Financial advisers: To MBA or not to MBA?

Two experts discuss whether aspiring financial planners should go to graduate school

Nov 6, 2012 @ 10:42 am

By Mark Bruno

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You have an undergraduate degree in financial planning … now what?

The following interview with Derek Klock, assistant professor of practice in the finance department of the Pamplin College of Business at Virginia Tech University, and Jon Yankee, principal with Fox Joss & Yankee LLC, a fee-only financial planning firm, aims to assist young financial planners who have already met the educational requirements to sit for the CFP exam in determining their next career steps.

Q. Should a young financial planner pursue an MBA degree?

Mr. Klock: As a faculty member and career adviser for the finance department, I have maintained that the MBA is a misused and often overused degree. The intent of the MBA was to add business knowledge to a technical background — think of a civil engineer who wants to become a business partner in the firm. The other, more recent adaptation of the degree is as a career “reboot.” In this case, a person has reached the highest achievable rung in business and needs additional academic work to move higher. I truly believe that a young planner who has an undergraduate business degree with an emphasis in financial planning from a top-flight university really has as much academic knowledge as they would need once they have completed the educational requirements for the CFP examination.

Mr. Yankee: As an MBA holder and a business owner/employer, I do not disagree with Derek's point that an MBA is possibly redundant for those with undergraduate degrees in business. However, I do believe that young financial planners should absolutely get a business degree/background as a part of their career path/development — especially if they wish to someday help manage or own a financial planning business.

Where our perspectives may differ is that I do not agree with the assumption that most young planners today have undergraduate business degrees. Many young planners have undergraduate degrees in liberal arts, financial planning, or some other technical topic — and pursuing an MBA is exactly in agreement with the original intent of an MBA, as Derek describes above. Just as with his example of the civil engineer, a young financial planner with an undergraduate degree in financial planning who wants to become a business partner in his/her firm needs an MBA to take that next step.

In addition, much of the value that is earned and achieved while working toward an MBA is from the life, business and work experiences of colleagues and fellow students within an MBA program. That is why many of the best MBA programs require a minimum of four to five years' work experience prior to applying. It was the hands-on work experiences of my business school colleagues — from a former executive at a utility company in Mexico to a small-business owner from Michigan — that truly provided me with the context that an MBA education is attempting to teach. I still apply many of those lessons today as I help manage my own firm.

Finally, as a business owner of a financial planning firm, I am looking for talented people who will become great advisers and my future partners/business owners. It is my belief that an MBA, in addition to financial planning credentials, puts a young planner on a more likely path toward that type of success.


Q. When is graduate school a necessity?

Mr. Klock: If a financial planner wants to become a specialist in a particular area such as law or tax, then a graduate degree not only becomes necessary but required. To practice law, a planner would need to complete law school and earn their doctorate of jurisprudence (JD). To become an accountant, a planner would need to have a minimum of 150 post-secondary-education credit hours to be eligible to sit for the CPA exam — this most often necessitates completing a Master of Taxation [degree program].

Another area where a graduate degree adds to competence is clinical counseling or therapy. If a planner wanted to pursue a counselor approach to planning, then a graduate degree in marriage and family therapy or psychology [would be beneficial]. But in each case, a more generalist MBA education isn't going to prove overly useful.

Mr. Yankee: If a financial planner wants to someday participate in the management of a firm or, as part of their career path, wishes to someday be an owner of a small business (which many independent financial advisory firms are), then I believe that an MBA is a necessity. In addition, at some firms now, an undergraduate degree is the credential that gets you in the door, but a graduate degree is what sets a potential candidate apart from his or her peers. At firms like mine, where we are hiring what we believe is the best talent in the country, a graduate degree is becoming the rule rather than the exception.

Clients these days have become much more discriminating about how they choose a financial adviser and additional education and skills are what advisers often need to close the deal with prospects. While the CFP mark continues to evolve into a more respected and known credential among consumers, a young planner with an MBA adds instant credibility to his/her resume in the eyes of potential clients.

Q. What other options are available for young financial planners?

Mr. Klock: Many. In addition to completing the experience requirement to become a CFP certificant, young planners should consider many of the other, more highly recognized, professional designations or certifications. These would include insurance-focused credentials like [chartered financial consultant or chartered life underwriter], both offered by The American College, or investment-focused credentials such as [certified investment management analyst], administered by the Investment Management Consultants Association or [chartered financial analyst], offered by the CFA Institute. The College [for] Financial Planning also offers a variety of programs that may be more highly valued by a planner's employer than a graduate degree. However, many specialist credentials, while possibly useful to marketing to a particular niche, have yet to show broad acceptance or add significant value.

Mr. Yankee: I agree that there are many options, but if a young financial planner is striving to be a great financial planner, then the CFP mark is the pre-requisite. Any other types of credentials, certifications or degrees will serve to enhance a passion or specialty that the planner would like to pursue.

However, young planners should pursue their continuing education with eyes open and a definitive purpose in mind. For example, a young adviser wanting to work at a fee-only planning firm that has a general asset allocation strategy using index funds and ETFs (carrying out a passive investment strategy) will not find a CFA or CIMA designation to enhance their qualifications as much as they might think. If you do not want to sell insurance, then there is not much need to get a CLU. My best advice is to select the truly meaningful or relevant credentials or degrees and then go out and get real work experience pursuing your passion.

Note: Mr. Klock and advisers from Fox, Joss & Yankee will be continuing this dialogue on Friday, Nov. 9 at the first-ever InvestmentNews NextGen Virtual Career Fair. If you, or anyone you know, is interested in developing a career in the financial advice industry, register to listen to any of our five webcast sessions on learning the ropes of the business. Also, attendees can network with prospective employers and apply for jobs on the spot during Friday's Virtual Career Fair. Registration is free -- sign up here now.


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