Are schools adequately preparing next-gen advisers?

Though degree programs for financial planning have made gains, professors, students and advisers suggest areas for improvement

Sep 1, 2018 @ 6:00 am

By Greg Iacurci

Eric Schaefer's client was all ears when he laid out a new financial plan for him.

Then the client's eagerness to implement the plan suddenly morphed into dejection.

"I literally have no time to do any of this," the client said.

Mr. Schaefer, an associate adviser at Pierce Financial Strategies and a recent college grad, tried to think of what to do. He recalled his academic training: Push clients to action by triggering their emotions — "What will happen to your family if you don't do this?" kind of stuff.

Mr. Schaefer's colleague, the lead adviser, however, jumped in with a totally different approach: Break down the financial advice into small, manageable pieces. The impossible suddenly became attainable. The client bought in.

The answer seemed so simple and obvious once it was presented, but Mr. Schaefer hadn't had much exposure to this sort of real-world client psychology and problem-solving as a student at the University of Illinois.

"It's a skill that was not taught in school," he said.

Financial advisers, recruiters, recent graduates, and even the heads of prominent financial planning programs at universities across the country almost universally agree that there are gaps in the way young financial planners are being prepared to enter the profession.

This shortfall has big implications for the financial advice industry. A stronger academic foundation would ease the burden on individual firms of spending significant time and money training young recruits, in turn helping those firms remain competitive in an age of fee compression and proliferating robo-advice.

The vast majority — 78% — of respondents to an InvestmentNews poll last month said they think young hires from university financial planning programs are only somewhat prepared for the job. Only 12% said they're very prepared.

Students "are definitely better prepared than they used to be," said Vickie Hampton, chair of the personal financial planning department at Texas Tech University. "But are they as prepared as one would want to go out and enter the profession seamlessly? No."

Another key motivation to improve programs: A more comprehensive and cohesive baseline curriculum for those attaining a financial planning degree would elevate the profession's stature in the eyes of the public, and help attract more young students to an aging industry.

The notion of getting a bachelor's degree in financial planning is relatively new.

A young calling

The first formal financial planning education programs cropped up in 1987. By contrast, the College of William & Mary opened the country's first law school more than 200 years earlier, in 1779. The University of Pennsylvania opened the first medical school earlier still, in 1765.

There are currently 115 universities offering financial planning baccalaureate programs in the U.S., according to an InvestmentNews analysis of data from the Certified Financial Planner Board of Standards Inc.

The vast majority of programs — more than 90%, experts said — only offer a minor or concentration in financial planning, rather than a full-blown major. These often cover just the bare-bones topics required by the CFP Board. (There are eight required domains: professional conduct and regulation, principles of financial planning, education, risk management and insurance, investments, taxes, retirement savings and income, and estates.)

And 114 universities offer CFP certificate programs, which prepare students for the CFP exam and which experts say on average take a year to complete. A greater proportion of those sitting for the CFP exam each year are people who passed a certificate rather than an undergraduate degree program — which some observers believe is problematic for the industry.

Overall, how prepared are people entering your firm from university financial planning programs?
Should universities be doing more to prepare financial planning students to enter the profession?

"If you look at any major profession out there — accounting, law, engineering — they all have academic roots that are at minimum rooted in an undergraduate degree," said Nathan Harness, director of financial planning at Texas A&M University. "For financial planning to be a profession, as opposed to a job, it needs to have strong academic backing to push it into the future."

By all accounts, the certificate and degree programs that focus on the CFP Board's minimum requirements still provide a solid foundation in technical skills.

Although nearly 80% of respondents polled by InvestmentNews thought schools should be doing more to prepare students, not everyone agrees. Some believe young financial planners don't need education beyond what is mandated by the CFP Board in order to succeed.

"There definitely are some have and have-not [financial planning programs] out there," said Caleb Brown, chief executive of New Planner Recruiting. "But even students from the have-nots do very well."

Graduates of the so-called have-nots may need more on-the-job training, but then again, the advisory business has always been an apprenticeship-model business, said Mr. Brown, who also teaches practice management at the University of Georgia.

But training around other skills essential to a financial planner's success — especially "soft skills" like client communication, counseling and behavioral finance — are broadly lacking.

