Think planners with employer incentives do better on the exam? Think again.

Maybe paying employees' way to get their Certified Financial Planner certification isn't the smartest investment your firm can make. In fact, offering to pick up the tab is shaving as much as 10 points off pass rates for employees who get such incentives. That's in contrast to those who aren't offered employer reimbursement, according to a new and ongoing academic study sponsored by the CFP Board of Standards.

Only 53.3% of those offered tuition reimbursement incentives pass the exam, while 62.1% of planners and employees who pay their own way pass. "It surprised us how negatively these employer-sponsored reimbursement incentives seemed to impact the pass rate," says Vickie Hampton, part of the research team producing the study. Hampton is also a member of the CFP Board of Examiners, which oversees the exam and the registration of college and university programs for the CFP Board of Standards.

"We can't deduce the cause for the lower pass rate exactly from the numbers, but we speculate that employer reimbursement encourages those who might not be as well prepared to go ahead and take the exam anyway," says Hampton, an associate professor of personal financial planning at Texas Tech University in Lubbock, Texas. In an important finding for bosses who want staff to get their CFP certification, the study did not find the same negative impact when employers offered staff and planners who passed the exam salary increases, bonuses or promotions. That's not to say that employers should not offer reimbursement for those interested in studying for the CFP exam, but they may want to consider making incentives contingent upon success, researchers say.

That's just one of the interesting findings emerging from the ongoing study being conducted by a group of six academics and practitioners. They are dicing and splicing CFP exam-taker data to provide the planning profession, the academic community and test-takers themselves with a more meaningful look at who is passing or failing the rigorous two-day exam, and why. The CFP Board of Standards in Denver is funding the project, called "Determinants of Success on the CFP Certification Examination." Because the academics and practitioners are volunteering their time, and the CFP Board has sanctioned the use of in-house staff to compile data, costs for the study so far have been under $3,000, CFP Board spokesman Lance Richlin says.

Being able to answer students' basic questions was a driving force behind the study, which looks at the demographics for 5,031 exam-takers between July 2000 and November 2001. "We'd get some really basic questions from students like, 'How long should I study for the CFP review course?' Or, 'Should I take the exam right after I finish coursework or wait and get experience first?' We simply didn't have the answers to these simple questions, which led us to undertake the project," Hampton says.

The task of finessing these types of answers from the data on exam-takers is continuing, but in the meantime the team has found some new intelligence and some interesting twists on existing wisdom about the CFP exam.

One finding worth noting is the performance of those who hold the insurance-related CLU (Chartered Life Underwriter) and ChFC (Chartered Financial Consultant) designations. Although observers have expected these groups of students, many of them seasoned insurance professionals, to outperform the average student, that hasn't been the case. The overall pass rate for students in the study is about 60.1%, while the pass rate for CLUs is 56.1%. ChFCs fared only slightly better with a pass rate of 58.6%. "The life insurance designations have not been found to be associated with greater success on the CFP exam," Hampton says. "They haven't really done better or worse than the general population." One reason why CFPs and ChFCs may not fare better is that they haven't really taken an exam as lengthy or comprehensive as the CFP exam before, she adds.

However, the numbers of insurance professionals taking the test increased significantly between 1999 and 2001, according to Vance Grange, a project researcher and the director of Tax and Personal Financial Planning Programs at Utah State University in Logan, Utah. Life insurance professionals grew to 14% of exam-takers, up from 9% in 1999. The number of property-casualty insurance professionals rose to 12%, from 9% in 1999, Grange reported to academic CFP program directors at an August CFP Board conference in Westminster, Colo.

Certified public accountants, on the other hand, fare much better than the average population when taking the CFP exam. "We found that people who hold the CPA pass at a higher rate than others," Hampton says. The pass rate for CPAs is 73%, which is 13% higher than the overall pass rate. Researchers on the project attribute CPAs' success to their rigorous academic program, workplace training and the fact that they had to study for and pass a comprehensive certifying exam to obtain their CPA credential.

The project has also shed some light on what type of review classes work best for exam-takers. "The highest pass rates are for persons who use a self-study textbook review (62.6%)," says Richard Cutler, the statistician on the project and an associate professor of statistics at Utah State University. Those who take a classroom (or live) review program pass at a rate of 57.5%, while those who take a computer self-study review program pass at a rate of 58.5%. "We believe the gap between those taking these different review programs is beginning to close, a point we're investigating further in a new paper we're writing," Cutler says.

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