Certified financial planners deliver higher revenue and more client satisfaction for their firms, while making more money than other investment advisers, according to a survey commissioned by the organization that grants their credential.
CFP professionals in a solo practice generate between 40% and 100% more revenue than those who don't hold the mark, according to a study by Aite Group LLC on behalf of the Certified Financial Planner Board of Standards Inc. that was released Tuesday. If a CFP is part of a team practice, the group earns about 30% more.
One reason that CFPs produce these results is that they manage clients holistically rather than selling specific investment products.
“Practices with CFP professionals work with more of their clients on a long-term, recurring basis, managing 45% of client assets for an [assets under management]-based fee (versus 30% for other advisers) and delivering a financial plan or a needs analysis to about 30% more clients in 2011 than did practices without CFP professionals,” the report stated.
The survey was based on a March 2012 Aite Group survey of 515 U.S. financial advisers. In addition, a top 50 U.S. financial services firm provided data on its advisers, and Aite Group interviewed executives with eight of the top 100 broker-dealers. Client satisfaction was based on an Aite Group survey of more than 1,000 investors in December 2011.
CFPs at insurance broker-dealers generate 131% more revenue than other advisers; at wirehouses, 18% more and 67% more at independent broker-dealers, according to the study.
Why? “The financial planning approach leads to longer-term relationships,” Sophie Schmitt, a senior researcher at Aite Group, said in a conference call with reporters.
Clients respond to the more comprehensive service they get from planners, according to the study. It shows that 87% of CFP clients are “satisfied or very satisfied,” compared with 72% who work with other kinds of advisers.
“We see a nice lift with the CFP group,” Ms. Schmitt said.
The CFPs also enjoy a boost to their salaries. About a third of advisers with a CFP and more than 10 years of experience earn more than $215,000. About a quarter of non-CFP advisers said they are at that income level.
The CFP-sponsored report buttresses the CFP Board's efforts to convince advisory firms to encourage their advisers to earn a CFP and to include CFP courses in their training curriculum. Approximately 67,000 U.S. investment advisers hold the CFP mark, or about 20% of the industry.
“Firms are increasingly seeing the value of certification and what that does for their client relationships,” said Tom Crowder, the CFP Board's managing director for marketing and business development.
The CFP Board also is positioning the mark as a key credential for an investment sector that is focused more and more on working in the client's best interests. Like all investment advisers, CFPs have to meet that standard of care.
The Financial Industry Regulatory Authority Inc. recently introduced a new rule that moves the less stringent suitability standard for brokers closer to the fiduciary requirement. The Securities and Exchange Commission is considering a rule that would impose universal fiduciary duty on anyone providing retail investment advice.
“CFP professionals are best qualified to deal with these new rules coming out," Mr. Crowder said. "We see that as a positive.”