CFA>CFP: I thnk you hit the important parts of why this is correct. I will concede that the CFA doesnt teach a ton of personal finance, and it shouldnt. 90%+ of people who focus on personal finance have no reason to know 99% of the CFA material cuz it won’t apply to their role. So yes, in personal finance (excluding the UHNW/FO crowd) a CFP is more applicable, and applaud those who take the step to differentiate themselves a bit in an industry where anyone can be labled an FA, but stand by the fact that CFA>CFP in life.
As for the litany of potential questions…I think a few of them may be valid. I think the bulk of them are best served by an accountant, and most others can be answered easily with 5 minutes on Google/IRS website. Not saying they can’t get an answer from an FA, just saying that responding with answers to basic questions or checking it in your references isn’t all that mind blowing. Plus whats the point if everything is prefaced with “I cannot give legal or tax advice” when thats the advice people actually need?
I appreciate pdx’s sarcasm, and hope some of mine rings thru. I will admit to a negative view on the career as a whole which may blanket those it shouldnt, but think in general I am correct in my view of the group. To answer a Greenman’s question in my best FA tone:
“Should I buy life insurance?” YES!!! “How much?” A FRICKING TON “What kind?” THE KIND THAT PAYS ME COMMISH
In closing, you might want to recheck your student loan interest deduction answer…there are phaseouts on its deductibility based on income, cheers fellas.
Point #1: 95% of investors rely on a bunch of CFAs for their return anyway, go look at the PM/Analyst roster for a mutual fund. Doesn’t apply for index funds, not all funds, etc…but I think you get the point. Point #2: 90% of a market return sucks, especially over long periods. (not going to entertain point of most managers underperforming, blah blah)Point #3: the CFA probably doesnt benefit 95% of individuals as much, thats why those with the designation tend for focus on the 5% it does as well as institutions.
Harder, deeper, broader, respected, skip your CFP components and pass go to the final exam, know a lot more about investments/markets, leads to more complex/fun work (opinion), etc
More than capable, I just finished reading “Personal Finance for Dummies”…see how I didnt even make a joke about that book also being the CFP study guide?
I know a couple Grandmaster CFPs. The combination of the grease on their slicked hair and the vacuum of their moral compass causes clients to inexorably slide into their clutches.
Greenman, you brought up a bunch of great example of what CFP’s can do for people, including CFA’s. I’m not going to rehash all of it, but believe me, outside of investments, there are planning techniques that CFPs use all the time to legitimately save money for their clients that CFA would just not normally know about.
However, the real difference I want to bring up is the difference I believe there is between the relationship between the professional and the client when it comes to CFP’s and CFA’s. Now, I have a lot more experience as a planner then a PM. But from what I have witnessed the relationship you form with your CFP is much more personal. As a CFP your goal is to have the client for life, and then continue planning for their kids. You’re going to tell your CFP about your kids, about your divorce, about how your wife is battling cancer. These are the types of things that a CFP looks into when they are planning and because of this really close bonds can end up forming. Which is good, because one of the things you pay a CFP for is to think of your financial life for you. A good planner should show up at a meeting and tell a client about a problem they didn’t even know they had and how to fix it (a legitimate problem, not that they have to buy a new high commission life insurance product).
As a CFA, you’re goal for the client is to increase the size of their investment. That’s it. If you you’re not doing that you fail and they leave. Now that’s not the end of the world, investor turnover is a part of the business, but you don’t take the same level of personal care/interest in your client’s lives. I would argue that a CFA is really just trying to outdo themselves, get their performance even better. Clients are really just there to give you the funds to be in the game.
So a CFA doesn’t need to have a planner, especially for managing their investments. However, I think it’s very short-sighted to think that a CFA wouldn’t benefit from the help of a good CFP.
Dude, this is an attorney issue. If you have that much money you don’t f*ck around with CFPs, you deal with an attorney. The fact that you would suggest a CFP for an obvious legal issue indicates to me you have no idea what you are talking about.
