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November 26, 2004

Who, Me? Back to School? (Part 2)

For those who are following along at home, earlier this year I completed the first of six classes in Florida State University's "Certificate in Financial Planning" course.

I previously discussed my "return to the classroom" in my IYM article from October 29, 2003. Since then, a few people have emailed to ask me what I thought of the FSU program and/or course.

I completed the first course ("Introduction to Financial Planning") in the CFP program, and at a total cost of something like $625 (course, textbooks, calculator, and all), I would say it was worth the money for anyone who might be considering a career in the financial-planning field.

There were about 115 students in the course. According to the students' online profiles, most were already employed in financial services in one way or another. If I recall correctly, it seemed like about 65 to 75 percent of them were employed in the mortgage industry and looking to "branch out." Most expressed an intention to pursue the CFP accreditation in order to help high-net-worth clients with investments, insurance, and other financial products. Only two of the students in the class publicly expressed the intention to use the CFP knowledge to help middle- and lower-income families. (Yes, I was one of the two. Not trying to get up on the proverbial "high horse" or anything, but I think this says more than a little about financial services today — and to whom they are catering.)

Particularly noteworthy to me were the collective responses from mortgage-industry folks to class questions and scenarios. The focal point of classwork was studying a fictional young couples' financial situation and then using textbook and course knowledge to provide the couple with prudent advice regarding various life situations. To say that the advice given by many of these students was "questionable" would be putting it mildly. I remember an instance where several mortgage-industry-mover-uppers were, in their calculations, considering the rising value of a home (rising 10 percent annually, of course) purchased in the future to be income which could be used to pay the couples' month-to-month bills now. If the couple were to go ahead and purchase their dream home, these students figured, the increase in bills would be more than offset by the home's rising equity, so buying the home would be a good move.

In my world, spending your home's equity (if you have any, that is) is a last resort. It's not like you can just reach into your wallet and pull it out at a moment's notice. And the rising (hopefully) value of your home should have nothing to do with how you pay your monthly bills. Yet my mouth dropped open again and again as I read answers from already-employed financial types whose "advice" would guarantee to lead these newlywed kids right into bankruptcy.

Another bit of dubious advice repeatedly given by financial-service-employed students to the fictional couple in the course:   Keep as much debt as you can on your house and invest the money in the stock market. I understand the theory here; it says that if you're paying 7 percent, tax-deductible interest on your mortgage, and money in stocks or mutual funds grows at 11 percent, you should maximize the mortgage debt in order to have more money in the market and thus pocket the 4 percent spread.

Hopefully you see the problems inherent with this. What if your market investments don't earn 11 percent annually? What if home values flatten or decline for an extended period? And what about the added risk of toting around a maxed-out mortgage and/or home equity line-of-credit . . . and then having something bad happen (job layoff, extended illness, etc.)? Well, the gurus say, you just yank the money out of the market as needed.

And if your investments have taken a bloodbath for some reason? You'll just have to eat the loss. (Of course your investments have gone down in value. Murphy was just waiting for you to take on extra risk, you know. And a maxed-out mortgage equals mucho extra risk.)

Aside from that, as far as content of the course, one can tell that FSU has put a lot of effort into their online CFP program. Professorial lectures were quite long and detailed, and added greatly to the textbooks. Classwork was mostly extra-credit, and of the problem-solving variety; student and professor responses were posted on bulletin boards for everyone to view and comment upon. Grading was done entirely from two multiple-choice tests, plus any completed extra-credit assignments.

All in all, I enjoyed the course immensely, and look forward to the next one. (Should cover insurance.)

Michael | November 26, 2004

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