The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

What’s The Point?

01/30/2020

In 1988, I completed my financial planning studies and proudly earned a CFP certificate.  Over all those years, I have enjoyed the prestige of being certified, even as the costs increased, the red tape mounted and the continuing education droned on.  Last summer, I was asked by Old Dominion University to teach the capstone course to students preparing to take the two onerous 3-hour exams.  Being asked to teach that particular course was an honor!  At first, I was excited, as I remembered how much I enjoyed teaching economics at the University of Texas in Arlington, as well as the American Institute of Banking.

Reflecting on the difference in teaching economics and teaching financial planning, I realized my love of economics was far greater than my love of financial planning.  Economics is a living, breathing invisible force-field all around — all of us, all the time.  Financial planning is a lot of often arbitrary rules, used to help people.  I like financial planning, but I love economics.

Taking a required continuing-education course recently, I realized that I have come to resent the time spent studying something I didn’t love.  I declined to teach the course at ODU.  Now, I’ve decided not to renew my CFP certificate.

Several friends have asked me if I have outgrown the CFP.  Maybe, but I think not!  I have so much respect for my fellow CFPs!

There is a large body of information needed for financial planning.  In 1988, the over-priced books for the CFP coursework were my primary source of information.  Today, the internet is much better.  The body of knowledge exists without any CFP designation, which remains as a great marketing tool that don’t need.

Since I’m not required to forget everything I’ve learned over the last three decades, I will continue to do financial planning, albeit without the CFP after my name.  On the other hand, I will maintain my CIMA certification as a Certified Investment Management Analyst, as that field is a deeper dive into investments and closer to economics.

The CFP designation requires mastery of five different fields of financial planning.  The CIMA designation requires an in-depth understanding of portfolio construction, as opposed to security selection.  I have long been a student of the Nobel prize wining Modern Portfolio Theory by Dr. Harry Markowitz, which demonstrated that long-term investment returns can be increased, while risk is decreased, over the long term, by wise allocation across multiple asset classes.  The problem is how much of each portfolio goes into each asset class.  There are software programs (called optimization software) that promise the answer, but it relies on asset class volatility.  My suspicion is that it could be based on econometric modeling.  I would rather work on that, than memorizing IRA distribution rules, which I can easily look up on the internet.

In addition, the whole new world of crypto-economics is fascinating.  It is certainly more interesting than  marginal income tax rate arbitrage of “back-door” Roth IRAs.  What’s the point of studying what I can just “Google”?

So, with great appreciation and a lingering sadness, I will give up my CFP.

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