CFP Designation Boosts Client Confidence and Revenues, Study Says

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Many accountants and other advisors include the designation of Certified Financial Planner (CFP) in their credentials, and a new study intends to show just how beneficial that is.

Building a Wealth Management Practice: Measuring CFP Professionals’ Contribution, which was commissioned by the CFP Board of Standards and conducted by Aite Group, takes a look at differences between CFPs and non-CFPs. It also compares advisory firms with CFP designees to those without, including their revenues and share of high- or ultra-high-net-worth clients.

What’s more, as the financial services industry wrangles with fee-based services and the US Department of Labor’s proposed fiduciary rule expected within weeks, this study indicates that CFP designees are more likely anyway to use fiduciary agreements specifying that they prepare plans that agree with clients’ best interests. (The finding pertains to advisors at brokerage firms, not registered investment advisors who are legally required to follow a fiduciary standard, the study notes.)

Overall, a strong emphasis on financial planning by CFPs results in “more frequent financial plan updates for clients, more financial plans delivered under a fiduciary standard of care, and a stronger adoption of fee-based financial planning,” the study states.

Here are key takeaways:

  • CFPs earn about a quarter more (26 percent) in fees than other advisors, based on experience.
  • Late-career CFP professionals earn 33 percent more than other late-career advisors.
  • Solo and team CFP practices generate at least 40 percent more in revenue than other practices.
  • The majority (70 percent) of CFPs who responded indicate that the designation helps build their technical expertise and clients’ trust and confidence.
  • CFPs on staff draw 53 percent more high- and ultra-high-net-worth clients than firms without CFPs.
  • CFP professional practices have more diversified revenue models and rely less on investment products to sustain their business relative to other practices.
  • CFP professional practices derive more than half of their revenue from noninvestment product business, compared to one-third for other practices.
  • Financial planning is more important than investment management for advisors in CFP practices than it is for advisors in other practices. Almost half (41 percent) of CFP advisors say financial planning is more important, while about a quarter (23 percent) of other advisors do.

“This research provides further evidence that CFP certification is the highest standard in financial advice that advisors, firms, and investing consumers seek,” CFP Board CEO Kevin Keller, CAE, said in a prepared statement. “CFP certification, as this study shows, provides firms and advisors significant value that ultimately benefits those they serve.”

The study is based on an online survey in October 2015 of 403 financial advisors in the United States. Of those, 146 hold the CFP designation. Respondents include 306 advisors who represent CFP practices.

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About Terry Sheridan

Terry Sheridan

Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.

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