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Personal financial planning Personal

financial
attitudes: a preliminary study planning
of graduate students
David S. Murphy 811
School of Business and Economics, Lynchburg College,
Lynchburg, Virginia, USA, and
Scott Yetmar
College of Business Administration, Cleveland State University,
Cleveland, Ohio, USA
Abstract
Purpose – The purpose of this paper is to report on a survey about the personal financial planning
attitudes of MBA students in the USA.
Design/methodology/approach – The study surveyed 206 MBA students about their attitudes to
personal financial planning. Participants were asked about their level of knowledge, whether they
had prepared components of a financial plan, where they might seek assistance in such a process and
the criteria for selecting a financial planner. In addition, participants were asked to indicate their level
of confidence in a financial plan’s capacity to help them meet their long-term needs and the likelihood
that they would implement such a plan.
Findings – The findings indicate that, while most respondents feel both that financial planning is
important and that they are interested in developing a financial plan, very few feel that they have the
necessary skills and knowledge to prepare their own plan. In addition, the participants indicated a strong
preference for professional personal financial planning advice. The study also indicates that less than 13
percent have prepared a comprehensive personal financial plan. When asked to identify the one
professional from whom they would seek advice, certified financial planners were the preferred resource.
Research limitations/implications – While the results are not generalizable to the wider population,
the views of this group are important because one might expect that educated individuals would be both
more interested in personal financial planning and more capable of preparing their own plans compared
with average Americans.
Practical implications – The study presents some implications for practice and financial literacy
education from a US perspective.
Originality/value – A perceived need of respondents is to feel that their financial planner will put their
needs first. While some professionals believe this to be the hallmark of ‘‘independence,’’ the respondents
placed less importance on planner independence. In order to foster client confidence, planners must act in
ways that convey clearly the primacy of their clients’ needs.
Keywords Graduates, United States of America, Financial services, Personal finance
Paper type Research paper

Introduction
The need for financial security, especially during retirement years, has been met
historically in the United States (USA) in three ways: personal savings (including
insurance and annuities), social insurance programs like social security and employer-
sponsored pension programs. Employer-sponsored pension programs have been the
cornerstone of these financial security tools. Consequently, pension programs have
been the target of continual legislative actions. The Employee Retirement Income and
Security Act of 1974 made significant and wide-sweeping changes that affected most Management Research Review
Vol. 33 No. 8, 2010
aspects of corporate and self-employed pension programs (that is, legal, tax, pp. 811-817
investment and actuarial) and initiated 401(k) programs. These changes lead to an # Emerald Group Publishing Limited
2040-8269
increase in the popularity of defined-contribution pension plans. DOI 10.1108/01409171011065617
MRR Pension plans are classified typically as either defined-benefit or defined-contribution
plans. Defined-benefit plans offer employees a guaranteed income upon retirement. In
33,8 these plans, the burden of risk falls directly on the employer. In these circumstances,
employers must make sufficient contributions to the plan to achieve the promised levels of
benefits. Defined-contribution plans, on the other hand, do not promise a guaranteed
income level upon retirement. Here, the annual contribution to the plan rather than the
eventual benefit is determined by the plan. In this case, because the investments of the
812 plan are employee directed, the risk falls on individual employees. An employee must
make sufficient investments in the plan and direct those investments into suitable vehicles
to meet desired future income objectives.
Table I shows the growth in both defined-benefit and defined-contribution plans in
the USA. The number of defined-benefit plans has decreased substantially while the
number of defined-contribution plans has grown rapidly. In fact, since 1980, the growth
rate of defined-contribution plans has exceeded that of defined-benefit programs.
According to the Federal Reserve Bank of St Louis (Fed, 2005), the personal savings
rate in percentage terms in the USA turned negative in 2005. A recent new Wall Street
Journal Online/Harris Interactive poll of 1,772 people indicates that only 34 percent of
Americans expect to be prepared for their retirement. Less than half of all Americans
participate in their 401(k) programs and only 45 percent reported that they participate
in 401(k) or 403(b) plans (Harris Interactive, 2005). A study of 22,000 Americans
conducted by the University of Michigan indicates that only 31 percent of Americans
have tried to calculate how much money they will need for retirement. Furthermore,
only 59 percent of those who performed the calculation developed a retirement plan
(Employee Benefit News, 2005). Extrapolated, that means that only about 18 percent of
Americans have developed a retirement plan.