Just to comment on the attorney issue for a second: I believe Greenman mentioned this, but a CFP is not going to take care of final estate documents. That will be done with a lawyer. However, the main reason (there are others, but I’m not going to get into them right now) you want to work with a CFP first is because it will save you an incredible amount of money.
Even simple wills and bypass trusts take a decent amount of time to figure out. And if you want items like QTIP or Dynasty Trusts and all of the other tweaks that come into play once you have over a few million dollars or a mixed family is going to take a lot of time to make sure it’s done right. So here is my question: Do you want to sit in a lawyers office and start having the discussion with your spouse only to figure out you two are on completely different pages? Then spend about three to five more sessions with the lawyer reviewing documents and making changes. So by the end of the entire ordeal you’ve spent probably 20 hours to get everything just right. So my question is do you want to spend all that time with the lawyer or with your CFP who works for a flat fee and then spends about an hour with the lawyer to give them the summary?
Either way the lawyer has to be the one that draws up the final documents, but believe me, the CFP route is a hell of a lot cheaper.
I was going to address this, but Greyhound got to it first.
(For all intents and purposes, a CPA can suffice for a planner in this case.) Most people who visit financial planners have given almost zero thought to their estate planning. It’s usually only when the planner brings it up that they begin to think about it. Then they talk about it to the planner. Then they talk amongst themselves. Then they talk to the planner some more. Several hours later, they decide what they want. At this point, the planner advises them on what kind ofestate planning they need and why.
Once the trust/will/testament needs to be set up, that’s where the attorney comes in. The attorney can create the document and dot the I’s and cross the T’s. I would not use a planner instead of an attorney. That would be a bad idea, but it would also be illegal, since planners are not licensed to practice law.
But for the first several hours, it makes more sense to pay $150/hr to the planner than $800/hr to the attorney.
Also (*and I speak from rich experience as a CPA), attorneys are just as likely as a planner to devise schemes to line their pockets with gold. I have seen many attorneys who approach business owners and exhort them to set up a Limited Partnership (which you have to hire an attorney to do, at $800/hr), where the General Partner is a C-Corp (which they will gladly create for $800/hr) for limited liability reasons, then advise them (at $800/hr) to treat the entire entity as a sole proprietorship for tax purposes (to avoid the double taxation). The same thing could have been accomplished by creating an LLC at a fraction of the price.
Lawyers are certainly not immune to the snake-oil tactics of financial planners–and they cost 4-5x as much.
I don’t know where you are getting $800 an hour dude. I dated an attorney who specialized in tax and estates just recently. She had a grad degree in Tax and was also named a “Rising Star” for the last three years in that lawyer poll. They billed her out @ $300 an hour and this was in Silicon Valley. She knew her sh*t and dealt with all kinds of millionaire issues because of all the dot.com millionaires out here.
You would have to be f*cking retarded to pay an estate attorney $800 an hour. She worked at a boutique law fim and as good as she was it was going to be hard for her to make partner because it is not a lucrative field to practice in law.
She wan’t fat just bigger than advertised. I have no problem with chicks like that I just would never bring one to a work function or introduce them to my family or friends. She was a lot of fun. Kind of like riding a moped…
You’re right. I pulled that number out of thin air. I didn’t do a lot of research on the going rate for estate planning attorneys. But $300/hr sounds low in any part of the country. And if you’re going to focus on that one number and not on the rest of my post, then I’d say you’re clutching at straws.
The point I’m trying to make is this–for 95% of all people (with less than $1m in investable assets), a CFP would probably be a better resource for the personal finance problems than a CFA.
A CFA would tell them, “Put 60% in bonds and 40% in stocks. That gives you an expected return of 8% and a standard deviation of 13%. That’s how you should invest.”
A CFP would tell them, “Put 60% in bonds and 40% in stocks. That gives you an expected return of 8% and a standard deviation of 13%. That’s how you should invest. Can I answer any questions about tax, estate planning, or insurance? Like any of the questions that Greenman mentioned above?”
