By Dr. Tyler Scott, WCI ColumnistTyler Scott, DMD, CFP®, CSLP: That’s my business card title, if such a thing were even to exist anymore. Ten letters in my name, 10 letters after my name, the symmetry is soothing, but what does it mean? What can you really know about me based on those post-nominal letters?
You could surmise that I am on the other side of a trimester life crisis, that I have professional ADHD, that I am highly driven, that my Enneagram 3 personality style assuages insecurities through achievement and extrinsic metrics of scholastic success. I can neither confirm nor deny any such allegations (though I'm sure my wife can).
All that you can really know about me from my myriad letters is that I can crush a multiple-choice test. Downloading huge amounts of information and then regurgitating it through recognition and deductive logic over short periods of time to me is like LeBron dunking over the pope.
That’s what you really know about me based on my credentials—that I test well. Chances are that most of you reading this have the same skillset. If I give you 500 things to know by next Thursday at 2pm, you can remember 450 of them better than most.
What’s the point of this self-reflective exercise? My hope is that you will ask yourself the following. What do I really know about someone who is a CFP? What does it tell me and what doesn’t it tell me about this person I am considering paying for financial advice?
At the risk of giving away the rest of the column, the answer is . . . not much. Or at least, not as much as you may hope.
Why Do People Look for a CFP?
On Episode No. 380 of the podcast, WCI founder Dr. Jim Dahle interviewed the patron saint of financial planners (at least my patron hallow), Michael Kitces. Jim asked him about how challenging it is for the common person to know if the financial planner they are considering is one of the far-too-few “good guys” or one of the myriad salespeople masquerading as true advisors.
Michael’s answer is both long and instructive as to why people may seek out a financial advisor with a meaningful designation:
“Now the challenge is that our own financial advising industry has done a horrible job of appropriating the advisor title for the advisors and not assigning it to the salespeople. They (the salespeople) did that 20 or 30 years ago when everyone stopped calling themselves stockbroker and insurance agents and started calling themselves financial advisor or financial consultant.
The product industry claimed the titles before the actual people who are doing the advising realized that they probably needed to defend the titles. In the context of your industry, your audience, it would be like the pharma company drug reps all claiming that their pharmaceutical reps are doctors because doctor is not a regulated title. And then they sell drugs to consumers directly through their proprietary doctors who, not surprisingly, only write scripts from their own company because they're actually drug pharma reps from the company posing as doctors and wearing white lab coats, but having no actual medical degree, license, training, or education.
That's basically where our profession is right now . . .
Regulators are recognizing we have this problem now, where consumers can't tell the difference between the salespeople and the advisors and are trying to figure out what to do with that. But the industry has had so much financial success selling products under the guise of advice, they're making it very, very difficult to take that title back for the advisor side of the industry.
And I have an immense amount of sympathy for the average consumer. I look at these articles that many good folks put out, like the '17 questions that you should ask to figure out if your advisor is a good advisor.’ I'm like, ‘What a crappy process that we make you ask 17 questions of multiple people just to figure out who's actually worth trusting in the first place.’ I think it's an awful state of affairs.
But to me, just the big takeaway for your listeners, I think, is understanding there is a difference between advisors and salespeople. There's a legal difference. There's a standards difference. There's a training and education difference. But our industry is not actually discriminating in how those titles work. Unfortunately, a lot of the due diligence for a client is just figuring out whether you're actually talking to an advisor or whether you're talking to a salesperson.”
So, why do people look for the CFP designation when searching for a financial advisor? Michael just outlined one reason why. Thanks to places like WCI, the public is increasingly aware that the financial advice industry is largely gross and that anyone can claim the meaningless title of financial advisor/planner. Thus, they are looking for a meaningful designation to separate the gross from the non-gross.
This begs the question: does a CFP ensure against grossness? The answer: absolutely not.
Follow-up questions:
If it doesn’t protect against grossness, what does it mean? Does it at least ensure competence? What is the value of a CFP?
More information here:
How Many Doctors Actually Have a Financial Advisor?
What a CFP Means
Let’s start with the facts. What is actually required to become a Certified Financial Planner?
One must meet the requirements of “The Four Es.” That's Education, Exam, Experience, and Ethics.
Education
The two-part education requirement includes both 1) completing coursework on financial planning through a CFP Board Registered Program and 2) holding a bachelor's degree or higher in any discipline from an accredited college or university.
