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January 01, 2012 at 11:54 PM
As with the rest of the country, the financial planning profession is graying, and the entrance of 20- and 30-something young professionals is causing a substantial shift in the makeup of the work force. Some 300 financial planning programs (some degree and many certificate) are producing hundreds of new planners every year.
Considering that the majority of today’s planners are, on average, age 50 or older, these are encouraging numbers for the profession. The U.S. Social Security Administration notes that the “normal” retirement age in the country has been 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born after 1959. This later retirement trend is especially evident with financial planners, and because the profession is relatively new, the first wave of significant retirements will occur at a time when entry points into the work force are not clearly established.
There are plenty of qualified individuals to fill the void that retiring planners will leave. The challenge lies in the reality that the profession doesn’t currently have the infrastructure to support those new planners. There is a persistent need to find a place in the profession for all qualified graduates to reside.
According to the Financial Planning Association’s “2010–2011 Financial Planning Salary Survey,” students anticipate graduating from a financial planning degree or certification program between 2010 and 2013. Upon graduation, 87% will hold a bachelor’s degree and 61% will hold Certified Financial Planner certification.
“Many of these graduates are well-trained aspiring CFP professionals entering the work force who don’t know where to go to get their three years of experience,” said Caleb Brown, MBA and partner at New Planner Recruiting, Tallahassee, Fla.
According to the FPA survey, many individuals just entering the financial planning profession expect to start in a junior financial planner or paraplanner position. This is a significant challenge for a profession where the majority of firms are still less than five people.
Top students entering the work force are faced with a dilemma. They have been trained to favor independent fee-only/fee-based type firms, which can dissuade recent graduates from working at large firms on the sales distribution side, even though they have the capacity to bring on multiple new hires and offer extensive recruiting programs to attract new planners.
On the small firm side, employers who have a need for entry-level staff struggle with deciding where a new employee will fit in. “There’s somewhat of a mismatch between the education and training applicants receive in school, which tend to focus on holistic financial planning, while many entry-level jobs are still focused on selling products,” said Mary Bell, financial planning doctoral student at Kansas State University in Manhattan, Kan.
For many students, the jobs that are available do not always resemble the jobs they hoped to obtain.
To add to the confusion, there are different compensation and career paths. “Candidates will contact various planners across the country and hear different definitions of what financial planning is, what a planner does, compensation and benefit offerings, and what the internal career track looks like,” Brown said. “It’s very frustrating for candidates that there is not more consistency and that every firm seems wildly different.”
Those who can’t find work as financial planners must seek work in other areas like banking, insurance and sales. After gaining experience, those professionals must re-enter the independent firm market, and a lot of times they just don’t come back.
While students are coming out of programs with the technical skills they need, many planners agree that new graduates still have a lot to learn before they are truly able to sit down individually with clients.
“One of the underdeveloped skills of recent graduates is how to think. They’re taught to crunch numbers and perform the tasks of the job but there is a substantial difference between doing financial planning and being a financial planner,” said Joe Pitzl, principal at Intelligent Financial Strategies. “Financial planners must have confidence in the advice they give clients, but must also learn how to communicate that advice in a way the client can understand. The mental process of understanding what it’s like to be in the client’s shoes is best learned through observing experienced professionals over time.”
Brown agrees that new planners need to spend a significant amount of time working with experienced planners before they should be allowed to meet with clients, and those new to the profession may need to readjust their expectations as they start out.
As employers begin to recruit new employees, it’s important to be cognizant of generational differences. The next generation is enthusiastic about financial planning and they want to help people. “It’s important to recognize that this generation learns through experience. It’s not that we don’t believe the facts that you tell us, it’s just that we still wonder what would happen if we looked at something differently,” said Pitzl, who is active in the young planner community with his local FPA chapter.
This article is part of Investment Advisor’s 2012 Career Guide. Click below for more articles: