Easing college students' transition into the financial planning profession

Financial Services Review, Fall 2005 by Goetz, Joseph W, Tombs, Joseph W, Hampton, Vickie L

Abstract

Like law, accounting, and medicine, financial planning is an applied profession. A mastery of "book knowledge" is insufficient preparation for a student entering an applied profession. The traditional model of financial planning education is inefficient in that it leaves students with a long and expensive transition into professional practice. This article proposes a new model that shortens this transition and includes an overview of various teaching techniques designed to integrate the professional world with the financial planning curriculum. Contact information for select educational 0 programs already working to ease the transition is provided for those desiring to model effective teaching techniques. � 2005 Academy of Financial Services. All rights reserved.

Jel classification: A22; A23; D14; G20

Keywords: Personal financial planning; Professional education; Financial services; Higher education; Curriculum reform

1. Introduction

Warschauer (2002) emphasizes the important role universities play in the emergence of personal financial planning as a legitimate profession. The number of colleges and universities offering educational programs in personal financial planning is growing. Currently, there are 191 colleges and universities offering 310 CFP Board-Registered Programs (D. Livran, personal communication, November 2, 2004). This represents significant growth as compared to the original 20 programs registered in 1987. As the discipline continues to evolve, educational programs designed to prepare students for practice should make a concerted effort to evaluate and improve their curricula on a continual basis. Indeed, the students of today are the professionals of tomorrow and higher education is responsible for preparing students to meet the challenges of a financial planning career.

The financial planning profession requires a wide array of skills involving aspects of psychology, counseling, leadership, marketing, and motivation. Financial knowledge alone is insufficient preparation for students to be competitive in the profession. Beyond the adequate technical skills that new employees typically possess, employers desire graduates with already-developed skills in leadership, communication, problem solving, and teamwork (Oblinger & Verville, 1998; Rao & Sylvester. 2000). Certified Financial Planner Board of Standards (CFP Board) continues to discuss how to assist and encourage academic programs to teach the "soft side" of being a competent CFP professional. Communication skills and the ability to interact effectively with clients are important, but these skills are difficult to teach and harder still to assess. The CFP Board also stresses the importance of internships and other ways students can gain practical experience.

CFP Board-Registered Programs are required to include in their curricula specified topics in the areas of financial planning fundamentals, risk management, investments, taxes, retirement planning, employee benefits, and estate planning. Therefore, students must acquire a broad knowledge of various facts and concepts, and most college-level financial planning programs depend primarily on the traditional lecture method to relay this knowledge base to students. However, the CFP Certification Exam is a practice exam rather than an educational exam. It requires more than "book knowledge." It also requires the ability to apply and synthesize knowledge. Furthermore, the practice of financial planning requires an entire new set of skills, many of which are not addressed in university programs or on the CFP Certification Exam. It is common for students to graduate from university programs without any financial planning experience, as well as being unlicensed, uncertified, and without good job prospects in the financial planning profession. In addition, students often graduate with little understanding of the realities of the financial planning business.

Financial planning is a challenging business, and it is often difficult to gain entrance into the profession. Because most clients do not want to hire a recent graduate with little practical experience, employers often place recent graduates into positions involving only entry-level work. These positions typically include either back-office work or financial sales. Graduates often view back-office work such as data-entry, report generation, filing, and updating tax bases as a tedious raison d'etre, and it is unlikely to pay a wage consistent with the rigors of completing a university financial planning program. Commission-based financial sales can be intimidating to young graduates who are afraid to live on an uncertain income. The employer typically pays the graduate for several months while the graduate takes several licensing exams required before the new hire can begin his or her career.

Currently, the transition into financial planning is difficult and expensive to both students and prospective employers. It may take years for a new graduate to become worth more than an entry-level wage; therefore, the employer pays a wage in excess of the value actually contributed by the graduate. In addition, employers incur costs in the form of in-house training, certification and licensing, supervision, and turnover. Employers hope to recoup these expenses when the graduate becomes more productive by paying a wage that is lower than the value of the employee to the firm at that time, typically within two to three years. It is at this point that many employees leave their original mentors for greener pastures with employers more willing to recognize the current value of their newly acquired skills. This tendency leaves the graduate's mentor less willing to hire inexperienced candidates in the future.