Do advisory firms and investors prefer advisors who have earned CFP credentials?
Officials at the Washington D.C.-based Certified Financial Planner Board of Standards, which trains financial planners and awards its CFP certificate, certainty think so, and say now they have research to prove it.
CFP certification can be a key differentiator for firms and individual financial professionals looking to improve the quality of their advice and provide additional value to clients, according to a new research report from the Aite Group commissioned by CFP Board.
Entitled Adding Expertise To A Financial Advisor's Practice: Measuring The Contributions Of CFP Professionals, the report looks at how CFP certification impacts a financial professional's performance and contributes to the success of his firm and his clients.
"For many years, CFP Board has heard that CFP professionals had a leg up over their peers -- this research proves that indeed they do," said Tom Crowder, the board's managing director for marketing and business development, during a press telephone conference call this morning. "We can definitely say now today that Aite Group's study validates that CFP certification enhances client relationships as well as advisor and financial firm success," Crowder says.
Key study findings include:
Although only 20% of all financial advisors hold the CFP certification, more than 70% of all team practices have at least one CFP professional, providing a holistic view of clients' finances, according to the research study, which examined this impact across multiple business models (broker-dealer, RIA, insurance) and firm sizes.
Roughly 87% of clients who work with a financial advisor who has CFP certification are satisfied or very satisfied, compared with 72% of those who work with an advisor without certification.
Sole CFP professionals generate between 40% and 100% more revenue than financial professionals who do not hold the certification; team practices with a CFP professional on staff generate 30% more in revenue.
Financial professionals with CFP certification work with more of their clients on a long-term, recurring basis, managing 45% of client assets for an AUM-based fee.
Forty five percent of CFP professionals state that financial planning is very important to their business model.
CFP professionals with less than ten years of industry experience are twice as likely to earn more than $215,000 annually (17% to 8%); and 35% of CFP professionals with more than ten years of experience earn $215,000 annually compared to 23% of those advisors without the certification.
The Aite Group study is based on data gathered through an online survey of 515 financial advisors based in the U.S., and on advisor performance data contributed by top 50 U.S. financial services firms and interviews of top executives at top 20 brokerage firms. The group also conducted a December 2011 survey of more than 1,000 U.S. investors.
Currently, an estimated 57,000 financial advisors in the U.S. are CFP Board certified. The number of financial advisors earning certification has increased 22% in the past 5 years, a CFP Board spokesman said.