Make Way for CFA

A new advertising campaign reinforces what has already happened: CFAs have become mainstream wealth managers.

Maybe you’ve seen the new round of advertisements that have come out on CNBC, NPR, social media and in the Google advertising queue, asking:  Does your wealth manager measure up? 

The video version is pretty compelling.  It tells us: There’s a name for people who put their clients’ needs above their own.  Who have the investment expertise you need.  The depth of knowledge to help you unlock opportunities.  To see things that other advisors might miss.  To help you adapt to the demands of a changing world.

They’re called (the voice-over tells us) CFA charter holders.

Financial planners who are accustomed to a CFP-centric universe, or CPA advisors who believe the PFS is destined to prevail in what are sometimes called the “designation wars,” may have to get used to CFA advisors viewing themselves as logical advisors for (particularly upscale) consumers.  In fact, charter holders are already players, whether the mainstream realizes it or not.

“We have 75,500 members of the CFA Institute in the United States,” says Bob Dannhauser, who heads up the Global Private Wealth Management division at the Institute’s New York-based U.S. headquarters.  “Forty percent of those report that their work involves working with individual assets, as opposed to institutional assets.  My best estimate,” Dannhauser says, “is that between 8,000 and 10,000 of our U.S. members are working in financial advisor/wealth management roles.”

Investment expertise

How well-suited are CFAs to provide wealth management advice to retail consumers?  The aforementioned advertisements, created by the CFA Institute, provide a link to a website for consumers:  There, among other things, you can see the results of a survey of 900 investors with over $5 million in investible assets, who were asked to rank the most important attributes of an advisor.  The answers might surprise anyone who thinks that investment-related services have become commoditized.

Number 1 on the list: “experience and savvy in investments,” at 17.5% (out of 100%).

“Access/knowledge to a variety of products” came in second at 12.0%, and only then did the survey respondents request the sorts of non-investment services that financial planning firms typically provide: “Good listening skills/ability to understand my needs” (11.8%); “Staying current on new strategies/anticipating future developments” (10.1%); “Responsiveness when issues emerge” (9.1%); “Proactivity in making suggestions and asking questions” (7.6%); “Patience in handling questions” (6.3%); “Effectiveness in teaching me what I need to know” (6.0%); “Flexibility to work in a system that works for me” (5.6%); “A holistic approach to wealth management” (5.4%); “Strong written/oral communication skills” (4.3%); and “Creative thinker that can come up with novel approaches” (4.3%).

The point is that the CFA’s expertise is at least competitive with other designations out there.  And, apparently, individuals with the CFA designation are moving into wealth management (their preferred term to ‘financial planning’) in growing numbers.

But how well do they fit the planning (or wealth management) culture?  Later this year, the CFA Institute will publish the result of a survey of advisors with various credentials which will show, among other things, that CFA practitioners identify being “a trusted advisor on many aspects of clients’ lives, even beyond money” as the best characterization of their ideal client relationship.  Interestingly, the non-CFAs in the survey most often aspired to being “a reliable financial professional” or (interestingly) “an expert on investments.”

And CFAs are like CFP or PFS advisors in another way: they want more public recognition for the credential that they’ve earned, and want the CFA Institute to be more aggressive about promoting it. 

“The most consistent piece of feedback I get from members is: My clients don’t know what a CFA is,” says Dannhauser.  “And as a result, they tell us, the CFA isn’t at all helpful to me in building my business.

CFA outreach

That afore-mentioned advertising campaign, which began March 4 and will continue through June, represents an initial $8 million commitment to addressing the Institute members’ concern.  Not surprisingly, it’s aimed at individuals in the higher net worth category.  Dannhauser says that the Institute’s research indicates that people with more than $5 million in investible assets are more likely 1) to know what someone with the CFA designation brings to the table and 2) to want more sophisticated wealth management and investment expertise in their advisor.

It’s easy to see this ad campaign as a direct competitive shot at the CFP Board’s advertising campaign.  But from Dannhauser’s perspective, the CFP and CPA communities are actually preaching the same basic message.  The CFP Board’s famous DJ ad, Dannhauser says, received a lot of attention and praise, but the impact seems to have been less to point people toward the CFP designation than to alert people to the fact that they need to work with an advisor/planner/wealth manager who has training, education and credentials. 