For example, I have a bachelor’s degree in Interpersonal Communication from the University of Utah and a DMD from Oregon Health & Science University. I completed my CFP coursework during COVID while my dental clinic was closed through a self-paced online program at The University of California-Berkeley facilitated by Dalton Education.
The coursework covers an in-depth education on the fundamentals of finance, investments, insurance, taxes, retirement, and estate planning. It is supposed to take 6-15 months to complete. I did it in four months, largely because I had a solid background from years of WCI and Boglehead reading and because I spent 12+ hours a day doing the courses to pass the time (anxiety) during COVID.
Exam
After the education requirements are met, you must pass an exam. The CFP® exam is a 170-question, multiple-choice test that consists of two three-hour sessions over one day. The exam includes stand-alone and scenario-based questions, as well as questions associated with case studies.
It is pretty hard. It had the same logistical/emotional impact as studying for the DAT or Part 1 and 2 of dental boards. It generally requires 200+ hours of study to pass. The historical pass rate is 60%-65%. Passing it on the first try felt like a significant achievement, and it was a tremendous relief.
Experience
According to the CFP Board: “The experience requirement prepares you to provide personal financial planning to the public without supervision. You can fulfill the experience requirement either before or after you take the exam. You need to complete either 6,000 hours of professional experience related to the financial planning process or 4,000 hours of apprenticeship experience that meets additional requirements.”
I completed the 4,000-hour apprenticeship program under the supervision and approval of my boss at my current job (a current CFP must attest to all hours garnered for the experience requirement).
This was the hardest requirement for me to meet as someone transitioning careers. I get a lot of emails from current physicians and dentists who hear or read my story and want to “get into financial planning part-time as a side hustle.” They ask me about how to become a CFP, and I tell them that, in my opinion, this is the requirement that is the most difficult one to meet. It takes 2-3 years to get this done if you are working full-time, and it can take a decade or more if you're doing financial planning part-time. Also, even if your supervisor is a ChFC or CFA (meaningful designations) but not a CFP, you don’t have anyone to attest to your hours at all.
Ethics
According to the CFP Board: “The ethics requirement is the final step on your path to CFP® certification. It indicates you've agreed to adhere to high ethical and professional standards for the practice of financial planning, and to act as a fiduciary when providing financial advice to your client, always putting their best interests first.”
This sounds good, right? This is probably the most common reason someone in the public would look for a CFP designation when they are shopping for a financial planner. CFPs must act as a fiduciary at all times, meaning they put the client’s interest ahead of their own (a stunningly low bar in my opinion and, incredibly, a bar that is almost never cleared by those working in this industry, as Michael Kitces pointed out earlier).
More on this in a moment.
Practical Meaning
Practically speaking, my CFP® marks mean that I have the determination to stick with something slow, boring, and methodical to get where I want to go in my second profession. It means I didn’t take the easy way into this industry. It means I spent a ton of time learning and testing on inane details of things that almost certainly have no bearing on your actual financial life.
It was similar to undergrad and much of dental school. I learned SOOOOO many things in dental school that have no relevance to dentistry or how to be a good dentist. I can diagram the loop of Henle like a champ, dissect the brachial plexus on a cadaver, find eosinophils in a microscope, etc. Does that make me a good dentist? No, it does not. If you wouldn’t pick your surgeon based on their ability to draw the Krebs cycle, then don’t pick your financial planner because they have a CFP.
What a CFP Doesn’t Mean
Fiduciary
Let’s start with the fact that, sadly, it doesn’t mean this person is actually going to act as your fiduciary. It means they committed to, they signed a paper saying they would, they could theoretically get busted by the CFP Board and lose their ability to use the CFP® marks if they do not. But, practically, it doesn’t guarantee you anything.
To quote Jim, “Many people who call themselves fiduciaries—or even have a legal duty to act as your fiduciary—simply do not do it. This may be due to them acting unethically on purpose to make more money off of you. More likely, it's due to their own ignorance. When the only education and training they receive comes from their insurance company about the products of their insurance company, what do you suppose they are going to recommend to you? My point is that you shouldn’t just put ‘fiduciary' on your list of things to ask about and if the advisor says they’re a fiduciary, check the box and move on. Fiduciary is a spectrum, and you want to see ongoing evidence that your advisor is operating at the right end of it.”
