The other day I was thinking about how to make some extra money on the side. As much as I love frugality, making more money is a great thing too. One idea that may seem completely obvious to you, but slipped by me, was to formally help people manage their money. I've been writing here for 7 years about my own money and occasionally answering reader questions (hint: mail me your questions). If I can parlay this knowledge to looking at a person's finances directly and helping them out, why not? It would be a win for them and perhaps I could make a couple of hundred dollars in the process.
In a strange way, this would almost piggyback on my computer science degree as I love to optimize systems. (In this case, the system would just be the other person's finances.)
So the first thing that I did was research what I'd need to be a Certified Financial Planner (CFP). It looks like there are three main parts:
- Take the Classes
- Pass the Exam
- Meet the Experience Requirement
Taking the classes wouldn't be a big deal to me provided I can take them online. You could even get an accelerated business degree online if you had enough time. Honestly, I didn't get too far into this one due the third item on the list. It did look like most of the things that you'd expect like classes in retirement planning, investment planning, estate planning, etc. Investopedia says that the average student will spend 1,000 hours on the coursework. That's about a half year presuming that you do it full-time, 40 hours a week.
In addition to the coursework, you must have a Bachelor's Degree or better. So you are pretty close to a 5 year Master's level program, perhaps a little less.
After that you have pass the exam. That makes sense, I've got no problems with that.
Then you get to the back breaker, the experience requirement. After you have done all that work, you then have to report your experience to the CFP board. There are two main ways to get experience, the 3-year (6,000 hour) plan and the 2-year (4,000 hour) plan. The 2 year way requires an apprenticeship under a licensed CFP. The 3-year plan allows you to do your work without a licensed CFP watching over you. One thing that hurts from my perspective is that I have to do all the prior work before knowing if my extensive work as a personal finance blogger counts as any experience. I'm not trying to be negative, but I imagine that they laugh at it, despite my following. It's clearly not individual planning experience like they are looking for, but it's not like I am the Average Joe who is looking to be a CFP.
The experience requirement also has to be completed within 5 years of taking the test, so if you wanted to take some time in between to pursue other endeavors, you risk having to start all over again (or at least having to pass the test again).
So adding it all up, it's a 3.5 year full-time commitment (I'm going to be conservative and assume that I can't find a CFP to be an apprentice under). If I wanted to put that much time into something, I'd go with business or law school. There's even a pharmacy school option for those who excel at that kind of thing. The median CFP salary of around $67K simply doesn't warrant spending nearly 8 years of education. I guess there's a difference in that you can still make money while you are getting experience. I'm not sure how much money you can make while you are getting your experience.
Given the requirements, I can't understand why anyone would pursue the career. Maybe he/she had a Bachelor's Degree that isn't in demand? Even so, why not going into some of the above professions if you are looking to maximize your income potential.
At this point, I probably don't need to put this in writing, but this clearly not the kind of thing that I can do part-time to earn some extra money. As a software engineer with around 10 years of experience (admittedly I'm rusty since I've been focusing on personal finance), it would be kind of foolish to put this effort into something that would pay me less than I made 2 years out of college and far less than I could expect today. I suppose this is why I see some of my favorite personal finance gurus like Clark Howard label himself as a "Money Coach." Jean Chatzky and Suze Orman don't have the designation either. If you look at famous personal finance gurus, it's rare to find one with a CFP degree.
To a certain degree I understand the need to be stringent with the requirements. You are dealing with people's money and (not that) indirectly their livelihoods. It's a huge responsibility. However, the rewards don't seem to match the requirements. Not to be complete jerk, but I've listened to generic (not individualized) advice from many CFPs and found myself amazed by their advice. I've seen some suggest that managed mutual funds are worthwhile based on their past performance. I've seen others suggest that they saved a couple of thousand of dollars in their 20's and suggest that is definitively going to be worth hundreds of thousands of dollars later in life. It might be, but they are certainly make a ton of assumptions about investing performance (and almost always ignore to point out inflation).
This isn't to say that all CFPs are giving out questionable advice, but their extensive requirements are certainly not in keeping my own self-education, standards, and ethics.
The requirements are so restrictive that they exclude a lot of very obviously qualified candidates. I'm reminded of the famous Groucho Marx' quote "I don't care to belong to any club that will have me as a member." Except in this case, I wonder if I should employ someone to give me financial advice who chooses a profession that seems to vastly undervalue his/her time in relation to the education required to give such advice.
[Editor's Note: This title is a nod to Hero's Quest, one of my favorite Sierra On-line games... and yes, I don't recognize the copyright lawsuit that made them change the name. Since they had previous hits with King's Quest, Police Quest, and Space Quest franchises, Hero's Quest was a natural name.]
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