The academic community is doing its part to fill the growing need for more financial advisors.
With numerous studies suggesting there could be an acute shortage of financial advisors as the baby boomer generation of advisors retires from the industry, universities and colleges are launching new financial-planning programs and educating more students specifically for a career as a financial advisor.
“I’m amazed at how fast it’s moving. We’ve seen very strong growth,” said Charles Chaffin, a Ph.D. and director of academic programs and initiatives at the Certified Financial Planner Board of Standards. The board sets standards for the profession and certifies institutions to offer programs of study in the field.
“It’s clear that university administrations and faculty at institutions who wouldn’t have embraced the idea five or 10 years ago are now open to it,” he added.
Since Chaffin joined the CFP Board four years ago, the number of institutions offering undergraduate degrees in financial planning has risen from 90 to 124. Another 52 programs—most planning to offer degrees—are in development. Currently, 48 institutions offer a master’s degree in financial planning, and five have a doctorate program.
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One reason more universities are launching financial-planning degrees is that, in the post-financial-crisis era, the $50,000-per-year “degree to nowhere” is getting harder to justify. Job opportunities matter.
“They’re being held more accountable for the placement opportunities available to their graduates now,” Chaffin said.
While finance and marketing graduates are having a much tougher time landing good job offers, financial-planning graduates are swimming in them.
“Parents tell their kids to study business or marketing, but we have the job opportunities,” said Lukas Dean, an assistant professor at William Paterson University who specializes in personal financial planning.
He estimates that the typical graduate from his program has between four and five job offers from which to choose when they leave school.
“Our students and graduates are having paid internships and job offers rained on them,” Dean said.
Historically, college campuses have not been a favored hunting ground for advisory firms, particularly commission-based firms emphasizing investment sales. Recent graduates lack experience and have limited networks of friends and colleagues who could become potential clients.
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As the industry has shifted toward fee-based planning, however, the interest in financial-planning graduates is now coming from all corners of the market, including wirehouses and broker-dealers.
“The industry recognizes that it can’t do things the way it did in the past,” said certified financial planner Deena Katz, a professor in the financial planning department of Texas Tech University and chairman of Evensky & Katz Wealth Management.
College graduates “may not have experience, but it’s better to have people who understand the profession,” Katz added. “If firms took half the money they spend on recruiting and invested it in ‘next-gen’ advisors, they would be amazingly successful.”
The growth in financial-planning programs at universities has been impressive, but only a little more than two institutions per state, on average, now offer the degree.
With the biggest programs graduating maybe 30 students per year, and the rest far fewer, the total number of financial-planning graduates in the country is probably less than 1,000 annually. For an industry anticipating a potential shortfall of more than 200,000 advisors in the next decade, the number barely puts a dent in the problem.
The 186 mostly online financial-planning certificate programs offered to working students and/or career-changers still produce more certified financial planners than the degree programs.
About 58 percent of people who earned their CFP designation last year came from certificate programs versus 42 percent from degree programs, according to Chaffin.
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Despite the clear demand for graduates with a financial-planning education, launching a new program and hiring faculty is still a hard sell to budget-constrained university administrators. “They have to take food off someone else’s plate,” said Dean, a doctoral candidate in the Texas Tech program. “There’s always a fight when the budget is tight.”
Texas Tech is ground zero in the effort to build a broader academic infrastructure for financial planning. It is one of only five institutions offering a doctorate in financial planning.
“If we don’t prepare a new way for young people to enter the profession, we won’t have a profession.”
Dean and other alumni from the school have been helping to develop programs at other institutions. Most recently, Texas Tech financial planning Ph.D. Jacob Sybrowsky has helped Utah Valley University build a program with five faculty members and more than 100 students.
At the end of the day, however, the colleges and universities will be only a part of the solution to the industry’s looming labor shortage. “We’re not going to get all the advisors we need from the universities,” Katz said. “But if we don’t prepare a new way for young people to enter the profession, we won’t have a profession.”