In short, a CFP designation does NOT mean that the person holding it is not gross. Even the worst of the worst financial services companies all have CFPs working for them.
One of these people is a friend of mine. He is a good person. He is a person of high character and proven integrity, and he truly believes his firm’s loaded mutual funds with ongoing 12b-1 fees are best for his client. He deeply believes this because the company has taught him to believe this, just like Jim said in the quote above.
It’s terribly frustrating. I have grace for people like my friend who get caught up in the propaganda of the evil empire for which they work. However, I have no grace for the evil empires themselves. They know exactly what they are doing, and they are making every effort to evade their fiduciary duties while selling Super Bowl ads to convince us otherwise.
The CFPs who work for the worst of the worst are basically told this (despite knowing that they have obligations to meet to be in compliance with the CFP Board's code of ethics and standards):
- They must sell a minimum number of products to keep their job.
- While they can technically sell you other products under limited circumstances, they get enormous commissions from selling you their company's products and almost no commissions if they sell you a product from somewhere else.
- They get bonuses and myriad benefits for selling you their company's products.
- The client has to tell them they don’t like the company's products; otherwise, the CFP is not going to bring up the possibility they could even sell you something else.
- Their commission for selling you loaded mutual funds is decent, but their commission for selling you annuities and whole life insurance is gigantic.
Gross!!!
Competence
OK, if the CFP designation doesn’t protect me from ethically bankrupt-induced nausea, does it at least guarantee me this person knows what they are talking about when it comes to my financial life?
Not really.
To make this point I’ve included below a litany of test questions from some of my CFP® exam study materials. Let me know which ones you think are critical to understanding and optimizing your financial plan.
1) Which of the following criteria must an individual meet in order to be called a key employee? (1) 5% owner (2) 1% owner with compensation exceeding $105,000 (3) An executive of the company with compensation exceeding $150,000 (4) An officer of the company with compensation exceeding $200,000
A. (2) and (3) only
B. (l) and (4) only
C. (l), (2), and (3) only
D. (l), (2), and (4) only
2) Tanya recently attended a sales conference for three days with other financial planners from her firm. Before she left, she failed to leave an out-of-office voicemail and email alert because she prefers to be the client’s sole point of contact and is worried that given the competitive nature of her firm, her colleagues might try to steal her clients. As well, upon returning, Tanya checks her messages and realizes she received a request from a client to sell two securities three days ago. After hearing this, she places two trades on these securities that declined in value in each of the past three days. From the options below, which Principles did Tanya violate?
1. Duty of Loyalty to the Client
2. Professionalism
3. Objectivity
4. Diligence
A. 2 and 4 only
B. 1 and 3 only
C. 1 and 2 only
D. 1 and 4 only
3) David is the owner and operator of a successful software company and is considering the use of an estate freeze. He plans to set up a trust to hold common shares (non-voting) on behalf of his two minor children and he will take back preferred shares that will be voting a retractable. The implementation of this estate freeze:
A. The retraction price of the preferred shares will increase the company’s value
B. Income from the trust paid to his two children will be taxed at their graduated rates
C. David will decide on the annual distributions of dividends to each class of shares (common and preferred)
D. David and the trustee will both have influence in operating the company
(This is pretty bad, right? Don’t worry, it gets worse.)
4) Kappa stock is predicted to pay $1.50, $1.60, and $1.70 in yearly dividends over the next three years. At the end of three years, the stock price is anticipated to reach $14.00. What is the anticipated price per share if the desired rate of return is 8%?
A. $14.67
B. $14.81
C. $15.23
D. $16.10
5) Assume a 16% actual realized return on an investor’s portfolio. For the same time period, the S&P 500 has a realized return of 18% and a risk-free rate of 6%. The portfolio’s beta is 0.75. What is the portfolio’s alpha?
A. -0.02
B. -0.01
C. +0.01
D. +0.02
6) If the stock market rises 4.5%, a stock with a beta of —1.2 and a standard deviation of 8.7 will change in which of the following ways?
A. Increase by 2.8%
B. Increase by 3.6%
C. Decrease by 4.8%
D. Decrease by 5.4%
(When is this going to end? Make it stop!)
