Financial Advice

Will advisors follow the plight of MBAs?

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Adam Singer writes on Substack, and his work on the value of an MBA this past week deserves a read. His recent post includes a piece from the Wall Street Journal that featured the plight of the higher-educated, jobless class. I live in the supply side of this world, benefit from it, and have observed that B-schools are good at running their businesses. Practice from theory is well done on Mockingbird Avenue in University Park, TX. Our administrators know how to sell seats. Not just at SMU. Look no further than specialized graduate degrees in Business Analytics that have proliferated everywhere.

Often left unsaid is what B-schools at universities really offer employers: a signal. Identifying talent is a tricky endeavor that requires search costs. In his paper, “The meaning of higher education credentials in graduate occupations: the view of recruitment consultants,” Gerbrand Tholen offers background on educational theory that he tests with data collected from hiring consultant interviews. It is a small sample, but there is strength in Tholen’s presentation of how education matters to employers. As Tholen writes, educational pedigree informs employers about “proof of productive skills (Human Capital Theory), as a signal of desirable characteristics (Signalling and Screening theories) or as a means for social closure (Closure Theory).”

Education in the Personal Finance World

This moves us to financial advice. How does a household identify a good financial planner? Few universities offer undergraduate education in financial planning, and very few have graduate offerings. Beyond a traditional undergraduate degree in finance, the education of future investment advisors resides in licensing hurdles, company training, and the CFA credential. At the same time, financial planners tout the significance of the CFP professional credential.

Like Adam Singer’s conclusions about a “show me what you’ve done” business professional, a well-experienced financial planner is a good start. Throw in some natural brilliance, a desire to serve customers, and a needs-based economics approach to financial planning, and you’ve got a package of signals to trust, regardless of a planner’s credentials.

This is a good time to reintroduce the Monte Jackson story. It is available to all subscribers and offers a menu of what to look for in a financial planner and advisor.