Right here’s a query from a podcast listener:
On a current episode of TCAF (Ep. 171 with Harvey Schwartz) you and Josh point out how wealth administration has drastically modified over the past ~20 years particularly citing that CFP candidacies are at document highs whereas CFA candidacies are at document lows. Understanding you and Ben are each charterholders, what do you consider this development and the way would you recommend a teenager contemplate these choices for extra-curricular training and accreditation?
We get A LOT of questions on this.
Questions from younger folks seeking to set themselves up for a prolonged profession in monetary providers. Questions from older folks seeking to break into wealth administration. Questions from people who find themselves not sure which path is true for them.
I’ve loads of ideas on the matter however let’s try the numbers first.
Assume Advisor has an replace on the variety of CFPs:
In 2024, the variety of licensed monetary planners hit 103,093 — a rise of 4.3% over 2023, in keeping with the Licensed Monetary Planner Board of Requirements, with a complete of 10,437 candidates sitting for the examination.
Almost 60% of newly minted CFPs are beneath the age of 35.
There are extra CFA charterholders than these with a CFP. The quantity I discovered from the CFA Institute was greater than 200,000 charterholders worldwide, so about double the variety of CFPs.
However the development is attention-grabbing right here. The arrow is pointing up for CFPs and down for CFAs.
The Monetary Instances wrote a narrative on the developments in CFA examination participation:
The newest accessible outcomes for CFA Institute, which oversees the exams, present 116,727 folks sat all three ranges of the examination within the first eight months of the yr, down 2,735 on the identical interval in 2023.
Final yr there have been 163,000 examination registrations, 40 per cent down from the height of 270,456 in 2019.
Take a look at the variety of exam-takers for the CFA by yr:
It’s in a extreme bear market from the pre-pandemic days.
I wrestled with this query after I was looking for my place within the finance trade too. I’ve at all times been extra of an analytical thinker and didn’t have a lot publicity to wealth administration early in my profession so I went the CFA route.
Taking the examination didn’t essentially make me a greater investor however it did make me extra knowledgable and employable. Most of the roles I used to be making use of for out of school required you to both sit for the exams or have already got the CFA designation.
I do know for a indisputable fact that simply sitting for the extent one examination obtained me an interview that finally led to a job provide. So it was definitely worth the gruelly three years of finding out.
However that was 15-20 years in the past. What if I needed to make that call now?
I’m not so certain I might go the CFA route once more realizing what I now know.
The CFA is a portfolio administration designation and whereas portfolio administration will at all times be essential, safety choice isn’t an enormous precedence prefer it was prior to now. Index funds and ETFs are swallowing up the fund trade. There’s a far higher emphasis on asset allocation, index publicity and thematic funds than old style lively safety choice.
Simply take a look at the fund circulate knowledge (by way of ICI):
Then again, the marketplace for monetary recommendation is about to blow up within the years forward.
I firmly consider one of many greatest bull markets within the finance area over the subsequent 20-30 years can be offering monetary recommendation to retired child boomers and managing the transition of trillions of {dollars} to their heirs. There are 70 million child boomers who management $82 trillion of wealth. They want it to final all through retirement after which see a easy transition to their youngsters.
The CFP is a monetary planning designation and the necessity for monetary planning will solely develop in significance within the years forward. And most advisors are themselves coming into retirement age.
In VC-speak, the TAM is far increased for the CFP than the CFA.
Being a monetary advisor requires extra intrapersonal abilities so it’s not for everybody.
However if you wish to go the place the expansion is, the CFP makes extra sense than the CFA.
Michael and I talked about CFAs, CFPs and extra on this week’s Animal Spirits video:
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Additional Studying:
The CFA vs. MBA Resolution
Now right here’s what I’ve been studying these days:
Books: