Understanding the Critical Skills Clients Value in Their Financial Planners

As part of its responsibility to set and uphold high standards for CFP® certification, CFP Board conducts periodic Practice Analysis Studies. These studies help us ensure that the CFP® certification requirements reflect current practice. We use the results to verify and update the content of CFP Board’s certification requirements. This includes our list of Principal Knowledge Topics, which are the topics covered by the curricula of CFP Board Registered Programs, assessed on the CFP® exam and accepted for continuing education credit.

The results of our latest Practice Analysis Study were released earlier this year, and our list of Principal Knowledge Topics was updated with an important new domain: Psychology of Financial Planning.

The Practice Analysis Study primarily reflects the input of CFP® professionals and others within the financial planning profession. As we looked at the skills and attributes that make up the competency framework, we recognized that its value goes beyond the professional development of financial planning professionals. These competencies provide great value to the clients served by financial planners.

 

As part of this latest study, CFP Board also took a bold step forward and sought to identify and validate the competencies that financial planners use to successfully apply their financial planning knowledge in their interactions with clients. CFP Board’s first Financial Planning Competency Framework is made up of three clusters:

1. The Technical cluster includes competencies related to financial needs analysis, financial advice and technological savvy,
2. The Interpersonal cluster includes competencies related to coaching, emotional intelligence and consulting, and
3. The Leadership cluster includes competencies related to professionalism, integrity and client advocacy.

Together, these critical skills enable financial planners to achieve high performance. But they also provide great value to clients.

The Practice Analysis Study primarily reflects the input of CFP® professionals and others within the financial planning profession. As we looked at the skills and attributes that make up the competency framework, we recognized that its value goes beyond the professional development of financial planning professionals. These competencies provide great value to the clients served by financial planners.

To explore the competency framework from a consumer perspective, CFP Board commissioned a survey dedicated in part to identifying the critical skills and competencies valued by clients of financial planners, and to gauge clients’ satisfaction with how their financial planners demonstrate those skills and competencies.

Critical Skills Most Valued by Clients

We were pleased to find that overall, the Competency Framework resonates and covers most client needs. The study found that Integrity is the most important competency area for those working with a CFP® professional as well as those working with a non-certified advisor.

For those working with a CFP® professional, the Financial Advice competency is the second most important, followed closely by Professionalism, Financial Needs Analysis and Consulting. Those working with a non-certified advisor also give high ratings to those areas. The study also found that those working with a CFP® professional not only place higher importance on all competency areas, but also have higher satisfaction with their advisor’s competency across all areas, compared with those working with a non-certified advisor. For example:

• 84% of those working with a CFP® professional are very or extremely satisfied with their advisor’s Financial Advice competency, compared to 72% of those working with a non-certified advisor.
• 92% of those working with a CFP® professional are very or extremely satisfied with their advisor’s Integrity, compared to 81% of those working with a non-certified advisor.

The Intersection of Importance and Satisfaction

Financial Advice, Consulting and Financial Needs Analysis are the competencies where importance and satisfaction scored highest among clients working with a CFP® professional, compared with those working with a non-certified advisor.

Those competencies also relate to the topics and critical skills addressed in the new Psychology of Financial Planning domain of the latest Principal Knowledge Topics. The new domain incorporates a number of topics and skills that were part of prior Principal Knowledge Topic lists, which CFP® professionals have been trained on, such as:

• Client and planner attitudes, values and biases,
• Behavioral finance, and
• Principles of communication and counseling.

The new domain also adds additional areas such as sources of money conflict and crisis events with severe consequences.

While the study suggests that a financial planner’s understanding of the Psychology of Financial Planning and related critical skills will be important to financial advisors’ careers moving forward, it’s not enough for financial planners to have knowledge and expertise in technical matters. Financial planners need to be sensitive to and understand the emotional context of money and finance. Both knowledge and interpersonal competencies are necessary to provide good service to financial planning clients.

Other Findings

The study also found that Communication is an especially critical skill, as proactive communication and responsiveness can make the difference between exceptional service and service that is only adequate – or even lacking. Consumers who are exceptionally satisfied with their advisors provided comments such as, “Anytime we have questions he gets back to us quickly and is able to satisfactorily answer our questions.” Compare that to comments from consumers who are adequately satisfied with their advisors: “There is not an overwhelming sense of communication with my current financial advisor. I feel as though I should be receiving a more customized level service.”

Moreover, the study found that procrastination, uncertainty/difficulties with execution or lack of clarity about the recommendations keep some people from acting on their plans. Many of these obstacles could be overcome through the skills associated with the consulting and coaching competencies that are part of the Psychology of Financial Planning domain.

CFP Board’s Principal Knowledge Topics have included elements of Psychology of Financial Planning for many years, and it appears that CFP® professionals’ psychology-related skills and competencies may contribute to higher client satisfaction. The study found that clients of CFP® professionals rate the value of service received higher than clients of non-certified advisors (84% compared to 70%), and clients of CFP® professionals report they are more likely to recommend them to others than clients of non-certified advisors (86% compared to 67%).

Financial planning is a client-centered profession. Financial planners not only need knowledge about financial strategies, but also must possess the skills and competencies required to learn about a client’s needs, goals and motivations before making recommendations. The new Psychology of Financial Planning domain will contribute to a future where clients value the services they receive from CFP® professionals even more than they do today.

---

A shorter version of this article was originally published on LinkedIn.

About the Author: Kevin Keller, CAE is Chief Executive Officer of CFP Board. CFP Board’s mission is to benefit the public by granting the CFP® certification and upholding it as the recognized standard of excellence for competent and ethical personal financial planning.