Certified financial planners undergo rigorous training to provide financial advice to their clients, and CFPs are often considered the gold standard for financial planners.
But very few are black.
Black certified financial planners account for just 1.8% of certified financial planners, or just 1,652 out of a total field of 92,000, according to the CFP Board of Directors.
There are many barriers that prevent Black financial planners from seeking accreditation, ultimately harming many Black Americans who may be less likely to seek out financial planners who do not understand their unique financial needs or experiences.
“I want to be a financial planner for the rest of us,” said Lazetta Rainey Braxton, a CFP and president of 2050 Wealth Partners. “I have black clients who are often first-generation wealth builders who are part of the sandwich generation and who care about their parents and children.”
barriers to entry
There are a number of steps to be taken to become a certified financial planner. Applicants must have a bachelor’s degree in any field and complete the CFP Board coursework, after which CFP applicants may take the test.
The 10-hour pass/fail CFP test consists of 170 multiple choice questions and is offered three times a year in March, July and November. According to the CFP board of directors, as of November 2021, the test pass rate is only 58%, and the standard test registration fee is $825, which may be prohibitive for many black applicants.
“Finding the time and resources to pass the exam is a huge challenge,” said James Brewer, CFP, founder of Envision Wealth Planning. “We don’t need an easier test, we need to help people pass the test.”
In addition, CFPs must complete 6,000 hours of professional financial planning or 4,000 hours of educational experience, which can take up to three years.
“It’s a tough profession,” Brewer said. “Before I’m a CFP, you must believe in me enough to invest your money. Not many black CFPs have friends with $250,000 to invest with them.”
Braxton agrees that the commitment, lack of pay, and professional connections during the three years of work experience may deter black students from applying to be CFPs.
“Gaining three years of experience in this field can also be a challenge. You pass the test, then you have to find people to train you to get your certification,” Braxton said. “How do you get the experience when you need a network?”
Black CFPs can help a wide variety of financial planning clients
The Federal Reserve found that the average net worth of black people was $24,100, a fraction of white people’s $142,500 wealth. Because of the systemic obstacles they face, Black Americans are often excluded from building financial security. A Black CFP who understands the challenges they face is better able to meet them.
“I want to serve underserved populations. Talking to people allows me to dive into their stories,” Brewer said, noting that minority customers often tell him, “I’m glad I met you.”
Black clients may have cultural differences around money that make it easy for black CFPs to empathize with clients while also advising them, Brewer said.
“They may be supporting their whole family. For black people, there’s a cultural expectation that we have to have the drive, we have to have the clothes, we have to live in a neighborhood that owes us,” Brewer said.
Braxton also reaches out to black clients who don’t have the generational wealth that white clients do, and who are often overlooked by other financial planners. She also advises black CFPs to offer seminars to teach potential black clients about financial planning.
Not only do black clients need financial planning from CFPs they can identify with, but Brewer also noted that clients of all races can benefit from financial planners from diverse backgrounds. For example, many white customers sought out Brewer after the 2020 racial bill, which began after the murder of George Floyd.
“There has been a post-George Floyd movement. I’ve seen more and more people looking for an African American financial advisor,” Brewer said.
Progress has been made, but more changes are needed to add more black CFPs
The certified financial planning field enhances its diversity with Kamila Elliott, the first black chair of the CFP Board of Standards.
Although there is a small number of black CFPs, there was a 10% increase in 2021. The CFP is also adding diversity and inclusion programs to attract more minority students to careers in financial planning.
Brewer noted that there’s still a cultural bias that needs to be addressed when clients imagine what a CFP looks like — from both white and black clients — with the latter potentially being more risk-averse and requiring more time to build trust.
“I walk into the room and customers are often surprised to see a CFP that looks like me,” Brewer said. “Black clients may have trouble trusting me because I give them advice that may not be intuitive to the financial advice they have received from other advisors.”
Brewer said that even if it’s challenging for black CFPs once they have resources, it’s worth getting into the field. He recommends that black students take college finance courses and do internships with financial planning firms to learn about the profession.
He also recommends that applicants take the CFP test after their bachelor’s degree to ensure they don’t regret investing three years in the profession during their undergraduate degree. He advises prospective CFPs to work as a Registered Investment Advisor so they can make money during the CFP process. You should also join the Association of African-American Financial Advisors organization to find mentors in the industry.
Braxton also wants the industry to have more outreach programs to attract more black CFPs.
“I’ve seen some grants, particularly in CFP board meetings with some financial companies,” Braxton said. “I appreciate more advertising with people of color so that you can see what you can do.”
Ella Vincent is the personal finance reporter for Yahoo Money. Follow her on Twitter @bookgirlchicago.
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