While the share of advisors with the CFP marks has risen steadily over time, today, about 2/3 of financial advisors are not CFP professionals. This means that, for most advisors, the decision to obtain this designation remains an open one. A crucial factor in an advisor's decision to prepare for the CFP exam – often requiring them to sacrifice evenings and weekends to complete the requisite coursework (which can take more than a year), and spending many thousands of dollars – is whether they will actually earn more as a result of doing so.

According to the 2022 Kitces Research Study on Advisor Productivity, CFP professionals take home more money per hour worked than non-CFP professionals, with this gap being substantially larger for service advisors than senior advisors. The typical service advisor without CFP certification earns $48.83 for every hour that they work, compared to $86.30 for service advisors with the CFP marks – a difference of $37.47, or a whopping 77% boost in income per hour! The typical senior advisor without the CFP marks earns $112.47/hour, compared to $120.00 for CFP professionals, a far more modest difference of only $7.53.

In this article, Michael Kitces and Mark Tenenbaum (Director of Advisor Research) explain this disparity in earnings per hour – dubbed the "CFP Productivity Gap" – and how it appears to be driven by explanations stemming from both the skills that CFP practitioners develop and deliver (supply-side explanations), and the preferences of clients – especially more affluent clients – when selecting an advisor to work with (demand-side explanations).

Specifically, service advisors with the CFP marks appear to spend more time on key revenue-generating activities such as meeting with clients and prospects and generating financial plans, and that these hours are put to good use because those CFP professionals both offer financial plans that are more comprehensive and update clients' financial plans more frequently than non-CFP professionals. As a result, teams with service advisors who hold the CFP marks tend to attract significantly more affluent clients than teams with non-CFP certificants, with a median client AUM of $1,000,000 AUM versus $250,000 AUM, respectively.

These wealthier clients also tend to pay substantially higher fees, which has a key implication for firms looking to attract and retain affluent clients: hire CFP professionals or help existing employees who have yet to earn their CFP marks obtain them. The knowledge obtained through CFP certification can forge a more planning-centric practice, offering financial plans that are more comprehensive and updated more frequently – which are clear value-adds for high-net-worth households who often have complex planning needs. Crucially, the research shows how the cost of employing CFP professionals (who command higher salaries than their counterparts without the CFP marks) is substantially lower than the revenue firms generate by employing them.

The CFP Productivity Gap also has profound ramifications for the income growth of service advisors throughout their careers. While senior advisors tend to see income growth over time regardless of their CFP certification, non-CFP professionals fall farther and farther behind their counterparts who are CFP practitioners over the course of their careers. Indeed, for service advisors, the CFP Productivity Gap grows from an earnings difference of $8/hour for those with less than 8 years of industry experience to over $50/hour (which adds up to $100,000+/year in greater earning potential) for those in business for 20 or more years. Hence, CFP certification appears to be a crucial vehicle by which service advisors can experience continued income growth over time without stalling out.

The key point is that service advisors earn substantially more by obtaining the CFP marks and firms are likely to benefit from supporting them in doing so. This helps the firm expand its teams of service advisors who can take on and support the firm's most high-dollar clientele. Which, in turn, frees up the capacity of senior advisors to continue to bring in clients and grow the firm further!

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For most of its history, the financial advice industry has been very slow to change. Over the last 50 years, even the most substantial changes to occur – such as the movement away from commissions and towards fee-based compensation, and the shift from an investment-centric approach to more holistic financial planning – have taken place over decades and, in many cases, are still ongoing. In the last few years, however, the pace of change seems to have quickened considerably, as the technology landscape has mushroomed, and private equity funding has fueled an unprecedented surge of mergers and acquisitions that has reshaped the competitive landscape.

For many business leaders, the standard playbook for dealing with changes such as those the advisory industry faces today has been based on John Kotter's change framework, which supports organizational change and alignment with a strategic vision that ultimately helps the business move forward. But while Kotter's model may work well for larger firms with ample resources and people available to enact change, it can be less effective for smaller organizations with fewer people available to create coalitions for change (and where the power to block change might even be concentrated among one or a handful of executives or owners).

Therefore, those at smaller firms who want to promote change may benefit from a framework based on an "Agile Change" model adapted for smaller firms. In this model, the groundwork for change is first established by assessing the situation (e.g., reviewing external factors like best practices and services or technology solutions available, as well as internal factors like the current pain points employees have with existing processes or technology), then using that information to communicate the importance of change to create a sense of urgency and build buy-in from the ground-level stakeholders who will be affected by the change. Additionally, those promoting change can be very clear about what the process will entail and how it will be implemented (with the caveat that the plan needs to be flexible to allow for change as conditions evolve).

Ideally, the result of all this groundwork is that when explaining the change process to higher-level management and firm leadership, there will already be solid evidence of the support for the change within the organization and the positive impact it can (or has already served to) create, making it more likely to achieve crucial buy-in from the top needed to go through with the change. Once the change process is implemented, it's critical to track the progress and assess the results so that refinements to adjust and improve the process can be made and, in the best case, can enhance buy-in even more. Eventually, the change becomes part of the normal business process to the extent that it is baked into job expectations with negative consequences for employees who don't buy into the change, setting the stage to begin the next iteration of change as the firm grows and evolves.

The key point is that even as situations develop rapidly and necessitate constant changes – both large and small – the process for dealing with these changes can be systematized in a way that ensures that the people who need to buy into the change, from the bottom to the top of the organization, actually do so. Although it may take time to lay the groundwork and build support for change before actually trying to implement it, these steps can be crucial to ensure that the change is accepted even among team members who may be less eager to change how they work. Which will ultimately make it easier for the firm to make the changes needed to adapt (and succeed!) in today's rapidly changing advisory industry!

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