7) Following a CFP Board designee’s name in advertising, letterhead, or business cards with RIA or R.I.A. may be deceptive and is not permissible, according to the Principle of_______.
A. Objectivity
B. Professionalism
C. Fairness
D. Diligence
8) “People typically naively diversify their investment funds, tending to allocate 1/n of the total to each of n available instruments.” What is described by the statement above?
A. Naive Diversification
B. Base Rate Neglect
C. Inertia
D. Status-Quo Bias
(Mind-numbing, isn’t it? Don’t worry it’s almost over. Remember the CFP exam is 170 of these.)
9) In a defined benefit plan, how much life insurance may the plan trustee apply for if a participant’s estimated pension payout is $1,500 per month?
A. $150,000
B. $120,000
C. $200,000
D. $100,000
10) Tom is a psychiatrist with two children and a wife. He isn’t particularly good at saving money, so he wants to get a life insurance policy that would cover him for the rest of his life and push him to save money. Which of the following is Tom’s best choice?
A. 15-year term life insurance
B. Whole life insurance
C. Variable universal life insurance
D. Irrevocable life insurance
See what I mean about the Krebs Cycle? Is passing a 170-question exam full of this stuff the bar you want your financial advisor to be able to clear? Maybe. I’m not saying it’s worthless; it’s just not anything I work with on a daily basis with more than 100 early and mid-career physician/dentist clients.
Even more interesting to me than what is in the required education and ultimately on the test is what is not included in the coursework or the exam. The following topics had exactly zero representation in my CFP® coursework, test prep, and actual exam:
- Backdoor Roth IRA
- Optimal use of an HSA
- The Trinity study/4% safe withdrawal rate
- Public service loan forgiveness
- Income driven repayment plans
- Mega Backdoor Roth
- Optimized charitable giving—i.e. bunching, Donor Advised Funds, etc.
- The impact of investment or advisory fees on wealth building.
They did mention multiple 401(k)s but taught incorrect information stating that all 401(k)/403(b) contributions are subject to the 415(c) limit. (Remember, if you have unrelated employers, it is true that you don’t get a new employEE elective deferral limit but you do get a new 415(c) limit you can fill with employER contributions.) Also, the right answer to any question about life insurance is whole life, universal life, variable indexed universal life, etc.
More information here:
When Interest Rates Matter and When They Don’t
My 27-Year-Old Car Will Make Me a Multimillionaire
My Simple Point
All things being equal, I actually do think you should consider working with a CFP, mostly because, just like you, they cared enough to put in the time and effort to be as legitimate and credentialed as possible before claiming they are ready to help the public.
Just don’t stop there. If a CFP is important to you, let that be the starting point, not the end point of your search. While the letters tell you something, they don’t tell you everything.
My Nuanced Point
Most of the financial industry is gross and you should be dubious if anyone claims they can help you. That said, the entire financial services industry is not corrupt and/or worthless. You can and probably should put in the time to find an ethical, kind, competent person to help you.
I know that sounds self-serving and probably rankles many of the dyed-in-the-wool DIYers that this blog attracts. I get it, I used to be that guy.
When I made the leap from dentistry to financial planning, I said to anyone who would listen, “I don’t know, this seems so dumb, why in the world would anyone pay me or anyone else for financial advice? Literally every single thing I will ever tell anyone is knowable if you just look for it. I don’t have any proprietary knowledge, I’m not performing any procedures, I’m just a human Google machine. This has to be the most worthless industry capitalism ever contrived.”
My imposter syndrome was real, and it was loud—for myself and for the profession at large.
Boy, has my opinion changed on that! While the broader points are still true, a few years of working with real people in real situations has turned me into a deep skeptic on how many people can truly DIY their financial lives.
I see now where the great financial author Dr. Wiliam Bernstein was coming from when he said:
“I've flown airplanes, and as a doctor, I've taken care of kids who can't walk. Investing for retirement is probably harder than either of those first two activities, yet we expect people to be able to do it on their own.”
While I now generally agree with the sentiment here, my quibble with that statement is that I don’t think it is just the “investing for retirement” that is hard. I mean, how hard is it to pick a target date fund during the accumulation phase? What is hard is everything that comes before, around, after, beneath, and adjacent to “investing for retirement.”
