Barring the Door

Recently, one of my clients lost a long-time employee to another firm. This employee had been the admin/back office assistant to a solo practitioner for 10 years, and her leave-taking was quite a blow to my client. This employee liked my client, liked the work she was doing, and loved financial planning. Too much, as it turned out.

In her spare time, she took all the CFP education courses, and since her work experience at my client’s firm qualified for the CFP Board’s experience requirement, after passing her test she was granted her CFP. But my client’s firm didn’t have the clients or the revenues to support another financial planner yet. So this great employee took a job as a lead advisor with a firm across town.

I’m frequently asked by young people whether getting their CFP designation is worth the time, effort, and modest cost involved. Although the CFP has emerged as the credential for professional financial advisors, the confusion among the young is understandable. Getting a CFP is a serious undertaking, especially if you’re going to do it in your spare time. Financial planning employers, like my client, aren’t always as supportive as they might be. In fact, I’ve talked to many young advisors who describe how their firms actively discourage them from getting a CFP. Still, the short answer is that if you want to get a job as a financial planner, today, you need to have your CFP. However, the actual value of a CFP has yet to be sorted out by the financial planning community.

These days, most financial planners screen potential employees on, among other things, whether they have their CFP. If they don’t, that’s usually enough to disqualify them from further consideration. Period. Harsh, perhaps, but it’s also understandable. The education that most college programs provide today give CFPs a sound foundation in the principles and current technology of personal finance not found among any other groups of candidates, not even other professionals such as CPAs or CFAs. Combined with the required three years of practical experience, hiring a CFP can save a firm years of training, along with all the cost and the effort that said training would entail.

That’s not to say that some of the larger firms only hire CFP professionals. Often they’ll staff tax or estate planning departments with attorneys or accountants. Sometimes they’ll hire a CFA to select and monitor various securities within client portfolios. Of course, once folks are in those positions they can sometimes advance to a full, lead advisor position (usually after attaining a CFP along the way). But for young professionals who want to become financial advisors from the get go–starting as support advisors, then service advisors, and finally lead advisors and even partners–getting a CFP is the ticket they must have.

Yet, as the example of my client showed above, the financial planning industry still is not laden with opportunities, even for CFPs. In fact, with a few exceptions, it’s only the larger firms that have created environments to maximize the contributions of young professionals; including training, mentoring, and career paths with defined goals, reviews, and rewards. Because these young professionals at larger firms are more productive, the firms can offer them higher compensation packages. Smaller firms, like my client’s, have a much harder time attracting and retaining professional, higher level talent.

Small Firms Lag the Large

Indeed, many smaller firms, again like my client, are a long way from maximizing the contribution of young professionals. Only within the past couple of years have most firms realized that they can benefit from young professionals at all. The result has been the huge leap in demand for professional talent. Yet most firms are solo or two-advisor shops, whose vision of the leverage they want from a young advisor is strictly support: someone to write financial plans, screen and track mutual funds, and help out with the back office technical nightmare, particularly during peak demand such as when quarterly or annual client statements are due. Maybe, and it’s usually a pretty big maybe, if the firm attracts enough clients, the principal(s) will deign to hand off a few of the smaller clients.

The bottom line: most financial planning firms don’t really want more than that from their young professionals. Sure, they may have some vague idea of ultimately selling the firm to their professional employees in 15 or 20 years, but don’t have any intention of doing anything about it for the next 13 or 18 years, respectively. Consequently, whether they are aware of it or not, what they are really offering their professional employees (and prospective employees) is a permanent support advisor position, complete with essentially flat support-advisor compensation.

That, my friends, is not a very attractive proposition for bright-eyed, bushy-tailed, 25-year-old advisors with their CFPs who are itching to set the world on fire. No wonder financial planners discourage their young professionals from getting their CFPs, why detailed career tracks are scarce, why there’s a chronic disconnect between older and younger advisors, and why the turnover rate among young professionals is off the charts.