Executive Summary
With over 75,000 CFP certificants, having an advanced designation is not the differentiator it once was in the marketplace. Instead, the successful growth of CFP certification, along with rising consumer awareness of the CFP marks, is turning the CFP into a minimum standard to be recognized as a professional, and those who really want to differentiate must pursue even most "post-CFP" certification instead.
In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore whether getting a PhD in personal financial planning is a good way to differentiate as an advanced practitioner... or rather, why a financial planning PhD is probably a bad idea for even sophisticated financial advisors.
Because the reality is that a financial planning PhD is really not just the ultimate advanced designation in financial planning. It's really a research degree, with content that teaches students how to actually do real research, applying proper research methods and conducting the appropriate statistical analyses. A financial planning PhD doesn't actually teach much at all about how to do financial planning; in fact, most of the PhD programs will expect candidates to have already learned that before applying (and/or may have to take "pre-doctoral" courses just to get the requisite education first).
Instead, the real purpose of getting a PhD in financial planning is to teach financial planning (at a higher education institution), or to do real research in financial planning. The good news is that there are a growing number of opportunities in both - in fact, the whole purpose of the origin $2,000,000 seed grant that the CFP Board made to Texas Tech's personal financial planning PhD program in 2000 was specifically to help create financial planning PhDs who could go create and teach in other financial planning PhD programs (which is exactly what happened). And there is certainly no shortage of applied financial planning research opportunities.
But the bottom line is simply to recognize that practitioners who want "advanced" financial planning designations should seek out post-CFP designation programs, or perhaps a Master's in Financial Planning. But a PhD is not just a more advanced designation; it's really a teaching and research degree, and is best suited for those who really want to teach and do research, either in lieu of becoming a financial planning practitioner, or perhaps as a second career for those practitioners who are ready for a fresh new challenge!
(Michael’s Note: The video below was recorded using Periscope, and announced via Twitter. If you want to participate in the next #OfficeHours live, please download the Periscope app on your mobile device, and follow @MichaelKitces on Twitter, so you get the announcement when the broadcast is starting, at/around 1PM EST every Tuesday! You can also submit your question in advance through our Contact page!)
#OfficeHours with @MichaelKitces Video Transcript
Welcome, everyone! Welcome to Office Hours with Michael Kitces!
I want to talk today about advanced financial planning education.
For most of the history of financial planning, educational programs associated with advanced designations like the CFP certification or the ChFC marks were the highest level of advanced education available. Unlike some fields that offer graduate level advanced education, though, most of these programs were typically taught as adult education certificate programs.
These adult education programs were created to teach the core knowledge (and maybe in the case of CFP marks, to specifically prepare you for the test), but not necessarily to develop 'advanced' practitioners. Most financial planning designation programs are functionally the equivalent of about a half a dozen undergraduate level courses at the most.
In the past 15 years, though, we've seen the rise of actual college degrees in financial planning. Much of that growth was spawned by a visionary grant from the CFP Board to Texas Tech – which seeded $2 million in 2000 to the personal financial planning PhD program at Texas Tech University, and started the growth of higher education programs for financial planning.
The goal of the grant was to create PhD graduates from Texas Tech, who in turn could go out and create other PhD programs, since most higher education institutions require a professor having a PhD in order to teach in a PhD program.
Financial Planning PhD Programs [Time - 1:38]
Now, 15 years later, the education landscape looks very different. We've reached the point where there are as many degree based undergraduate and graduate programs in financial planning as there are adult education certificate programs!
We've also seen the rise of about a half a dozen Ph.D. programs. These include, the original Texas Tech personal financial planning PhD program itself, as well as PhD programs at the University of Georgia, Kansas State University, and the University of Missouri – each of which have had some faculty who received their doctorates from Texas Tech. More recently launched programs include Louisiana State University and the new Ph.D. program at the American College of Financial Services taught by Dr. Wade Pfau, who many of you know from the world of retirement research.
With the growth of all these advanced programs in financial planning, I'm actually hearing more and more practitioners asking the question: is worthwhile to get a Ph.D. in financial planning?
So that's the question I want to tackle today. What's the relevance of a PhD in financial planning for a financial planning practitioner?
What Is A Financial Planning PhD, Really? [Time - 2:37]
To answer the question, first I think it's really crucial to recognize what a PhD actually is. A PhD is a professional research degree. It is not an advanced financial planning designation for practitioners.
You'll see this distinction if you actually look at the curriculum of a PhD program. You may see some credit hour requirements for mastering the core financial planning body of knowledge, but many programs actually characterize these as pre-doctoral foundational classes – stuff they would've expected you to get in a Master's degree, but if you haven't, then you can do that first.