It's cash flow organization and optimization, it’s adequate contingency planning, it’s asset location and withdrawal strategy, it’s articulating the impact of any given choice on any and all other goals (i.e. the interplay between college planning, a home purchase/renovation, changing jobs, cutting back to part-time, increasing travel, buying a vacation/investment property, planning for an inheritance, navigating tragedy, disability, burnout, etc.), and a thousand other variables that ripple through a financial plan.
I think that is what Dr. Bernstein really means, that the totality of understanding the mathematical implications and navigating the emotional ramifications is very, very challenging and not a task that most people can reasonably expect to do successfully over a lifetime on their own.
In short: investing is a lot easier than people think, but financial planning is much harder than anyone anticipates. I have seen very few serious “endgame” investing mistakes from DIYers; I have seen innumerable severe financial planning mistakes from those trying to juggle these myriad variables by themselves.
That doesn’t mean investing mistakes don’t happen or are inconsequential. Carl Richards put it succinctly in his conversation with Jim: “You can spend all your time debating the 1% and then you make one behavioral mistake. Build the best portfolio ever created, misbehave one time in a decade, and you may as well own CDs at the bank.”
Overall, I have to admit I have come to share Carl’s and Dr. Bernstein’s opinions. When I first learned a little about personal finance, it seemed so easy that I figured anyone could do it. The more people I meet and talk to about their money, the less I'm convinced that most doctors, much less most of the general public, can do it on their own.
Even I, a CFP®, WCI blog-writing, WCICON-presenting, full-time financial planner benefit greatly from running my own financial plan past my peers from time to time. I have never completed a review of an existing plan—formally in my job or informally in a social setting—where I didn’t discover a blind spot, including when I talk about my own plan with my colleagues.
Life insurance policies that were priced but never purchased. Trusts that were created but never funded. Personal and employer disability policies sequenced incorrectly or missing critical riders. Meaningful amounts of cash in investment accounts that were assumed to be invested. Inadequate savings rates to meet stated financial independence goals. Unknown fees on investments that were dragging down returns. Cash reserves earning radically below market interest rates. Availability of additional workplace retirement accounts that had been missed or not maxed out. The underutilization or outright missed tax deductions/strategies for business owners, property owners, and/or those with charitable inclinations. Poorly planned or poorly executed student loan repayment strategies. Employer benefits that are not organized or optimized for a given set of circumstances. Insert a hundred other examples here.
Can you find information on all these individual topics on WCI or Bogleheads? Of course, that’s not the question or the hard part. Does the forum answer or the podcast from three years ago apply to your aggregated, specific, and dynamic situation? Of course not, that’s the challenge.
It turns out this stuff is actually really hard for most and doing it alone is not the only option. Having an objective, educated, and experienced third party to be an ongoing second set of eyes and thinking partner with you is, to my surprise, really valuable.
The challenge is to find good advice at a fair price and to keep in mind that there is no price low enough for bad advice.
A CFP (or other meaningful designation) is a great place to start that search. I might just be a good test-taker, but I am also very proud to be a CFP and to be living up to its standards every day in the way I treat and serve my clients. I am very grateful there are many others out there like me who are totally committed to doing this the right way and providing real people with peace of mind, confidence, and hope in this very important area of our lives.
Many readers here—thanks in large part to the existence of free resources like the WCI blog and podcast—can do it yourself. Many more cannot or just don’t want to take the time. To those, I encourage you and warn you to strongly consider the benefits and the pitfalls of seeking a CFP® to be your guide.
What do you think? How important is the CFP designation to you? If you're looking for a financial advisor, what other questions have you asked?
The weekend before the National Championship all CFP means is College Football Playoff.
I’m studying for CFP at the moment. Maybe 4 months in. I’m finding I need to jump around through the course modules to keep interested. Some of the material is very dry. I have two other degrees, so I’m fine at passing exams, but some of these multiple choice questions seem designed to trip one up. I’m actually learning more by digressing into other topics, which isn’t doing much to keep my focus. The current course I am doing gives me access to the online material for 20 months. I hope I can get through it all.
Jona,
If you are already 4 months in with your time and 100% in with your money, I’d vote to finish it and get the CFP® marks. While I learned relatively little practical information (I did learn about QTIPs which ended up being the perfect solution to my dad’s blended family estate problem), I am very grateful/proud to be affiliated with an organization and movement to increase the standard for those operating in this industry.
