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Firms Must Support CFA, CFP® [Professional] Candidates: Poll

Feb 19, 2013

Investment firms should reimburse employees for the expenses incurred while earning Chartered Financial Analyst (CFA) and (CFP®) [certification], as well as provide staff time to study for those designations. That’s according to a majority of FundFire poll respondents.

Approximately 60% of voters – 367 in total – said companies should both reimburse their employees for certifications and provide study time during work hours. That made it the top response in FundFire’s weekly poll, which gathered 609 votes as of 3 p.m. Wednesday.

Another 35% said companies should only provide reimbursements. Less than 1% said companies should just offer study time, and nearly 4% said employees should be on their own when it comes to earning certifications.

FundFire readers have recognized the importance of earning certifications for years. In a 2010 poll, 64% of voters said the CFA was the most important designation for institutional sales professional to hold. The Certified Investment Management Analyst (CIMA) designation was the second most popular choice with 18%, and the CFP® [certification] came in third with 15%.

Now, asset and wealth management firms are increasingly recognizing the importance of supporting employee certifications and are providing the credential-friendly benefits that FundFire readers are advocating.

Partly in response to this changing sentiment, the Certified Financial Planner Board of Standards has been promoting a program for about two years at larger firms to increase the number of designated CFP[® professionals], as reported. The CFP® [certification] takes about a year to complete, and CFP Board CEO Kevin Keller says the organization is starting to see an increase in certifications because of its campaign.

Meanwhile, Merrill Lynch incorporated CFP® [certification] coursework into its trainee program 18 months ago, reimbursing employees for the costs associated with the test and giving its employees time to study. In addition, the company provides a financial reward for advisors who earn CFP® [certification].

Other companies, including Morgan Stanley Wealth Management, Wells Fargo Advisors and Ameriprise Financial, have implemented similar measures.

But some firms are hesitant to provide the benefits because of the up-front costs and perceived delay in return on investment, industry experts contend.

The three CFA exams cost approximately $3,500, according to the CFA Institute’s website. The baseline CFP® [certification] program costs $4,000 to $5,000, according to the CFP Board. The Investment Management Consultants Association, which sponsors the CIMA, says that certification can cost between $7,500 and $8,000.

“They think they would invest money in a person and then they would leave,” Preston & Co. president Joe Preston says. “But I think this is the short-term view. You can look at it as an expense or an investment. I understand where people come from, but I think investment is a much stronger way to look at it.”

Further, there are also claw-back options companies can utilize. For example, firms can reimburse their employee for certifications with the agreement that if the employee leaves before a certain time, he or she would have to repay the company.

Another drawback to reimbursement programs is that most who start the certification processes do not finish, experts add. The CFA has the lowest completion rate, with only 10% passing all three exams. Approximately 60% pass the CFP® [exam], and around 40% who start the CIMA certification process complete it.

For this reason, many companies only reimburse employees once they have received the designation, but IMCA executive director and CEO Sean Walters says that is a narrow view of how the process works.

“For CFA and CIMA candidates, the odds are that most will not successfully pass, but they’re learning critical skills and knowledge the whole time,” says Walters, who advocates for companies to reimburse employees as they go through various stages of the programs rather than reimburse a lump sum at the end. “As soon as someone digs into the program, they’re providing benefits back to the employer. They’re learning things that they can use in the client relationship.”

Walters says study time can also be a valuable learning experience. When candidates for the same designation study in groups, they often talk about their client strategies and generate ideas from one another, which again benefits both the clients and the company. Duke Advisors president Roy Duke agrees that study time is an important benefit, but notes that companies are more likely to offer financial reimbursement alone.

“When study time is not part of the company’s package, it does require an added commitment on the part of the employee to accomplish the goal,” he says.

The CIMA, for example, requires at least 300 hours of study time, and other certification programs such as the CFA could take more than four years to complete.

While that long-term investment could keep some firms from making the investment, Duke says one of the greatest benefits is that reimbursement programs build much-needed employee loyalty.

“Loyalty is in short supply in the asset management industry, and by supporting advanced degrees and advanced designation, I think it has a modest positive effect on employees,” he says. “If employees feel they are being supported to become the best people they can become and be viewed as credibly as possible, that’s going to have a beneficial effect on the company.”

FundFire
Gretchen Frazee
February 19, 2013

 

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Did You Know?

Among clients who work with an advisor, 87% of those working with a CFP® professional are satisfied or very satisfied, compared with 72% of those who work with an advisor without certification.
Anyone can call himself a “financial planner.” Only professionals who meet CFP Board’s rigorous standards can call themselves CERTIFIED FINANCIAL PLANNER™ professionals.
The 2013 Household Financial Planning Survey shows that those with a financial plan feel more confident and report more success managing money, savings and investments than those without a plan.
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