growing. The cultural differences are leading new planners into careers fraught with obstacles, disappointment, and frustration. The crisis doesn’t just involve newcomers to the profession. I believe that the implications for the established planning community are much worse: The failure to find a place for these young professionals results in low productivity, high employee turnover, and unattractive exit strategies that cost firm owners millions of dollars every year. If the situation doesn’t change, some of the best and brightest young planners are likely to leave the profession, and there will be fewer new graduates to fill the void. It is a serious crisis that threatens the future of financial planning.

Too many new planners feel professionally lonely and confused. Aspiring next-generation planners find themselves directionless and frustrated, facing difficult barriers of entry and a lack of meaningful career opportunities.

You would think that new planners would have much more positive feelings. After all, they’ve chosen to work in a profession that focuses on helping people reach their personal and financial dreams. However, many young advisors are left out of the planning process. Consider this posting on an industry discussion board: “The more I read this board, the more I question whether this is a profession worth pursuing. I am considering becoming a CFP mostly for the satisfaction of knowing my efforts help families plan their lives. But I am wondering why anyone would want to bust their butt for three years to possibly make $50K. From what I gather, 75% of those who started have dropped out, discouraged and having exhausted their savings, and the rest are hanging on out of sheer stubbornness.”

For a long time, I thought the career development and generational problems facing the profession were the same problems other professions face. As in other professions, many experienced planners often protest that new planners want too much too soon, have job commitment phobia, and don’t appreciate the sacrifices their elders made. While some typical generational frictions do exist, I have learned there are many issues facing financial planning that are unique. Here’s a view from the bottom looking up.

What Career Track?

It’s not news that the planning profession lacks a clearly defined career development track for the next generation of talent. In years past, folks came into financial planning largely via the securities or insurance industries. They learned to be good brokers or agents, then later decided they could serve their clients better as independent, comprehensive financial planners. The planner pioneers were usually aged 30 or older, and financially established enough to capitalize the startup of their own firms when they made the move.

While this career shifting effectively built the planning industry and led to many successful planning firms, it’s not the basis on which to build a profession. Doctors don’t start out as drug salespeople nor lawyers as insurance claims adjusters. Professions have their own professional schools, and financial planning has responded with the creation of nearly 200 CFP-registered university undergraduate, graduate, and certificate programs that are churning out hundreds of graduates every year. But what do these newly minted financial planners do? Largely in their early to mid-20s, without financial resources, many are still forced to take jobs in the securities or insurance industries, while the lucky ones find jobs with established planning firms.

Unfortunately, instead of finding a path to success, even the “lucky” graduates are frustrated. Considered by many established planners to be too young and inexperienced to meet with clients or do meaningful planning work, these young planners get stuck with clerical or administrative duties at low pay and with few opportunities to do what they have been trained to do: work with clients as financial planners.

Consequently, the current “career path” for young planners is to stick it out with their firm for three years to fulfill the experience requirement for the CFP certificate, get their CFP, and leave to start their own planning firm. Not only is this a poor excuse for a professional career track, it leads to high levels of employee turnover that costs established planning firms significant time, effort, and money in recruiting and training efforts. Plus, without long-term associates who become junior partners, established planners are forced to turn to strangers when it comes time to sell their practices.

A typical new planner’s story came from a young women who e-mailed me: “I graduated from a CFP-registered program, attended the FPA Residency program, passed the CFP exam, and today am four months away from fulfilling the CFP experience requirement. Yet I’m questioning whether I even want to be in the profession. I spend most of my time addressing envelopes for marketing seminars that I don’t even get to attend, and I make less than $12 per hour, without health insurance. What am I doing wrong?” She later wrote to say she quit her job and became an insurance agent.

They Aren’t Like You

When today’s experienced planners started their planning careers, the option to obtain a four-year or graduate degree in financial planning simply did not exist. Instead, the education and training they received came mostly through trial and error. The next generation of talent has more education, technical knowledge of financial planning concepts, and know-how on the latest trends in the industry than the older generation. Unlike older planners, the majority of those entering the profession today are doing so largely through a choice made while in school.

My experience is typical. I entered the field after graduating from Kansas State’s CFP-registered undergraduate program. In school, I mastered the 101 financial planning topics required by the CFP Board. I completed coursework and projects that helped me to develop life planning, motivational, counseling, and communication skills. I completed marketing, management, and technical writing courses.

In my capstone course, my classmates and I–without the use of planning software–were required to make recommendations for numerous comprehensive case studies. Then we solved another set of comprehensive cases with industry-common software. Moreover, we had to present our recommendations to panels of professionals, to prove that our motivation, communication, counseling, and professional skills were sufficient to work with real people. Just when we thought our senior year was winding down, we were given a final project: Take all our business management, marketing, and financial planning knowledge and package it into a formal business plan.

After completing the coursework and these projects, we entered the profession confident, enthusiastic, and ready to get started. This preparation has knocked 10 years off the professional growth process, something that experienced planners do not understand.

Mismanaging Young Talent

Experienced planners’ failure to grasp the quality of talent graduating from financial planning programs creates another problem–the tendency to mismanage new planners as employees, leaving them directionless and frustrated, and leading them to feel they are being taken advantage of.

In my consulting work, I continually see established planners placing new planners in the wrong jobs and giving them the wrong responsibilities. Part of the problem is that many planners tend to be reactive in their hiring: They wait far too long to hire desperately needed help. Then, feeling overwhelmed and thinking vague thoughts about growing their firm, they decide to hire someone with some knowledge of planning.

Many planners, then, throw together a “canned” job description, review a few resumes, conduct an informal interview, require a personality test to determine if the candidate fits the culture of the firm, and make a few promises about opportunities for advancement. On the flip side, the new planner has seen this job description before, but she applies anyway, gets excited when the firm owner makes promises about the future, and takes the job.

See the problem? All too often, firm owners place new planners in glorified administrative positions, often called paraplanners or junior associates, rarely taking advantage of the new planners’ current talent or future potential, and often pitching the admin work as a steppingstone. It doesn’t take long, maybe six to 18 months, for the new planner to realize the staff work isn’t a path to planning work, and she becomes bored, frustrated, and distracted. As a result, the boss starts to believe that the talent he hired is not capable of handling more responsibility, or of working with current clients. The new planner either leaves for another job or starts her own firm, using the excuse that she’s “incompatible with the firm culture,” or is terminated for poor performance. Not surprisingly, those are the top two reasons why employees leave planning firms, according to the 2003 FPA Compensation and Staffing Study.

Failing to Share

Most of the experienced planners whom I have helped in my consulting tell me that they have every intention of giving firm ownership to a new planner who proves their ability. However, I have seen or heard about very few owners who have actually given out ownership. Partly that’s because few new planners stay at a company long enough to gain equity. In the few cases where ownership has been shared, the portion amounted to virtually nothing. Consider this e-mail I received recently: “I am a new CFP and know that I’m going to start off at the bottom, but the long-term benefits and opportunities to move up within the company are going to ultimately be the deciding factor for me. I don’t want to work at a job for three years and leave, but I can’t work a job for five years with zero chance for income growth or meaningful ownership.”

Most experienced planners have good intentions of rewarding their valuable employees, but as entrepreneurs, it’s hard for them to cede part of their firm to “some youngster who hasn’t paid his dues.” Yet without a career track that involves sharing ownership with junior partners, there is no career development, merely training grounds for our competition.

Of the many challenges facing the next generation of planners, the one that bothers me most is that some established CFPs quietly discourage new planners from getting the very designation that they themselves have obtained and built into the hallmark of the planning profession.

Let me explain. Because most firm owners focus on finding employees to help in the back office, they haven’t thought through their business plan enough to realize how to use another CFP in their company. So if a young employee were to obtain his CFP, the owner wouldn’t have an appropriate position for him. Consequently, many existing independent CFPs subtly–or not so subtly–discourage young planners from pursuing the designation.

