The relentless march of technological change is slowly taking its toll upon undifferentiated financial advisors. It's casting a bright light of transparency on questionable products, commoditizing simple investment transactions (and even somewhat more complicated portfolio construction) and forcing advisors to move up the value chain to provide substantive, high-quality financial advice to justify their cost.
Yet at the same time, the push towards providing financial advice to solve complex problems creates a demand for advanced educational programs to provide advisors with the knowledge they need to deliver those solutions.
Despite the opportunities created by this changing environment, though, the recent announcement by the American College of changes to its flagship ChFC program spent as much time continuing to fight its ill-fated ChFC versus CFP designation war as it did talking about its own program. I found that an odd juxtaposition given that the CFP marks now have 50% more designees than the ChFC and five times the consumer awareness. For all the recent criticism that the CFP Board has taken regarding the enforcement of its compensation disclosure rules, at least it has an enforcement mechanism to publicly sanction its designees or even revoke the certification, unlike the American College.
Against this backdrop, today's blog post is about both the future of advisor education for all the institutions that teach financial advisors, and is an open letter to the American College. The College's new leadership and board has an unique opportunity with the transition to incoming president and CEO Bob Johnson to finally move past its ill-fated ChFC versus CFP designation wars and its hypocritical criticisms of the CFP marks that the organization itself teaches. The College can instead strategically reposition itself to support the emerging need for deeper post-CFP specializations and niche educational programs for financial advisors…or leave the door open once again for other institutions to step up.
Changing (Educational) Trends in Financial Services
The pressure is growing for advisors to demonstrate the value of their advice, as the profession's product-based roots continue to be undermined. The Internet and online discount brokers have long since obliterated the traditional "stock broker" of old. The percentage of permanent life insurance has declined drastically in the past 20 years from over 55% in the early 90s to barely 25% today. The increased availability of technology tools to analyze the (often poor and costly) performance of active mutual funds is driving a decline of fund managers and the advisors who recommend them. There's even a shift of advisors away from mutual-fund-picking towards portfolio management that is now being pressured by the rise of "robo-advisors" that are commoditizing the assembly of a strategic diversified asset-allocated portfolio at a very low cost.
The good news is that even as every 'traditional' advisor product channel is slowly and steadily undermined, the value persists of holistic financial planning advice to weave it all together and help clients change their financial behavior for the better. The bad news for many advisors, though, is that it takes much more skill, experience and raw knowledge to deliver effectively on the personal financial advice value proposition. So as advisors are driven further up the value chain to justify their cost, there is a need for greater technical competency and expertise, and educational programs to help get us there. Accordingly, it's no surprise that the market share of CFP certification among advisors overall has more than doubled since the early 2000s. In fact, the shift towards financial planning has been so significant than among financial planners a crisis of differentiation is emerging because it's no longer enough to just be a financial planner. Being a credentialed advisor with years of experience who delivers customized, individualized, comprehensive personal financial planning advice to clients is becoming mere table stakes to have a chance to work in an advice relationship with a high-net-worth or even a mass-affluent client. Instead, it's becoming increasingly necessary to pursue a "post-CFP" education towars a particular specialization to maintain differentiation and a competitive advantage.
Fortunately, a number of educational institutions and even some startup training/education organizations are stepping up, carving out deeper specialized knowledge programs in subject-matter areas like retirement income planning, Social Security, or wealth management, or fully focused niches like planning for LGBT couples to divorce planning to working with doctors. As more and more niches and specializations are established, the demand for programs can only grow, and enterprising educational institutions have an opportunity to lead the charge and help advisors define effective niches by rolling out educational programs to support them.
Notably, this potential proliferation of specialized designations is quite different from today's glut of sometimes questionable advisor designations. Historically, such programs have thrived among "advisors" who didn't want to go out for more rigorous educational programs but wanted some "letters" after their name to imply greater expertise and credibility.
When the education always starts with CFP certification and then goes beyond it to specialize, there's little value to specious designations (who really needs to add some bogus letters to their name after they already have a CFP?). The only educational programs that survive are those that add genuine value for the advisor, and therefore the consumer, above and beyond the core CFP educational curriculum.
The American College's Failing ChFC Versus CFP War
Despite all of this incredible opportunity for moving the ball forward on advancing advisor education, the American College has remained stubbornly entrenched in its one-sided war with the CFP Board over the American College's proprietary ChFC designation versus the CFP Board's much-more-widely-adopted CFP certification. Thus, when the American College recently announced its latest program changes to the ChFC designation, including new coursework on issues like divorce, retirement income and planning for GLBT couples, the organization took the announcement as an opportunity to take digs at the CFP mark for everything from having more advanced training to more "hands-on" instruction to making content that is compensation neutral. Taking swings at the CFP mark is hardly new for the American College.