When Darius Sanandaji, born in Iran, educated in England and the United States, first opened an account with a broker more than 30 years ago, he understood little about how brokers worked, despite his master's degree in international finance. To be blunt, Sanandaji says, “I had no idea about nothing.”
“I'd get calls just about every week, and trading would occur because I believed they [the brokers] were connected to good information,” says Sanandaji. That was until he realized he'd lost $25,000 as a result of the hyperactive trading in his account.
Ten years later, after another dismal experience, Sanandaji decided to become a broker — the right way. He would be, he pledged, an educated broker, who took the time to give his own investment intuition an academic base to stand on. Now, the Oak Brook, Ill.-based Morgan Stanley rep manages a $260 million book and has been named an “Outstanding Broker” by Registered Rep. (see page 43).
Sanandaji, who earned his Certified Financial Planner (CFP) designation in the early 1980s, was among the first batch of Morgan Stanley brokers who went to the University of Pennsylvania's Wharton School of Business to become Certified Investment Management Analysts (CIMA). “That program was really instrumental in me changing my business,” says Sanandaji. “I was much more comfortable about approaching managed money.”
Sanandaji was on the forefront of a back-to-school movement that has been inspired largely by changes in the clientele that major brokerages cater to. When Sanandaji was coming up in the business, in fact, wirehouse brokers were often discouraged from pursuing advanced certification — or anything else that would divert their attention from generating commissions. Now, more and more brokers are getting advanced training, and increasingly with firm sponsorship. In 2001, nearly 3,000 people passed the CFP exam, compared with 1,166 in 1996.
They're doing it because the much-desired “mass affluent” client already knows how to buy — and lose money on — the stock du jour. What the mass affluent — those with $250,000 to $500,000 in assets — desires is a greater depth of advice on taxes, estate matters, college saving plans and other vexing financial events. The best way to find solutions for this wealthy group is with a fee-based, consultancy model using outsourced professional money management — or at least that's what Street management believes.
| Designations | Recipients |
|---|---|
| CFA | 44,300 |
| CFP | 39,200 |
| CHFC | 37,000 |
| CIMA | 1,850 |
| AEP | 1,200 |
| Sources: CFP Board, AIMR, American College, IMCA, National Association of Estate Planners and Councils | |
And the best way to gather assets is to hire enlightened brokers and turn them loose. While recruiters say brokerage houses generally aren't looking at your educational pedigree when you're hired, if you don't have degrees, you're going to go back to school.
“There's been a tidal shift in terms of the way the corporate financial community thinks,” says Stewart Welch, president of the Welch Group in Birmingham, Ala. Five years ago, he says, “they didn't want their people distracted by doing all this planning. But all the major firms have seen the success of the RIAs, turned the business around and said, ‘this is a better mousetrap.’”
The question is, what do all these degrees do for you? First off, on a pure marketing level, degrees look good. “As much as I hate to say it, the public doesn't know what these mean, but having a batch of them after your name is impressive,” says Mark Snyder of Mark J. Snyder Financial Services in Medford, N.Y., who counts seven designations to his name, an educational process that has kept him in classrooms and self-study programs more than 25 years. (Snyder, too, was selected as an “Outstanding Broker,” see page 35.)
However, just adding one set of initials doesn't necessarily mean clients are going to come beat down your door. But the added knowledge, some say, has the effect of making better brokers. “There was a significant difference for our brokers who completed their CFPs when measuring their production compared to prior to getting into the program,” says Chuck Gronigen, head of broker training for A.G. Edwards.
Advisors believe that the CFP, because of its high profile and status, confers the best combination at this time — recognition by the public and its educational component. (That's to the chagrin of those who support the ChFC, Chartered Financial Consultant, because it includes the same courses of study for the CFP, plus a few others centering around insurance.) People from related professions are centering on the CFP, including accountants and insurance agents.
“Most firms are now requiring people to get the CFP,” says Thomas Langdon, associate professor of taxation at the American College in Bryn Mawr, Pa., which teaches curriculum for the CFP, ChFC and other degrees. “Or, they're making it unpalatable not to have it.”
A number of firms, including Morgan Stanley, A.G. Edwards and Merrill Lynch, have programs that will, in one way or another, cover the material needed for the CFP. Merrill and Morgan include it in basic training. A.G. Edwards' training qualifies brokers to become Accredited Asset Management Specialists, a less rigorous program offered by the College for Financial Planning.
