For advisors, and their clients, continuing education is certainly a good thing. But does all that learning pay off? It all depends on the designation.

To analyse the value of professional designations in the context of this year’s roster of Report Cards, Investment Executive merged all the responses to the various Report Cards (brokerage, planners, account managers, insurance advisors and regional dealers) and then segmented the total retail advisor population by designation rather than industry. Advisors were sorted into three categories: those with financial planning designations (certified financial planner, registered financial planner and professional financial planner); portfolio management designations (chartered financial analyst, Canadian investment manager, fellow of the Canadian Securities Institute and financial management advisor); and insurance credentials (chartered life underwriter and fellow of the Life Management Institute).

The results show that, despite all the talk about the importance of financial planning, it’s portfolio- management expertise that correlates with bigger books. That’s not to say that achieving these designations is the reason these advisors run the biggest books. But the advisors who hold these designations clearly outpace the rest of the field in assets under management.

The data show that those with portfolio-management credentials have much bigger books, have more productive books and skew more distinctly toward high net-worth clients. Comparing the CFAs, CIMs, FCSIs and FMAs with the overall advisor population, the former group’s books are about twice as big; they average $95.5 million in AUM, compared with $48 million in AUM for the total population. Throw in a smaller-than-average client base — 393 clients for the CFA/CIM crowd vs 471 overall — and their average AUM per client, based on individial averages, is also more than double that of the rest of the field — $345,449 compared with $172,572.

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The much higher level of productivity reported by these advisors (as measured by AUM per client) is reflected in the distribution of their accounts, too. The CFAs/CIMs report that just 32% of their accounts are worth less than $250,000. That’s far below the average advisor, who finds that 53% of accounts fall into the smallest category.

The CFAs/CIMs outpace the average advisor in every other account-size category as well — and their advantage grows as you get into the really big accounts. They hold a modest advantage in accounts in the $250,000-$500,000 range — 28% vs 23%. But that widens in the $500,000-$1-million range, with 22% of the average CFAs/CIMs’ book in that category, compared with only 14% for the average advisor. They almost double the allocation of the average advisor in the $1-million-$2-million range — 11% vs 6%. And they hold a more than two-to-one edge in the $2-million-plus range — with more than 7% of their books falling into this category, compared with just 3% for the overall advisor population.

If we further separate those with CFAs from those with CIMs, it’s clear that the CFAs are the cream of the crop — which is good news for those who have slogged through the notoriously gruelling course. All that effort does pay off.

Comparing CFAs with CIMs, both groups of advisors report similar overall book sizes — $97 million in AUM for CFAs, vs $95 million for CIMs. However, the CFAs are spreading this over a much smaller client base — they average slightly more than 300 clients, compared with the CIMs, which have slightly more than 400 clients on average. The result is a notable edge in productivity for CFAs, who average slightly less than $324,000 in AUM per client, compared with $237,500 for the CIMs.

This distinction also shows up in the account distribution within advisors’ books. The CIMs hold the edge in smaller accounts (57% of their accounts are in the less-than-$500,000 range, compared with 47% for the CFAs), although the two types of advisor are virtually equal in the proportion of $500,000-$1-million accounts they manage.

The CFAs hold a real advantage in the largest accounts; almost 30% of their book is made up of accounts worth more than $1 million. They edge the CIMs in the $1-million-$2-million range: 14.5% vs 13.1%. And they clearly outpace them in the $2-million-plus range: 14.2% vs 8.2%.

The high-end businesses the CFAs/CIMs are running also lead to differences in the way they are paid and how much, and in the types of investments their clients are making. They do far more fee-based work than the overall population. Fee-based arrangements represent 27% of their compensation, compared with 14% for all advisors. They also do notably more fee-for-service work and deal-based work. Transactions are still the biggest portion of their compensation, however, at more than 50% — significantly less than the two-thirds of revenue the average advisor derives from transactions.

@page_break@Of course, fees work out nicely when they are based on a large book and, indeed, the CFAs/CIMs do boast the highest annual compensation numbers. Only 20% of them are making less than $100,000, compared with 37% of all advisors. Moreover, 25% of the CFAs/CIMs are bringing in between $500,000 and $1 million, more than double the overall average of 11%. And 9% of them are making more than $1 million, vs 5% overall.

These self-styled portfolio managers also do a lot more direct investing than does the average advisor. Half of their AUM are directly invested in bonds and stocks, compared with only about one-quarter for the average advisor. They rely far less on mutual funds than does the average advisor; funds represent just 23% of their book, compared with 39% overall. And, while they use an average level of managed products (both third-party and proprietary), they sell notably less insurance.

These trends become more pronounced when we again break out the portfolio managers into CFAs and CIMs. While both groups rely much more on fee-based arrangements than does the general advisor population, the CFAs are getting more than 8% of their revenue from fee-for-service arrangements, compared with less than 4% for CIMs.

The CFAs are also notably heavier users of direct stock investments — 35.4% of their books is in stocks, compared with 28.7% for the CIMs. They also appear to use few managed products, other than mutual funds; just 2.2% of their books is in third-party managed investments, rising to 3.9% for proprietary products.

While the portfolio-management designations are clearly correlated with bigger books and more production, what’s just as intriguing is how that’s not the case for those with financial planning designations. Indeed, advisors with planning designations have slightly smaller books than the overall population that responded to our surveys.

Those with a planning designation reported having an average book of $43.5 million, compared with $48 million for the total advisor population. And these advisors average more clients on their books — 494 clients for advisors with planning designations, compared with 471 for the overall population — and their AUM per client falls short of the overall average, too.

The good news is that the planners’ estimated compensation breaks down almost exactly as it does for the overall average advisor, with 36% making less than $100,000, 47% earning between $100,000 and $500,000 and the rest pulling down the significantly high incomes.

One obvious reason for the big disparity between those with planning designations and those with portfolio-management designations is that the CFAs/CIMs are overwhelmingly brokers, with only the odd planner, insurance advisor, and even a banker or two thrown in. Yet the planning designations capture a much broader spectrum of the advisor population. Financial planners (fund dealers), account managers and, particularly, insurance advisors all have much smaller investment books than do bro-kers, on average.

Moreover, not many of the biggest brokers — those with portfolio-management designations — also have planning designations. A comparison of those with planning designations to those without them shows that the non-planners have more assets, fewer clients and, therefore, greater AUM per client.

It’s not just the presence of CFAs/CIMs in the overall population that makes the planners lag the average. Those with planning designations also have slightly smaller, less productive books than do those without any of the major designations (excluding those high-producing CFAs and CIMs). This, despite the fact that other demographics — such as age and time in the industry — are more or less the same for both groups. Thus, the lack of productivity is not attributable to a lack of experience.

The only group that the planners do beat is professionals with insurance designations, a group that’s made up largely of insurance advisors, who tend to have smaller books. Yet that lack of investment productivity doesn’t translate to their respective pay packages because insurance specialists are not as dependent on investments to drive revenue. Indeed, CLUs’ compensation profile more closely resembles the CFAs/CIMs, with just 21% earning less than $100,000 a year, and 53% generating between $100,000 and $500,000.

It seems that, while a financial planning designation may help advisors serve their clients, it doesn’t necessarily do much to help advisors serve themselves. If building the biggest book is your primary interest, it’s best to swallow hard and take a crack at the CFA. IE