I think the material could be improved radically, I also think there is merit/honor is going through the labor of obtaining a respected designation if we are going to hold ourselves out as experts to the public.
Thanks for your encouragement ! I will try and keep my spirits up during this process, and focus on the goal. I hope I don’t end up having to sell insurance products !
Eye Doc,
Maybe Josh is willing to set up a 12 team Certified Financial Planner playoff at WCICON this year. We can all answer ludicrous questions from the CFP® exam until one final champion is crowned. I could use my NIL money to open a solo 401k.
Thanks for posting this, Dr. Scott! And hello from a fellow U of U and OHSU alum!
I’ve been a financial planner for the last several years. Like you, I found time during COVID to study, take Series 65, and get licensed.
While I started the CFP coursework, I’ve stopped working on my classes over the last year or two. For one, I had already covered much of the CFP legal issues during law school and to a more in-depth degree. Whether that was income tax, estate law planning, or securities law – the CFP coursework was incredibly superficial. I wasn’t finding much value.
I am more curious about whether consumers care about the CFP designation. The CFP Board would like us to think so. It’s not an indicator of quality or a fiduciary, but it’s the best designation we currently have for someone who made an effort to get some education.
But as you mention, the most critical financial planning topics your clients care about—PSLF, Backdoor Roths, and the critical importance of individual disability insurance to physicians—are not even discussed in our CFP coursework.
I may eventually finish the CFP coursework. For now, my JD offers me more insight and a better education.
We need to start a U of U, OHSU, doctor-turned-financial planner club. We will be small but we will be mighty!
To your question about how much consumers care about the CFP® designation – It’s hard to tell. I’d say less than half of prospective clients ask me about my designations. Now, some of them may have already seen the CFP® marks on our website or in my email and “checked the box” but overall what seems to convert prospects to clients for me is being a good listener, being direct about what I can do for them and what I cannot, and the flat fee structure (it seems like most people I talk to, correctly, value No AUM more than CFP®).
I think the CFP says “Hey, I’m serious about this career.” That’s worth something to me. Avoiding an AUM fee is only an issue for the wealthy and those uncomfortable negotiating as assets grow. If the advisor will negotiate their AUM fee such that it gets into the “reasonable” range of $5-15K a year, I have zero problem with an AUM fee. But if you’ve already got $4 or $5 million and don’t want to hassle with negotiating, might as well only look at flat fee planners because very few AUM charging advisors have set up their AUM Fee such that the “normal” fee for someone with $5 million is a fair price.
Thank you for writing this . . . very interesting post. I’ve toyed with the idea of taking CFP coursework as something to keep me busy in retirement, but this gives me pause.
Sharon,
I have always been of the opinion that training in anything that remotely interests you is never a bad thing. In your own retirement, education in anything that is the very wide field called “financial planning” can be helpful, if not to others, at least to yourself. A short story of my own path may be a good illustration, but what Tyler says above is pretty much all true as it stands, but what he didn’t say is the CFP training and the exam at the end of it from a qualified school could help you branch off into different areas, if CFP doesn’t seem the way you want to go.
Almost the same as you, shortly before retirement I was seeking something to do in retirement part time. This was about 15 years ago when this site and many others were barely getting on the map. I will try to shorten this story with just some bullet points along the way, as they are very similar to Tyler’s up to a point in time where I decided getting those CFP letters was not my goal:
1. Took an 800 hour online course for the CFP exam – took slightly less than 1 year.
2. Along the way through emailing instructors teaching the course who all were CFPs, I found that less than half of them could not answer the question and give me reasons as to when a Roth account is appropriate over a TIRA. The one instructor who wasted no time in giving the right answer was – you may have guessed it – the person teaching the section on taxes.
3. Side story, the above got me interested in taxes as they seemed to be the key to an “efficient” retirement and maximizing what you have. So, one of my first Retirement jobs was volunteering for AARP / VITA to do taxes for people. No pay, but lots of good training from an IRS website every year to get certified. Great experience which lasted for 7 years, right up to COVID.
4. Back to CFP training – one of the barriers for me was the CFP license requirement of training under someone. Besides the time involved, I knew no CFPs that I would want to train under – for many of the reasons mentioned in the article. Rember this was 15 years ago.
5. However, passing the CFP “training exam” gave me an offshoot designation of RFC (registered financial consultant) which was really all I needed, since I didn’t want to actually manage people’s money, I just wanted to teach them or advise them on how to manage it themselves for retirement.