The study
The purpose of this discrete study is to measure the interest and capability of more
financially sophisticated individuals to engage in personal financial planning and to
identify reasons why individuals fail to plan appropriately. The study included the view of
206 MBA students, 120 from a metropolitan state university and 86 from a small private
liberal arts college who completed a financial planning questionnaire. Participants were
informed that participation in the study was optional, that they would receive course
points for participating and that there were ‘‘no correct answers’’ to the questions on the
instrument. A summary of the demographic data concerning the participants is presented
in Table II. While the results may not be generalizable to the population as a whole, one
might expect that these educated individuals would be both more interested in personal
financial planning and more capable of preparing their own plans.

1979 2000
Number of Total assets Number of Total assets
plans (USD millions) plans (USD millions)

Defined benefit plans 139,489 319,959 48,773 1,986,177

Defined contribution plans 331,432 125,835 686,878 2,216,495
Total 470,921 445,430 735,651 4,202,672
Table I.
Pension plan growth Source: US Department of Labor (2005)
 (%) Personal
financial
Number of participants n ¼ 206 planning
Female 104 50.98
Male 102 49.02
Mean age 29.1 years –
Highest educational level 813
Bachelor’s degree 171 85.9
Master’s degree 23 11.6
Doctoral degree 5 2.5
Mean years of work experience 6.5 years – Table II.
Number employed in accounting or finance 25 12.25 Summary participant
Mean annual income (USD) 47,558 – demographics

Attitudes toward planning

Participants were asked specifically
. whether they thought that preparing a personal financial plan was important;
. whether they were interested in preparing such a plan;
. whether they had time to do so; and
. whether or not they felt that they had the necessary skills and knowledge to
prepare a personal financial plan.
The results of these four questions are summarized in Table III.
It is interesting to note that the percentage of participants who indicated that they had
the skills and knowledge necessary to prepare a personal financial plan (33 percent) is
slightly lower than the percentage of Americans in the University of Michigan study who
had tried to calculate their retirement fund needs (Employee Benefit News, 2005). Of the 68
participants who indicated that they had the necessary skills and knowledge to prepare a
personal financial plan, 47 indicated employment in accounting or finance positions.
Only 69 of the subjects (33.5 percent) indicated that they had prepared a written,
comprehensive personal financial plan. A complete financial plan addresses many
issues, some of which are not applicable to all individuals. Consequently, the
participants were also asked to identify plan components that they had prepared.
These results are summarized in Table IV.
As evident in Table IV, the participants in the study have not prepared many of the
components of a comprehensive financial plan. About the same percentage of
participants who reported that they had the skills and knowledge needed to prepare a
financial plan (33 percent) had actually prepared such a plan (33.5 percent).
Approximately one in five participants had prepared an educational funding analysis.

Affirmative
responses (%)

Personal financial planning is important 156 75.7

Interested in personal financial planning 138 67 Table III.
Have the time to prepare a personal financial plan 83 40 Financial planning
Have the skills and knowledge to prepare a personal financial plan 68 33 interest and knowledge
MRR This percentage may be artificially high because all of the participants in the study
33,8 were graduate students and consequently needed to be concerned about funding their
graduate school education. Participants were also asked to indicate if they participate
in a retirement program. Only 95 (46 percent) of the respondents currently participate
in such a program. This is similar to the results of the Wall Street Journal/Harris
Interactive poll discussed above. This indicates that, at least in this respect, the
respondents are similar to other Americans when it comes to retirement planning.
814
Attitudes concerning planners
Participants were asked to indicate whether they would develop their own personal
financial plan or seek the assistance of another and, if they were going to seek
assistance, to whom would they turn for advice. The results of these questions are
summarized in Table V.
About the same number of participants who responded that they had the skills and
knowledge necessary to prepare their own personal financial plan (n ¼ 68 or 33.0
percent) also indicated that they would rely on their own skills to prepare their personal
financial plan (n ¼ 58 or 25.6 percent). The remainder (74.4 percent) indicated that they
would seek assistance from a professional or another person. Although the accounting
profession via the American Institute of Certified Public Accounts (AICPA) has
developed an accredited personal financial planning designation (CPA/personal
financial planning (PFS)) for its members, the majority (75.2 percent) of the respondents
indicated that they would rely on a Certified Financial PlannerÒ. Certified Public

