A study shows advisors' incomes are rising, despite the financial markets.

It may seem hard to believe, but advisors are happier with their careers and are making more money than in the heady days of the bull market, according to a new survey by the College for Financial Planning.

"I think there's no doubt it's been challenging for advisors in light of the bear market. Advisors are receiving more calls from clients who are seeing retirement accounts and investment accounts go down, but at the same time, I think the reason satisfaction is going up is that advisors are needed more than ever," comments Jesse Arman, the college's vice president of academic affairs.

The college's "2002 Survey of Trends in Financial Planning" found that an overwhelming 98% of respondents were either satisfied (24%) or very satisfied (74%) with their professional work. Planners reported higher satisfaction with the client-related aspects of their careers than business-related aspects. Further, planners find people and communication skills to be the No. 1 reason for their continued success.

The study also found planners are earning more money. The 2002 respondents reported a 67% increase since 1998, from $60,000 to $100,000, in annual individual gross earnings after receiving the CFP certification. Planners with more years practicing in the industry reported higher gross and net earnings. In the 2002 survey, the median combined gross earnings for the most recent fiscal year from financial plan writing, product sales, consulting and related activities was $200,000, an 82% increase over the $110,000 reported in 1998. The median net earnings reported in 2002 were $120,000, an increase of 60% over 1998 figures. Of the respondents who charge hourly, the median hourly rate was $150.

Why earnings rose so significantly is difficult to quantify, Arman says. For one, the percentage of respondents with 13 or more years of financial services experience rose dramatically, to 79% in 2002 from 47% in 1998. Also, four years ago, fewer people were calling themselves financial advisors, Arman notes. "You have a lot of individuals coming into the profession from accounting, insurance and law. They have a client base, an earnings base and an experience base. They may have been doing accounting for 15 years, but more recently became a CFP," he says.

The Denver-based college invited more than 2,500 people to participate in the survey. They were randomly selected from a list of 17,279 Financial Planning Association members having CFP certification. The number of people who completed and returned valid responses to the 2002 survey was 247, a number judged to be satisfactory for describing and comparing their opinions and experiences.

In its 1994 and 1998 surveys, only graduates of the college's CFP education program were polled. The college broadened the survey population to provide a more accurate picture of the industry. The change also recognizes the growing number of schools offering CFP programs. In the past four years, the number of programs registered with the CFP Board of Standards has more than doubled to 234 programs offered by 151 educational institutions, the survey notes.

About 78% of the respondents were male. The gender split of all FPA members is 75% male and 25% female. The 45- to 54-year-old age group had the highest representation in the survey, with 44.1% of responses coming from that group. It was followed by the 55- to 64-year-olds, at 24.9%.

Other major findings of the survey follow.

Compensation

More advisors are choosing to be paid by fee and commission, rather than commission or fee only. In the 2002 survey, 57% used the dual method compared with 48% in 1998 and 35% in 1994. The 2002 survey also showed that, for the first time, the percentage of fee-only advisors exceeded the percentage of those charging by commission only. In 2002, 26% said they were fee-only advisors, compared with 21% in 1998 and 18% in 1994. Commission-only advisors dropped to 11% in 2002, compared with 24% in 1998 and 35% in 1994.

"I think you're going to see that continue. It's a trend in the industry as there's been more and more disclosure. It's also an indication of the maturity of the profession itself. The profession is really only 30 years old, and somewhere down the road, you'll see the fee-only planner dwarfing any other kind of compensation," Arman says.

Fees have significantly increased since 1994. Unlike the findings in 1998, which indicated a prominent downward trend in fees being charged by financial planners for pure advisory engagements, the 2002 results showed an increase of 100% or more. Advisors participating in the 2002 survey charged median fees of $500 for a single-focus plan, compared with $250 in 1998 and $300 in 1994. For comprehensive plans, the median fee was $1,450 in 2002, $600 in 1998 and $750 in 1994.

Arman believes the 1998 survey showed fees dropping because during the roaring bull market, clients may have been a little less willing to pay as much for advisory services. The feeling, he says, was why go to a planner? You could throw darts and still get a 20% return. Now people are being more discriminating, and many realize they can't do it on their own, he says.

Also, the number of single-focus plans requested in 2002 was significantly lower than in 1998, while a significant increase was seen in the number of comprehensive plans requested over the same 12-month period. The 2002 outcomes suggest a significant shift in client requests from single-focus planning toward comprehensive planning and indicate that the typical client is now more interested in a wider spectrum of financial advisement services, the study says.

"As the profession matures and the public realizes the intrinsic value of financial planning, they are willing to see it in the same way as they see doctors, who dispense comprehensive integrated advice," Arman adds.

The Typical Client

The feedback from survey participants indicated that the typical client continues to be a two-income couple between the ages of 45 and 64, whose median income reflects a significant increase in both gross and net income from those reported in 1998. The typical client's annual gross income was $100,000, a 14% increase over the $87,500 reported in 1998.

Net worth was 30% higher, rising to $650,000 in 2002 from $500,000 in 1998. That also may seem surprising, given the bear market of more than two years. However, Arman observes the dramatic rise in real estate values in many areas of the country may account for the increase. Also, he speculates, individuals in other professions, such as law and accounting, who recently have become CFPs may be bringing in wealthier clients. And in spite of the bear market, people have continued to add money to their retirement plans, so net worth hasn't fallen off as it might if people stopped saving and investing all together, he says.

The study found no change in the typical client's annual discretionary income, which remained at $15,000 in 2002. But that number now represents just 15% of total gross income, versus 18% in 1998. Furthermore, planners report virtually all of the money set aside by their clients for savings are intended for retirement purposes.

Other Findings

Looking at the national population of CFP certificants, the preferred method of obtaining the educational content needed to sit for the CFP Certification Examination is the self-study format (90%).

The study reported 97% of all respondents use the Internet as a way to gather information. More than four out of five (81%) feel the Internet has increased the amount of information they use in making recommendations to their clients, compared with only 55% in the 1998 study.