CFP

[PalacioHill]

At least in the US, the CFP designation seems to be very popular, especially among Financial Advisors. How come no one on this forum seems to give it much credit or discuss it?

 

[Systematic]

Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

 

[bpdulog]

Systematic wrote:
Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

LOL wow, if that’s what you think then the CFA isn’t that much better in that regard. If I was shopping around for an advisor, I’d have more comfort from someone with the CFP designation than Joe Schmoe from off the street. One of my Stalla instructors held the CFP, CFA and CPA designations. If you want it, go for it. It will only make you more marketable.

 

[bchad]

CFP goes more into tax and estate planning and insurance than CFA does (which is hardly at all). For ordinary financial advisors advising ma and pa Kettle, this stuff is generally pretty important. However CFA candidates are generally gunning for a different class of job than a financial advisor, although there is nothing wrong with financial advising in principle.
CFA Charterholders can challenge out of parts of the CFP exams so the process of getting a CFP can be shorter if you’ve already gotten your charter.

 

[chibwack]

CFA = analysis
CFP = planning
seems pretty cut n dried to me…

 

[PalacioHill]

Seems as though that there is some value in the CFP designation that is not recognized here. Analysis is involved in planning. Most CFPs that I know do analyze investment opportunities for their clients.

 

[Systematic]

bpdulog wrote:

Systematic wrote:
Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

LOL wow, if that’s what you think then the CFA isn’t that much better in that regard. If I was shopping around for an advisor, I’d have more comfort from someone with the CFP designation than Joe Schmoe from off the street. One of my Stalla instructors held the CFP, CFA and CPA designations. If you want it, go for it. It will only make you more marketable.

Yeah, compared to a Joe Schmo off the street a CFP is better than nothing. If you want a job as a financial advisor, all they care about is an existing book of business. A high shool drop out with a series 65 and a book of $100m will get far more oppertunities than someone with a Bachelor’s degree, CFP, and no book of business.
The only reason to pursue it, IMO, would be if you already had a desigination that allows you to sit for the exam without taking the classes (assuming you want to be a financial advisor). But I also think that if you’re already a Charterholder or JD, taking the CFP is a bit like having a bachelors then going back and getting an associates degree.
I obvioulsy have a strong distaste for the desigination, its because I know 12+ CFP’s and they have almost no estate or tax knowledge, they merely know to enough to refer you to someone else.They add no value in the process.

 

[former trader]

I believe it’s more relevant than FRM and CAIA, even though it tests different things.

 

[bpdulog]

Systematic wrote:

bpdulog wrote:

Systematic wrote:
Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

LOL wow, if that’s what you think then the CFA isn’t that much better in that regard. If I was shopping around for an advisor, I’d have more comfort from someone with the CFP designation than Joe Schmoe from off the street. One of my Stalla instructors held the CFP, CFA and CPA designations. If you want it, go for it. It will only make you more marketable.

Yeah, compared to a Joe Schmo off the street a CFP is better than nothing. If you want a job as a financial advisor, all they care about is an existing book of business. A high shool drop out with a series 65 and a book of $100m will get far more oppertunities than someone with a Bachelor’s degree, CFP, and no book of business.
The only reason to pursue it, IMO, would be if you already had a desigination that allows you to sit for the exam without taking the classes (assuming you want to be a financial advisor). But I also think that if you’re already a Charterholder or JD, taking the CFP is a bit like having a bachelors then going back and getting an associates degree.
I obvioulsy have a strong distaste for the desigination, its because I know 12+ CFP’s and they have almost no estate or tax knowledge, they merely know to enough to refer you to someone else.They add no value in the process.

I get what you’re saying, but how is it any different at the institutional level? If I was an equities PM and my client wanted exposure to fixed income, wouldn’t you refer them to someone you know? And isn’t AUM a pretty big deal?

 

[Sweep the Leg]

As others have stated, CFP is really only for FAs. In the world of financial planning (retail) the CFP is important to get ahead. Sometimes it’s even required before the financial advisor can start his fee-based business. For example, at many broker-dealers (not RIAs) your first 1-3 years as an FA will consist solely of transactional business. You won’t be allowed to start a fee-based practice until you’ve met certain requirements. Generally experience and AUM, but in many cases you can get around the experience requirement if you have your CFP.
CFP isn’t really applicable for institutional investors. It’s much more about the retail market.