6. Never did any advertising, just started blogging and getting involved in all types of financial questions and a few people came to me and that is all it took. Charged very low rates, and in my opinion gave pretty good advice, but in all fairness, how can you go wrong in a 15-year bull market advising clients to buy index funds, and not buy variable or index annuities. It must have been a little more than that as my clients always seemed happy with my advice, and some even told their friends.
7. Retired from my consulting at 70, almost 3 years ago, but still write two or three articles a year about retirement.
Anyway, maybe this “ramble” will encourage you to do whatever you are interested in because it “still” doesn’t take a CFP to help people, if that is your mission, though volunteer work can also be satisfying.
Hi Dave,
I would love to talk to you if you have the time. I am a teacher and reading WCI posts over the years have been invaluable to me for acquiring financial knowledge (along with other sources). All of the knowledge I’ve acquired is allowing me to retire early. I’ve been thinking about what I would like to do in retirement and one of the ideas is to help out teachers with their financial plan. There is a huge need for this in teaching. Most teachers have very little financial knowledge and defer to the vendors who come to school and get them signed up for a 403b with high expense ratios and charge 1% aum. I’d love to get some advice on how to start this journey. I have talked with a few colleagues and shown them the impact those fees are having and the response I get is “I’m happy with my financial guy”. It drives me crazy! I’m not looking to make money in this potential path. I’d just like to help and inform those who need it.
@Jeremy,
You can message me here:
https://seekingalpha.com/author/financialdave
Sharon,
I have a lot of people reach out to me asking about becoming a CFP in their free time, as a side hustle, or as a goal/hobby in retirement. As Dave said above, I think there is some value in going through the process but overall, I can’t endorse the idea.
The material is just so…..lame. So much of it has no application, it’s not interesting, it’s deep math that has not bearing in real decision making, it’s obscure legal history, niche estate planning idea, etc. In short, so little of it would actually be enjoyable or actionable I don’t think the price you pay to enroll in the courses would feel worthwhile for the vast majority of casual hobbists.
I’ve received that question too a lot over the years. My answer is no unless you want to work professionally as an advisor.
@ Tyler
@ WCI
I agree with both of you, but when I think back on it, in my Engineering Profession, very little of what I learned in College, was ever used in the real world, but it was a means to an end to one, decide if that at all interests you and two, if it does interest you, gives you some basis to continue.
If nothing else, the CFP training gives you some basis, to understand the terms and at least have been introduced to things like portfolio theory, estate planning, and to acknowledge other areas such as trusts, which may be out of your expertise, but it’s good to know they exist.
At the beginning, which was 15 or so years ago, I easily justified the cost, as something that might at least benefit me personally in my retirement.
It is inconceivable to me that they don’t spend any time on retirement withdrawal strategies (4% guideline and adjacent). Also, those example questions are terribly written from an educational assessment design perspective. We’ve known for decades not to use k-type multiple-choice questions (Q1 & 2). Q3 the answers don’t follow from the stem. Q4-9 are simple “knowledge” questions of Bloom’s Taxonomy. Someone needs to direct them to the NBME MCQ guide.
Erik,
I don’t know if I was more surprised at what was covered or what was not covered. That said, I felt the same way about dental school.
When I left dental school my training really started even though I had the DMD letters already. Graduating with my dental degree simply meant I passed all the minimum standards of some academic definition of what being a licensed dentist means, whether I am a good dentist or not cannot be known by my designation. Similarly, obtaining the CFP® marks means I passed a minimum standard and in no way indicates whether I actually am a good financial planner for any given person.
Thus my point is that CFP® marks can be the beginning of due diligence by the consumer, it cannot be the end of the analysis.
Hey Tyler great article. Unfortunately I was taken advantage of by a CFP and was sold whole life insurance and had a variable annuity within an IRA, and loaded mutual funds. I complained to the CFP board and they did look into it sending me a letter but no disciplinary action was taken. It seems selling whole life insurance inappropriate fulfills the CFP’s fudciary standard, as well as putting a tax deferred expensive product in a tax deferred account. Even the sample question you had in the article supported using whole life insurance.