That, in itself, is a step ahead—but everybody who happens to have a rigorous credential participates in that step.  “We all face the same obstacle,” Dannhauser says: “This is a profession which right now has no practical barriers to entry.” 

What else is the CFA Institute’s research into wealth management telling us?  “First of all, that investing is not dead,” says Dannhauser.  “The feedback we’ve been getting, particularly from higher-net-worth consumers, is that investing is not destined to be a couple of ETFs strung together into portfolios.  Wealthier individuals who have more complicated lives and complicated needs recognize the opportunity for thoughtful and perhaps sophisticated investment approaches to add value in a way that is discernible to the end client.” 

Training opportunities

Non-CFA advisors might be interested to know that wealth management concepts already make up fully half of the Level 3 CFA curriculum, so advisors with what many think of as a purely investment credential actually have broad-based expertise built into the training program.  But the Institute is now looking at ways to support its members’ continuing education in areas once thought of as more relevant to CFP or CPA advisors. 

That starts with an annual Wealth Management Conference, which took place this year April 2-3 in Ft. Lauderdale, FL, and will move to Seattle WA in late March of next year.   The session titles there would be familiar to anybody attending a NAPFA Spring or Fall conference: financial planning strategies, estate planning issues, philanthropic and planned giving ideas, practice management and client relationship management. 

Meanwhile, 67 local CFA Societies host their own wealth management breakfast and luncheon programs.  Dannhauser says that Philadelphia, Toronto, Los Angeles and San Francisco seem to do a particularly outstanding job of covering the broad wealth management topics.

Since there are so many CFAs practicing wealth management, there are a lot of subject matter experts to draw from within the credentialed community.  But Dannhauser says that other technical experts from non-investment domains are also regular presenters.  “In the coming years, you’re going to see a much more systematic attempt to open up channels to best-of-breed presenters,” he says.  “We’re exploring relationships with other membership associations that have that expertise,” he adds.  “And frankly, we believe we can make a pretty decent trade by exposing other peoples’ memberships to what we think is pretty good investment content that we’ve developed and made available to our own members.”  Dannhauser himself is speaking at the upcoming AICPA Engage conference, June 9-13 in Las Vegas.  (I’ll be in the audience.)

Meanwhile, the CFA investment curriculum is evolving beyond analysis of corporate balance sheets to a broader focus on the human element of investing.  “Behavioral finance has been a part of our curriculum for quite a while,” says Dannhauser.  “Lately, we’ve been spending some time thinking about the professional implications of client behavioral issues.”

Meaning?  “Your average CFP and your average CFA both have pretty good facility in understanding what the potential cognitive and emotional biases are when they sit across the table from somebody,” Dannhauser explains.  “Where I think we have done a less good job is thinking about what that means for the practitioner, for self-diagnosing the practitioner’s own biases, and what needs to change for their approach to be maximally effective.  It’s potentially the next frontier in behavioral finance,” he adds; “to start getting practitioners much more comfortable with those self-assessment and practice-oriented issues that go with a more sophisticated understanding of behavioral finance.”

Will we see additional CFA public awareness outreach once this current campaign is over?  Yes.

“Our senior management team has bought into the idea that this is likely a 4-5 year effort with some pretty significant money attached to it,” says Dannhauser.  “We’ve been kicking around ideas for budgets of $40-50 million.  The CFA Institute is strong enough and is doing well enough that we could devote those kinds of resources very realistically.”

If Dannhauser is right, the CFP and CFA campaigns could be powerfully synergistic in that they’ll both direct consumers toward a credentialed professional, and make consumers more aware that financial planning/wealth management services are best offered by people with specialized training and expertise.  If the public can receive that message, and internalize it, then any rivalry among the designations would have a win-win feel to it—especially as more and more firms include CFP, CPA/PFS and CFA professionals on staff.

The bottom line is that advisors with all designations can expect the CFA members of the profession to be more visible and more vocal in the coming years—and also to be presenting at the next conference you attend. 

“In the next 12 to 24 months, I think people are going to be thinking about CFAs a little bit differently,” says Dannhauser.  “The story of how that happens could be pretty interesting as it unfolds.”