 

[Systematic]

bpdulog wrote:

Systematic wrote:

bpdulog wrote:

Systematic wrote:
Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

LOL wow, if that’s what you think then the CFA isn’t that much better in that regard. If I was shopping around for an advisor, I’d have more comfort from someone with the CFP designation than Joe Schmoe from off the street. One of my Stalla instructors held the CFP, CFA and CPA designations. If you want it, go for it. It will only make you more marketable.

Yeah, compared to a Joe Schmo off the street a CFP is better than nothing. If you want a job as a financial advisor, all they care about is an existing book of business. A high shool drop out with a series 65 and a book of $100m will get far more oppertunities than someone with a Bachelor’s degree, CFP, and no book of business.
The only reason to pursue it, IMO, would be if you already had a desigination that allows you to sit for the exam without taking the classes (assuming you want to be a financial advisor). But I also think that if you’re already a Charterholder or JD, taking the CFP is a bit like having a bachelors then going back and getting an associates degree.
I obvioulsy have a strong distaste for the desigination, its because I know 12+ CFP’s and they have almost no estate or tax knowledge, they merely know to enough to refer you to someone else.They add no value in the process.

I get what you’re saying, but how is it any different at the institutional level? If I was an equities PM and my client wanted exposure to fixed income, wouldn’t you refer them to someone you know? And isn’t AUM a pretty big deal?

Because at least, as an equities PM, you’re adding value to the process and an expert in something.
As a planner, you’re really just refering to a bunch of experts (mutual funds, CPA, estate lawyer) and aggregating their advice/expertise to the end-user. Which is valueable and time consuming, but I dont view it as inexpendable, unlike an estate lawyer or PM. Hence why many people don’t use an advisor.
FYI, I work as a “PM” (term used loosely) for an RIA with $1.6 billion. The CFP’s just don’t add much value.

 

[bpdulog]

Systematic wrote:

bpdulog wrote:

Systematic wrote:

bpdulog wrote:

Systematic wrote:
Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

LOL wow, if that’s what you think then the CFA isn’t that much better in that regard. If I was shopping around for an advisor, I’d have more comfort from someone with the CFP designation than Joe Schmoe from off the street. One of my Stalla instructors held the CFP, CFA and CPA designations. If you want it, go for it. It will only make you more marketable.

Yeah, compared to a Joe Schmo off the street a CFP is better than nothing. If you want a job as a financial advisor, all they care about is an existing book of business. A high shool drop out with a series 65 and a book of $100m will get far more oppertunities than someone with a Bachelor’s degree, CFP, and no book of business.
The only reason to pursue it, IMO, would be if you already had a desigination that allows you to sit for the exam without taking the classes (assuming you want to be a financial advisor). But I also think that if you’re already a Charterholder or JD, taking the CFP is a bit like having a bachelors then going back and getting an associates degree.
I obvioulsy have a strong distaste for the desigination, its because I know 12+ CFP’s and they have almost no estate or tax knowledge, they merely know to enough to refer you to someone else.They add no value in the process.

I get what you’re saying, but how is it any different at the institutional level? If I was an equities PM and my client wanted exposure to fixed income, wouldn’t you refer them to someone you know? And isn’t AUM a pretty big deal?

Because at least, as an equities PM, you’re adding value to the process and an expert in something.
As a planner, you’re really just refering to a bunch of experts (mutual funds, CPA, estate lawyer) and aggregating their advice/expertise to the end-user. Which is valueable and time consuming, but I dont view it as inexpendable, unlike an estate lawyer or PM. Hence why many people don’t use an advisor.
FYI, I work as a “PM” (term used loosely) for an RIA with $1.6 billion. The CFP’s just don’t add much value.

So your argument is slowly drifting from planners adding no value to adding very little value. It’s debateable as to how much value they actually add, but are they not adding value by channeling their clients’ resources more efficiently than they would on their own? To folks who have a finance background, such as yourself, it may not seem like much value is added, but to someone who has very little financial knowledge, I would think they would assign a greater value to these type of services.

 

[bchad]

A sensible asset allocation probably does add value to mom and pop. There are tons of investment issues and perspectives to consider. Someone trustworthy to help people navigate to a sensible asset allocation that generates return without any more risk than necessary is definitely adding value.
True, an individual can read a ton of stuff and learn to do that themselves with ETFs or MFs, but sorting through all the literature takes an enormous amount of time and there are stray paths to go down. So yeah, I think financial advisors add value, particularly if they are accessible and can talk to clients when they need hand-holding and reassurance.
The interesting question is whether a fee-based-on-AUM is a better model than fee-for-consultation-time model for mom and pop investors.