Within the PhD program itself, you'll often find courses that are heavily research oriented. You'll find courses on research methods, quantitative models, possibly even econometrics – all built around how you actually do research in financial planning.
A PhD program will culminate in a doctoral dissertation where you're going to do a very in-depth research study into something related to financial planning. Some programs will let you do a dissertation composed of three slightly smaller original research studies that you can later submit for journal publication (a "three papers" dissertation, rather than one mega study).
But I can't emphasize enough that the focus of financial planning PhD content is not advanced financial planning like a Master's degree might be. It's about actually doing research in financial planning!
Using A PhD in Financial Planning To Become A Professor [Time - 4:03]
Given these dynamics, what do you do with the financial planning PhD?
As the funding from the original CFP board grant indicates, one of the primary opportunities for getting a Ph.D. in financial planning is to teach personal financial planning, particularly in a higher education institution. And I think it's worth noting this is a really exciting time for the growth of financial planning as an educational discipline, as we grow the number of degree-based programs.
My gut is that in the coming decade we may actually see a shift where the requirements for financial planning education move up and require more college course work in financial planning. We already require a general bachelor's degree to get your CFP marks, but perhaps will require more actual content in financial planning. After all, when you compare financial planning to other more established professions - such as law, accounting, medicine - they all require graduate degrees to really master the content, and then you learn to be a practitioner as you get your experience and actually attain your license!
As financial planning grows and expands its body of knowledge, we may soon get there as well with an important caveat: If we actually require everybody who's getting CFP marks to get college education in financial planning, there are not enough professors to teach them all! Particularly not if we require coursework at the graduate level, which will require more PhDs to build more programs and continue to grow the field.
So for those of you who are practitioners and think a second career as a financial planning educator might be appealing, a PhD can be a very good path for you.
Doing Original Research With A Personal Financial Planning PhD [Time - 5:36]
The second alternative for what to do with a financial planning PhD is to actually do research.
To be honest, I think research in financial planning is woefully inadequate right now. There's so much we advise on that relies on rules of thumb instead of real, validated research. I think we're especially weak about this when it comes to the science of actually delivering financial planning.
You can even see it in our labels. It's common to call the technical stuff the "science" of financial planning, while the delivery is the "art" of financial planning (or the "soft side" of financial planning).
However, there's actually a hard science to the soft side of financial planning as well! If you look at fields like medicine and psychology, there is extensive research in the soft skills that relate to connecting with patients and giving people advice that helps change their behavior. When we look at financial planning, we don't even teach behavior change in most financial planning programs! It's certainly not a material part of the core curriculum.
Imagine all the research that can be done on the softer side of financial planning – not to mention all the stuff on the hard research side as well, such as retirement research, research on how to positively impact spending and saving behaviors, research on how to improve the psychology of insurance so people who actually need coverage would buy it, and research on how our financial literacy grows, develops, and changes over time.
For instance, there's fascinating research out there already on how our financial literacy tends to decline with age, though our confidence in financial literacy does not. We continue to be confident, even though we actually know less. That has all sorts of implications around how we might engage as planners, but you need research to validate and support it. As a financial planning PhD, if you want to go down that road, you can contribute to that research!
If there's one thing you take away from this, it is to recognize that a personal financial planning PhD is not an advanced financial planning practitioner designation – it's a research degree (or at least it's a teaching and research degree). It's something that you get if you want to be a professor that teaches financial planning, or if you want to be affiliated with a university that does financial planning research, or maybe you want to do your own independent financial planning research. It's not meant for simply being an advanced practitioner, and that's an important distinction.
In fact, realistically, if you don't like doing mathematical analyses, building models, working with giant spreadsheets, and learning how to use real number crunching software – recognize that you're probably not going to be very happy in the program. Good PhD programs are generally very quantitatively oriented. So at a minimum, be certain that you go into it with your eyes wide open about what it really entails because the cost is not trivial. A lot of PhD programs will cost you tens of thousands of dollars.
If you just want your CFP education as Eddie just noted [from Periscope], you can get a CFP designation and maybe pursue a Master's degree – most of which are structured as advanced practitioner degrees. But, a PhD is really something different. If your passion is teaching and research, go get a PhD If you're a practitioner that's maybe thinking about a second career and interested in conducting research, you may want to consider a PhD as a second career path. But, if you simply want to get a more advanced knowledge and education as a financial planning practitioner, look to graduate degrees and advanced designations – not a PhD!
So I hope that helps a little as some food for thought. This is Office Hours with Michael Kitces 1:00 p.m. East Coast time every Tuesday. Thanks for hanging out with us and have a great day everyone!
So what do you think? Do you have any interest in getting a Ph.D. in financial planning? Do you think we will continue to see research more heavily influence our industry? Are Master's degrees or advanced designations better options for most practitioners? Please share your thoughts in the comments below!