The curricula "can almost be devoid of the people," said Ruth Lytton, director of Virginia Tech University's financial planning program.

Indeed, respondents in the InvestmentNews poll ranked client communication and counseling as well as behavioral finance as the two most valuable skills in a young financial planner, yet they also ranked these as the No. 1 and No. 3 areas in which students are most underprepared by universities. (Sales skills claimed the No. 2 spot.)

Ms. Lytton believes students should be learning such concepts as the emotional impact of money on individuals, how to understand client goals, what drives decisions about money, the difficulty of influencing behavioral change, how to build trust with a client and how to respond to client emotions such as grief.

Client values

"You can put together a plan that numerically works, but if the numbers and approach don't match the values and intent of the client, then the plan won't work," Ms. Lytton said.

Mr. Schaefer agreed these sorts of counseling skills would be useful for young advisers, even if they don't take a lead role with clients right away.

"If you're able to make your lead adviser more effective in the relationship, everybody wins," said Mr. Schaefer, who graduated in December.

Schools are trying to beef up this area of study. Virginia Tech, for example, requires students to pass a client relationship management course in order to graduate; Texas Tech requires two, in counseling and communication skills.

Some programs are trying to give students hands-on client experience. Utah Valley University, the University of Georgia, Kansas State University and Texas A&M, for example, offer peer-to-peer counseling opportunities in which financial planning students counsel other university students one-on-one on topics such as student loans and credit cards.

Luke Dean, director of Utah Valley University's financial planning program, believes academic improvement in the area of client counseling and therapy also will help practitioners remain competitive in an age of compressing fees and the expansion of cheap, automated digital advice.

"It creates a bigger need for the adviser to be able to show added value," Mr. Dean said. "Counseling, behavior, protecting clients from themselves — I think that's where the most added value for the profession can be made, and probably where our curriculum has the most room for improvement."

The CFP Board does a job task analysis every five years to determine minimum requirements for its academic programs. Although the CFP Board doesn't explicitly require universities to offer client psychology courses, Mary Kay Svedberg, the CFP Board's director of education, said it's a topic schools should be considering. She said it may emerge as a core subject in the group's next analysis, which is slated for 2020.

There are other curriculum gaps, and some schools fill them better than others. One biggie is technology.

Interestingly, respondents in the InvestmentNews poll ranked technology as the area in which schools are best preparing students, just ahead of investment planning and retirement planning. But program directors still feel there's more to do.

"The technology has changed enormously," said Thomas Warschauer, director of financial planning programs at San Diego State University. "Any school that's doing its job now has access to at least two or three different software programs that are widely used."

Higher education
Number of U.S. universities offering the following financial planning programs

Hands-on with​ tech

Advisers and academic program directors said providing students with even a general overview of adviser tech platforms, such as MoneyGuidePro and eMoney, gives them an immediate leg up in a hiring situation.

Ryan Marshall, a partner at ELA Financial Group Inc., has hired about 10 graduates from William Paterson University over the past 15 years — primarily because they know how to use financial planning software.

"Training is time and money," Mr. Marshall said. "The less we have to do to get them up and running, the better it is for us."

Mr. Dean said some non-tech-savvy senior partners even turn over important tech decisions — such as which client relationship management system to use — to new hires straightaway. In these cases, having prior experience with applications in college is invaluable.

The list of possible improvements in financial planning curricula doesn't end there, according to academic directors, advisers and recent grads. Greater knowledge and skill-building in sales and professional development; the law, regulation and compliance; and practice and firm management would help any graduate.

The last — especially becoming familiar with industry business models, such as registered investment adviser and broker-dealer — was particularly useful to CJ Harrison, a young financial planner at DecisionPoint Financial.

"You learn pretty quickly what you think you want and what you don't want," said Mr. Harrison, who graduated from Utah Valley University in 2014. "At least you're not heading into the profession totally blind."

Program directors admit that teaching financial planning can be a bit like being a parent — you can never instruct your kids about everything they need to know.

"Nobody coming out of an undergraduate degree program is going to be an expert," Mr. Dean said. "Even if you're a Triple-A All-Star, you're about to go to the major leagues and learn what a 95-mile-per-hour fastball looks like."

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