Number who had

prepared component (%)

Comprehensive personal financial plan 69 33.5

Current year tax liability analysis and plan 24 11.7
Educational funding analysis 43 20.1
Estate plan 11 5.3
Insurance needs analysis 31 15.1
Table IV. Retirement plan 39 19.0
PFP components Will 37 18.0

Number (%)

Preferred planning resource

Self 58 25.6
Professional advice 152 74.4
Source of professional advice
CFP 155 75.2
CPA/PFS 32 15.5
CPA 8 3.9
CFS 2 1
ChFC 9 4.4
Preferred compensation mode
Fee only 127 61.7
Table V. Fee and commission 30 14.6
Planning assistance Commission 49 23.8
Accountants (CPA) were selected by 19.4 percent of the respondents. This percentage Personal
was divided between CPA/PFS (15.5 percent) and CPAs (3.9 percent). Other financial
planning designations (for example, Charted Life Underwriter [CLU], Certified Fund
financial
Specialist [CFS] and Charted Financial Consultant [ChFC]) were included in the study planning
but were selected by only a few participants.
Weston (2008) indicates that there are about 250,000 individuals in the marketplace
who identify themselves as financial planners. Of that number, about 56,000 have
earned some kind of professional certification. The CFPÒ designation appears to be the 815
most popular with about 58,000 certificate holders (CFP Board, 2008). Participants’
reported preference for CFPsÒ is consistent with the predominance of CFPÒ certificate
holders in the marketplace.
When asked whether they preferred fee only, fee and compensation or compensation
only planners, the majority of participants (127 or 61.7 percent) indicated that they
preferred fee-only planners. Only 30 participants (14.6 percent) indicated a preference
for working with a fee and commission planner while 49 (23.8 percent) indicated that
they would seek the advice of a commission only planner. Participants were also asked
to rank six different reasons for selecting a specific planner. The results of their
rankings are shown in Table VI.
The most important planner characteristic, as suggested by the participants, is that the
planner places the client’s needs first. This predisposition is consistent with the expressed
desire by the majority of the respondents to work with a fee-only planner. The desire that
the planner demonstrates high levels of product familiarity means that fee-only planners
must be as familiar with the products that they recommend, as are commission-only
planners. Fee-only planners often use no-load funds for plan implementation, products for
which they do not receive a commission. Low transactions costs or the use of commission-
free financial products ranked last in importance among the participants.
Participants ranked freedom of choice third in importance. Thus, it may be important
for all planners to present clients with a menu of choices for plan implementation.
Selecting a number of different funds, for example, with similar risk-return characteristics
and time horizons and letting the client make the final selection may help meet this
perceived need. Planner independence and confidence ranked considerably lower than did
meeting clients needs first and product familiarity. Independence is an attribute often used
as a selling point by CPA/PFSs. It appears that this independence may give them little
competitive advantage in the marketplace or at least among graduate business students.
Finally, participants were asked to indicate their level of confidence in a financial
plan’s capacity to help them meet their long-term needs (measured on a scale of
1 ¼ not at all confident to 5 ¼ extremely confident) and the likelihood that they would

