Is the CFP designation a "cash cow"?
By Paul Wilson
I read today about a new study that attempts to measure the effects that a certified financial planner (CFP) certification has on advisors’ practices and clients.
I have to admit that I raised an eyebrow when I saw the study was commissioned by the CFP Board of Standards but still, it includes some interesting findings.
Apparently, the CFP Board was tired of relying on opinion and anecdotes when describing the benefits of certification, so they commissioned a study to unearth more concrete statistics.
The study, which compiled data from interviews and surveys with clients, industry execs and financial advisors, found that 87 percent of clients who receive advice from advisors with a CFP certification describe themselves as “satisfied” or “very satisfied.” Among the clients of non-certified advisors, this figure fell to 72 percent.
This increased level of customer satisfaction means an increase in revenues, according to the study. For example, CFP-certified sole practitioners earn somewhere between 40 percent to 100 percent more than their non-certified peers, while teams of certified advisors earned an average of nearly one-third more.
The report, which you can read in full here, goes on to provide more details about the increased earning potential for those with a CFP designation at different career stages.
Actually, this very topic stirred up controversy recently in Australia when Peter Johnston, executive director of the Association of Independently Owned Financial Planners (AIOFP), referred to the CFP designation as a "cash cow."
In addition to boosting earnings, certification leads to higher client retention rates and higher compensation rates, the study said. "Firms are increasingly seeing the value of certification and what that does for their client relationships," said Tom Crowder, the CFP’s managing director for marketing and business development.
Are you CFP certified? If not, what’s holding you back? I’m curious to hear your opinions on the pros and cons of this designation.