 

[Systematic]

bpdulog wrote:

Systematic wrote:

bpdulog wrote:

Systematic wrote:

bpdulog wrote:

Systematic wrote:
Because it basically worthless…
There’s probably some value in the general knowledge, but most ppl here are pursuing “advanced” degrees for better pay and to make themselves more attractive in the labor market… which the CFP wont help you do.
It is a rediculously long test though. I’ve know some idiots that passed, and the fact that you can you use a formula sheet reminds me of high school.

LOL wow, if that’s what you think then the CFA isn’t that much better in that regard. If I was shopping around for an advisor, I’d have more comfort from someone with the CFP designation than Joe Schmoe from off the street. One of my Stalla instructors held the CFP, CFA and CPA designations. If you want it, go for it. It will only make you more marketable.

Yeah, compared to a Joe Schmo off the street a CFP is better than nothing. If you want a job as a financial advisor, all they care about is an existing book of business. A high shool drop out with a series 65 and a book of $100m will get far more oppertunities than someone with a Bachelor’s degree, CFP, and no book of business.
The only reason to pursue it, IMO, would be if you already had a desigination that allows you to sit for the exam without taking the classes (assuming you want to be a financial advisor). But I also think that if you’re already a Charterholder or JD, taking the CFP is a bit like having a bachelors then going back and getting an associates degree.
I obvioulsy have a strong distaste for the desigination, its because I know 12+ CFP’s and they have almost no estate or tax knowledge, they merely know to enough to refer you to someone else.They add no value in the process.

I get what you’re saying, but how is it any different at the institutional level? If I was an equities PM and my client wanted exposure to fixed income, wouldn’t you refer them to someone you know? And isn’t AUM a pretty big deal?

Because at least, as an equities PM, you’re adding value to the process and an expert in something.
As a planner, you’re really just refering to a bunch of experts (mutual funds, CPA, estate lawyer) and aggregating their advice/expertise to the end-user. Which is valueable and time consuming, but I dont view it as inexpendable, unlike an estate lawyer or PM. Hence why many people don’t use an advisor.
FYI, I work as a “PM” (term used loosely) for an RIA with $1.6 billion. The CFP’s just don’t add much value.

So your argument is slowly drifting from planners adding no value to adding very little value. It’s debateable as to how much value they actually add, but are they not adding value by channeling their clients’ resources more efficiently than they would on their own? To folks who have a finance background, such as yourself, it may not seem like much value is added, but to someone who has very little financial knowledge, I would think they would assign a greater value to these type of services.

Sorry, I didn’t mean to make it sound like I was “slowly changing my argument”. What I intially stated was that the CFP designation is worthless, which I still believe. Mostly because its a very general education of taxes, planning and investments- because you can do very little of the above, they might as well teach you to google search “estate attourney”.
Financial Advisors adding little value and aggreagting the services of other experts, is sort of another topic. I am aware that I take their services for granted, but with some deiscpline and reading maybe 300 pages of books you can buy your owm mutual funds and ETFs. But for a widow or entrepreur, the price of paying the advisor can be worth its weight in gold. It varies by client.
Bchad, has valid point, that sort of follows up my beliefs about the model. Some people are paying thousands of dollars per hour for these services.
Bpdulog, can I ask what you do or why you care so much?

 

[Sweep the Leg]

I love bashing FAs as much as the next guy, but they do add value to the average retail client. You guys vastly overestimate the intelligence of the “average” retail investor. They don’t even know what a mutual fund is or how an ETF works nor wil they ever put in the time to learn. The overwhelming majority of retail investors that do bother to look up what a mutual fund does pick them solely based on their Morningstar rating. Forget asset allocation or managing risk…they don’t have a clue.
And that’s not just for those that don’t have much in the way of investable assets. Most wealthy people got that way having nothing to do with finance so it’s still a foreign concept to them as well.
Let’s assume we’re dealing with a relatively smart retail crowd though…one that could at least tell you what asset allocation means. They still have to think about ways to save for their kids college and their retirement. Even your slightly above average investor doesn’t bother to learn the tax consequences of 529 plans and IRAs.
Of course there are other vehicles to think about too. When is it appropriate to buy a variable annuity (never), or a fixed annuity (only if you just got drafted in the NBA). What about whole vs term life insurance?
Then we get into estate planning which even us smart people should have a specialist help them out with.
Sure, your Edward Jones advisor down the street isn’t a financial genius, but he’s better than an individual doing it themselves. The guy in the corner office at Merrill? He has the resources to add value on every level possible and could add value even to a CFA.

 

[Sweep the Leg]

I forgot to address fees. I’ve worked with all different types of advisors - RIAs, wirehouse guys, and your average independent FA (Ameriprise, Northwestern Mutual, Commonwealth, et al.). They all boil down to two compensation structures: transactional or fee-based on AUM. No one that works retail charges an hourly fee for a full time client…maybe for an ad hoc request for a friend of a current client, but not for their regulars.
Transactional business is all about commission. Selling A share mutual funds and getting that 5.75% front load, selling stocks or ETFs at an amazingly high per transaction fee, private REITs, and insurance premiums. The major problem here is you get an advisor that puts a person entirely in, let’s say, American Funds mutual funds so they hit breakpoints and reduce their front end load. Problem with that is American Funds doesn’t offer great products in every asset class. Also, transaction based business comes off as product pushing. Is the advisor putting you in a product because it’s in your best interest or is it because he gets a hefty commission? This business is dying fairly rapidly. Mainly just your old-time stock jocks.
The fee-based model is now the bread and butter for just about all your RIAs and many of the largest wirehouse and independent FAs out there. Depending on how much you have to invest you’re looking at anywhere from 60-120 bps a year. The obvious benefit of charging on AUM is it’s in the FA’s best interest to see your assets grow. They also have no incentive to pick one product over another. If they’re building an asset allocation using mutual funds it’s not uncommon to see them use 12 funds from 12 different fund families. The downside is it forces the FA to be tactical. If the FA is good at investing this may be a benefit, but when you’re charging a client 1% a year they expect you to make changes just for the sake of doing something….so that’s not always a good thing. Also, you can’t charge a fee (or, rather, most don’t) on money market assets. Most FAs will still go to cash when they think it’s appropriate, but they don’t like to nor do they like to hang out there. They want you fully invested 100% of the time.
Fee-for-time just doesn’t exist for the average retail client. There are some consultants that will do it for HNW clients, but it doesn’t make much sense as a full time gig. Wrap accounts/managed accounts/fee-based/advisory is where we’re heading. Not perfect, but way better than brokerage.
The catch phrase these days for FAs is they’re providing a “holistic approach” to financial planning. With that as the goal, the CFP certainly doesn’t hurt. However much value the designation actually adds, the bottom line is it’s expected.
One last thing. The best FAs work on a team. One single FA that claims to be awesome at everything from taxes to estate planning to investments to insurance is full of shit. That’s why you’ll normally see the most successful FAs in groups of 2-4 guys/gals each having their own area of expertise, all working with a client that’s giving them a yearly fee based on their assets.

 

[former trader]

People here are indeed overestimating the average retail investor’s knowledge. Most don’t even know what an index is or what the Dow Jones represents.

 

[burk85]

bchadwick wrote:
“A sensible asset allocation probably does add value to mom and pop. “

I agree with everything you said, but this. A sensible asset allocation can add value to all investors. Not just mom and pop
But there are two things working together that will never change. PM’s with their fresh CFA in hand who will always think they are in the 5-10% of managers who beat the market over time (which statistically may still be random chance) and HNW investors who believe they are also special and are willing to pay for PM’s for Alternative investments which return market rates of return after fees.
Just look at CalPERS, $200 Billion to invest in the “best” managers and their 10 year annualized return is about 2% below a passive 60/40 portfolio. The employees would probably be better served with more passive investments.

 

[goes to eleven]

Snobbery is a very interesting subject. We all do it. CPAs look down on EAs. CFA charterholders scoff at CFPs. Brain surgeons feel superior to Family Practitioners. There is a great book on snobbery, and much of it deals with issues such as the one here. Are CFPs worthless? I think that is a bit harsh. Do most people on this site think the CFA letters are vastly superior? No doubt.
Be honest with yourself. If someone hands you a card and it has CFP behind his or her name, what is your fisrt reaction? The fact is the amount of time one puts into getting the charter vs. CFP is not comparable.

 

[Sweep the Leg]

goes to eleven wrote:
Be honest with yourself. If someone hands you a card and it has CFP behind his or her name, what is your fisrt reaction? The fact is the amount of time one puts into getting the charter vs. CFP is not comparable.

It’s really not the same things though. CFPs deal with the retail world. CFAs deal in the institutional world. If someone handed me a card and it said CFP on it, I’d expect to see “Financial Advisor” below his name. It would be equally strange to see a PM at a large asset manager have CFP after his name as it would an advisor at Wells Fargo have CFA after theirs.
(The caveat is analysts/investment specialists, particularly at large RIAs, that have their CFAs. Those are pretty common.)