That’s not to say that independent planners are the only culprits here. Young planners who take jobs with insurance companies or brokerage firms–even the ones who prominently give lip service for their support for the CFP certificate–hear the message that pursuing the designation takes valuable time away from building their business. Sure, many large financial services institutions allow their associates to pursue a CFP. Most often, however, those so allowed are executives in the company or well-established reps who are so encouraged as a way to retain them and their books. Often, new planners entering a financial services firm will have to wait three, five, or even seven years before they will be given the time, encouragement, and financial support to make it happen.

Think this is just another example of a young person’s paranoia? I wish it were. I can’t tell you how pervasively such practices are discussed among young planners. “You don’t need to worry about that right now,” or “Getting your CFP won’t really help you in your current position,” or the latest favorite: “Perhaps you’d be better off becoming a registered paraplanner,” are mantras young planners hear over and over.

When I talk about career development issues, I usually get two responses: new planners privately thank me and experienced planners say up-front that they don’t believe me. The state of denial continues to plague the profession, and if you’re in the camp that doesn’t believe me, consider these two recent e-mail responses to my work by experienced planners: “You make some good points. But remember that the firm is investing a great deal of time and money into cultivating [these young planners]. They should be grateful for whatever time and effort they do get.” And: “…I have hired several [young planners] and I cannot seem to keep them around for longer than 10 months. They are talented, but seem to jump from job to job. My colleagues and I have determined that we don’t think it’s worth the time, effort, and cost in hiring them.”

I get a call at least once a week from an established planner looking to hire some help. I ask, “Have you tried a student from a CFP program?” Most reply that, yes, they have hired one or two young planners right out of school, but they didn’t stay with the firm for very long. When I ask them why that happens, the all-too-common response is that the new planning generation wants too much too soon. These young graduates lack patience, exhibit job commitment phobia, don’t appreciate what they get, and often just leave. I have to bite my tongue to keep from blurting out that maybe they weren’t motivated, used properly, given rewarding opportunities, or were discouraged from taking the CFP exam. If experienced planners would admit that they have a problem of mismanagement, fail to provide true firm ownership participation, and suffer from high turnover, then they would realize that with a little effort, the young planner they cultivate and motivate might become the best junior partner they could ever hire.

The Code of Silence

For a long time I feared (and still do a little) telling the planning community about these issues. Many new planners have the same fear. They don’t want to appear unappreciative. They don’t want to feel any more disconnected from their chosen profession than they already do. They don’t want to appear to be the bad guys or to blame problems on experienced planners that they know worked very hard to build the profession. They don’t want to lose their jobs.

So as a group, new planners have agreed to be silent, talking only among themselves, working toward owning and opening their own businesses, and trying their best to open the lines of communication between their bosses, colleagues, and mentors in hope that one day they will have opportunities for advancement in this great profession. Many believe that if they did say something, anything, about these problems, that no one would listen anyway.

Well, I have listened. I have listened to young planners cry on the phone after getting fired for “poor” performance or standing up to an ethical dilemma that they simply couldn’t agree to. I have watched some of the best and the brightest talent leave the industry. I have helped new planners start and build their own businesses just so they could practice in the profession they were trained for. I have coached many new planners on how to ask for ownership in a business where they were producing 50% of the revenue, only to watch their hearts sink as they were told “no,” or offered a 5% stake.

Those entering the profession want to do great things; want to serve clients; want their talents to be respected and treated professionally. They want to work with experienced planners who share the same ideals, yet understand the inherent differences between the working styles of “our” generation and the older generation. They want their talents to be recognized and rewarded. They want to be managed properly so they can grow themselves and help grow the practice.They want the profession to appreciate the high level of education they have received. They want to be rewarded by owning their own financial planning business or having a stake in another firm. Most important, they want to make a difference in the lives of clients who need their help and can benefit from their education, experience, and know-how.

They’re not just asking for direction, experience, and jobs. They’re asking for a viable career. I can only hope that the industry is ready to listen. It troubles me that in such a great industry there are so many challenges. Can the profession come up with innovative ways to solve them? Yes–and that will be the topic of my next article, in March’s Investment Advisor.

Angela Herbers is a virtual business manager and consultant for independent financial planning firms. She can be reached at [email protected].


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