Allan Roth is pretty open about his disgust with the CFP enforcement: https://www.financial-planning.com/opinion/the-cfp-board-has-given-up-on-protecting-the-public-from-unscrupulous-advisors-instead-protecting-its-own-executives
Given my experience I actually tell people not to trust the CFP designation for always doing the right thing, but rather like you said, that at least it’s an indication of committment to the field.
I think Tyler said it well: “The beginning of due diligence, not the end.”
Rikki,
Thanks for reading and sharing your experience. Also thanks for sharing that Allan Roth article, he articulates many of frustrations and concerns so well.
I’m sorry you were taken advantage of in this unfortunately common way. Your story highlights the point that someone can’t stop their due diligence at identification of certain credentials. Sadly, the vetting has to go much deeper but that vetting requires a certain level of financial literacy that is rare in the public at large. It’s a real conundrum.
Your cynicism about telling people not to trust CFPs is warranted. I mean, Edward Jones added more CFPs than any other firm last year with 1,000 of its advisors becoming CFP® certificants in 2023 (a 62% year-over-year increase), representing almost 1/6 of the total of new CFP® certificants added during the year. Yikes.
All we can do is keep sharing the good word in communities like this and encouraging our friends and family to move slowly and ask the right questions. Thanks for being part of the solution.
Yeah thanks Tyler. The CFP designation really fooled me in trusting my salesman buddy. also the fact of being a high school friend let my guard down as well.
I am shocked again at how CFP course work does not delve into actual retirement optimization like backdoor Roth, 4% rule and optimal drawdown strategy, etc. Is there any movement within the CFP world to change the curriculum? Or is the CFP board made of salesmen that work for insurance companies? Does the CFP board have their own biases to make every insurance question answer permanent life insurance? Who does the vetting of the vetters in this case?
I don’t know of any movement to change the curriculum. I don’t know who sits on the CFP Board and what their motivations are.
My point in sharing the Edward Jones data is to suggest that cynicism/suspicion of the CFP Board is reasonable. If the CFP Board’s goal is simply to grow the number of CFPs and collect the associated fees of testing and membership, they would have little incentive to change the curriculum or raise the membership standards that would keep out 1000+ new CFPs annually from Edward Jones alone.
That said, I think a CFP is still worth something. I think it is a place consumers should START their journey of finding the right advisor. From that place of knowing the person took time to invest in their career, the consumer can BEGIN asking questions to determine how the CFP actually views financial planning and what they actually know that is relevant to the client’s particular situation.
Is that really their goal? Or just their incentive? I mean, my goal is to help doctors get a fair shake on Wall Street. But my incentive is to sell them stuff.
Great information! Still practicing dentistry 2 days, and looked into free space available financial courses at the local state university for seniors in my spare time. Lots now! This is so important and high earning professionals are thrown to the wolves in many cases. Thankfully, I did remember one lecture at my dental school where a financial person came in, The only topic that stuck was that whole life insurance was mostly a rip off. That one lecture may have saved me a quarter million dollars and helped me retire maybe 5 years earlier.
Fast forward to my 50s, and White Coat Investor came into my life! Having agitated my NWM rep by not buying the whole life insurance , I further POd the rep by insisting on index funds for the lions share of 401k lest I depart. Saved me thousands over the last decade and a half and years off retirement. I DIY now that I have no employees, surely POing the rep further.
My CPA knows his stuff, BUT knowing about more in depth strategies may not be his forte? My use of a QOZ fund to defer and eliminate some capital gains on the sale of my practice seemed foreign to him and I had to walk him through the tax forms. I still doubts he gets it, You really have to know this stuff on your own.
Your CPA, CFPs , and other advisors may be fantastic but I have not had that blessing.
WCI has truly been my go to for ideas that have saved me time in the workforce and capital. If only I had seen this information prior to buying that sport cruiser yacht in my mid 40s!!! I could have retired MANY years ago!
You really regret the boat huh? Too bad. Mine is far from a smart financial move, but I don’t have any regrets about it.
I would do the boat again actually. I did not consider the full financial impact at the time though. It might have diminished my fun if I did!
I bet buying that yacht feels better than if you had bought whole life! Wonderful that you got the correct advice to avoid whole life insurance and at least blew the money on something fun. My $50,000 loss from whole life is just gone into NWM’s pockets 🙁 Nothing fun to show for it except an angry wife, money shame and a scarcity mindset.