However, Edwards, like others, has a deal with the college to unbundle the units of the CFP program, and is starting to award internal designations to brokers as they complete one of the five steps toward the CFP. The first of these accreditations — retirement planning — will be rolled out in June, says Gronigen.
Meanwhile, Merrill is providing incentives for brokers to get the CFP, offering a $100,000 certificate for brokers who, by their fifth year of service, obtain the degree, which only has a 58 percent pass rate. Other types of firms are doing it too: State Farm Insurance sponsors training for the CFP for its agents and employees.
Taking It
Further
These days, though, many financial planners aren't stopping with the CFP, which is becoming the benchmark. Brokers who want to promote their educational background are adding even more designations to their CVs.
“You distinguish yourself by the services you provide uniquely to your clients,” says Welch. “I think, ultimately, that the CFP will begin to launch advanced programs in specialty areas; they'll say, ‘You've got the CFP, now, we'll allow you to get a master's.’”
Something of that sort is already established inside a number of Wall Street firms. Merrill awards designations such as the Private Wealth Advisor and the Wealth Management Advisor, geared toward individual clients with several million dollars in assets. Morgan Stanley has several designations, including the Senior Consultant, which involves expertise in separately managed accounts (similar to the CIMA title).
Meanwhile, nationally recognized advanced degrees focusing on wealth management, estate issues and investment management are growing in popularity. Among those are the CIMA and the Accredited Estate Planner (AEP) programs.
Currently, 1,850 people hold the CIMA, says Evelyn Brust, executive director of the Investment Management Consultant Association. About 90 percent of the 550 people expected to enroll this year will past the test. They offer 11 classes a year through Wharton. With the wirehouses reserving more than half the available classes, there's a waiting list of several months now.
Managed accounts expected to grow to $1 trillion in four years and the skills involved in the analysis of portfolio managers is growing in importance. Merrill rep Elizabeth Weiner-Schulman of Tucson, Ariz., says her CIMA enhanced her understanding of concepts such as assessing risk management, the volatility of stock portfolios and viewing a portfolio through the eyes of the manager. In such a complex area of money management, the CIMA also has the benefit of affirming her own instincts. “It provides you with the education that allows you to have your gut to speak and your brain to back it up,” she says.
But while the knowledge aspect of the various accreditations is well-known, many say it doesn't really confer upon the newly minted CFP, CIMA or whatever any particular wisdom in terms of how one sells themselves. As Lloyd Painter of Painter Financial in Greenville, Ky., holder of six designations, says, “I don't know that it makes you worth more money. Some people you deal with appreciate what it takes to get and maintain them, and most do not.”
Recruiters generally agree. They say Wall Street firms look upon degrees favorably but in no way are they the first thing a prospective employer is checking out. “The firms are looking more for fee-based, managed money business,” says Mindy Diamond, head of recruiting firm Diamond Consultants. “It's all about production and how that relates to assets.”
But the asset mix that broker/dealers are looking for dovetails with the people who would be getting degrees. How one leverages those degrees is another story. Anyone can go elephant hunting, but without the proper artillery, it's going to be a frustrating hunt.
From his experience, Ted Ridelhuber, president of the Cannon Financial Institute in Athens, Ga., which trains brokers, says education in topics such as business succession planning, charitable giving, titling of assets and other issues are what gives the planner the confidence to successfully go after wealthy clients. “We work with people to get their CFPs, but also talk about how you use it to grow your business,” he says. “Part of that is sourcing, as well as then being able to find attorneys and others to provide other services for clients.”
Barring that, a more old-fashioned approach is still needed: Market the hell out of yourself. “When I got my CLU in 1976, I thought all these people were going to beat down my door, and boy, was I disappointed,” says Snyder. Now, because of extensive marketing, his seven designations means that “they're somewhat pre-sold when they walk in the door,” although he, like others, says that's not the whole battle. “I have to make sure I'm the right person for them.”
Ridelhuber agrees. “I don't think that because you have a CFP behind your name a client worth $100 million is going to say, ‘I want to talk to you,’” he says. “When you're able to talk about how you want to work with a client, and you show that by example of the things you bring up, that's when you understand you're able to work with them.”