|2012 Household Financial Planning Survey Highlights Differing Interests Of CFP Board Versus CFPs, Documents America’s Financial Pain, And Shows No Increase In Financial Planning By Americans Since 1997 — But Planning Works|
|Friday, July 27, 2012 05:13|
The 2012 Household Financial Planning Survey paints a grim picture of the American household’s financial condition and deals a dose of bad news for financial advisors. Sponsored by the Certified Financial Planner Board of Standards and Consumer Federation of America, the survey was last conducted in 1997, a much better time for Americans and advisors. Data documenting the deterioration in the American household’s fiscal wellbeing overshadow the main highlight of the survey results: that people with comprehensive financial plans are more confident about their finances, save more, and are better able to meet their financial goals.
“Still feeling the effects of the Great Recession, many American families today struggle just to make ends meet,” says the opening line of the executive summary.
“Our new survey documents the economic pain people are feeling,” according to the survey report prepared by Princeton Survey Research International. “In 2012, households where people live from paycheck to paycheck outnumber those where people feel financially comfortable (38% versus 30%). Fifteen years ago, when economic conditions were much more positive, these numbers were reversed — fewer people described themselves as financially struggling than said they were living the good life (31% vs. 38%).”
Other bleak statistics showing the pain people feel today versus 15 years ago: In 1997, 50% of non‐retirees expected to retire before they turned 65 versus 34% today; 15% thought they would not be able to retire before age 70 versus 27% today; 4% of those not yet retired thought they would not ever be able to stop working versus 15% today.
Conducted by phone in May, the survey was a random sampling of 1,508 households. The summary report divides the respondents into four categories of annual income: $24,999 or less, $25,000 to $49,999, $50,000 to $99,999 and $100,000 or more. The focus on lower- and middle-income households and the data present a compelling case for the benefits of comprehensive financial planning for the masses.
“Financial planning is often seen as a tool for the more affluent, but the survey provides strong evidence that those with modest incomes also benefit,” says the report. “Among those in the $25,000‐$49,999 income category, 46% of those with a plan say they usually pay their credit card bill in full each month, compared with 26% of non‐planners. The margin is 41% to 16% between planners and non‐planners in the under $25,000 category.”
However, the findings highlight an underlying problem for financial planning professionals. The CFP Board is a professional licensing body that must act in the public’s interest. As such, the CFP Board’s focus on the broad spectrum of American households is necessary, appropriate, and in line with its mandate to serve the public.
But where does the CFP Board’s mandate leave CFP professionals paying the Board’s $325 annual license fee?
The differing interests of the CFP Board and CFP licensees are highlighted by the survey’s findings.
As admirable as it is for the CFP Board to survey the broad population, it does little to help CFPs. Households with less than $25,000 or even less than $50,000 are of little interest to CFPs because practitioners have not figured out how to serve those individuals. In fact, many CFPs have no interest in serving households with less than $100,000 of household income.
Maybe the gulf between CFP Board and CFP licensees can be bridged as the Internet makes comprehensive financial planning possible for the masses. Then perhaps instead of 66,767 CFPs currently licensed, the CFP could be licensed by 100,000 or 150,000 financial professionals. But what would such growth do to the profession? How would it affect the income of CFP designees?
Perhaps the most troubling question posed by the survey to CFPs is why financial planning has not caught on with Americans. “The percentage of American families who have made a comprehensive financial plan — either on their own or with professional help — has not changed significantly from 15 years ago,” according to the report. “Overall, only about a third (31%) of decision‐makers today report having ever put together such a plan.”