Criteria Mean ranka SD

I want to know that the planner will put my needs first 1.78 1.61
Planner’s familiarity with products 3.08 1.59
I want to preserve my freedom of choice in product selection 3.37 1.30
I want to feel that the financial planner is confident in his/her
recommendations 3.60 1.48
I want to feel that my planner is independent 3.99 1.68
Reduced transaction costs 4.86 1.44
Table VI.
Note: a1 ¼ Most important to 6 ¼ least important Planner selection criteria
MRR implement the plan (1 ¼ not at all likely to 5 ¼ extremely likely). Participants
responded to these questions for plans prepared by fee-only, fee and commission and
33,8 commission-only financial planners. The respondents’ answers to these questions are
summarized in Table VII.
As Table VII reveals, there is little difference between reported confidence and plan
implementation likelihood between plans prepared by fee/commission planners and
commission-only planners. There is an apparent difference, however, between
816 confidence and implementation likelihood for plans prepared by fee-only planners and
the other planners.
The difference between confidence in plans developed by fee-only and plans developed
by commission-only planners is statistically significant in a paired t-test (df ¼ 205,
t ¼ 3.893, p ¼ 0.000). The corresponding difference in implementation likelihood was
also statistically significant (df ¼ 205, t ¼ 3.135, p ¼ 0.002). The differences between
plan confidence and implementation likelihood were not significantly different in a paired
t-test when comparing commission-only and fee and commission plans (df ¼ 205,
t ¼ 0.551, p ¼ 0.583; and df ¼ 205, t ¼ 1.042, p ¼ 0.300).

Implications for practice

First, there appears to be a tremendous need for financial literacy education in the USA.
While over 86 percent of the participants felt that financial planning is important and
almost 80 percent are interested in planning, less than 25 percent of participants felt that
they possessed the necessary skills and knowledge to prepare and execute their own
financial plan. This highlights the importance of financial planners carefully explaining
complex financial concepts in ways that their clients can readily understand. Financial
planners could start to meet this need for financial literacy education in a sustained
campaign of public workshops and seminars. While such events are useful marketing
tools for the industry, we suggest that the primary focus of these events be educational.
In addition to a need for financial literacy education, there appears to be a very
strong need for financial planning. The participants in this study are MBA students.
This population could be perceived as being more financially literate than average
Americans are. Nevertheless, less than 13 percent have developed comprehensive
financial plans and only about 11 percent had prepared a formal retirement plan.
It appears from the results of this study that the Certified Financial Planner Board
of Standards, Inc. and the CFPÒ professionals have done a much better job in educating
the public about their services and qualifications. Over 75 percent of the participants in
the study indicated that they would seek planning advice from a CFPÒ. About 20
percent of the participants indicated that they would seek the advice of a CPA or CPA/
PFS. This is surprising given that 31.1 percent of the participants indicated that they
had established a professional relationship with a CPA. Thus, it appears that while
over a quarter of the participants view having a relationship with a CPA as important,

Planner type Plan confidence Implementation likelihood

Fee-only financial planner 3.37a (0.87) 3.09 (0.97)

Table VII. Fee and commission financial planner 2.87 (1.07) 2.67 (1.10)
Plan confidence and Commission-only financial planner 3.09 (0.92) 2.92 (0.98)
implementation (mean
response and SD) Note: a1 ¼ Not at all to 5 ¼ extremely
the majority of them do not view their CPAs as potential providers of financial Personal
planning advice.
Very few of the respondents indicated that they would seek the advice of CFS,
financial
ChFC or CLU. These are designations normally held by insurance professionals. planning
This also is surprising because the most frequently mentioned professional
relationship was with an insurance agent. Indeed, 40.7 percent of the respondents
had established such a relationship. It appears that both the insurance and public
accounting professions have not had the same success in promoting members of 817
their professions as personal financial planners.
A perceived need by the respondents to feel that their financial planner will put the
client’s needs first is clearly apparent in Table VI. While some professionals may feel that
this is the hallmark of ‘‘independence’’, the respondents placed much less importance on a
planner’s independence. Thus, to foster a client’s confidence, planners must act in ways
that very clearly convey the message to the client that their needs are paramount.

References
CFP Board of Standards (2008), ‘‘CFP certificant profile’’, available at: www.cfp.net/media/
profile.asp#link4 (accessed 14 September 2008).
Employee Benefit News (2005), ‘‘Lack of basic financial knowledge impairs retirement’’, available
at: www.benefitnews.com/retire/detail.cfm?id¼8116 (accessed 28 November 2005).
Federal Reserve Bank of St Louis (2005), National Economic Trends, available at: http://
research.stlouisfed.org/publicaitons/net/20051101/net 20051108.pdf (accessed 28 November
2005).
Harris Interactive (2005), ‘‘Nearly half of US workers participate in a 401(k) or 403(b) plan, New Wall
Street Journal Online/Harris interactive personal finance poll’’, available at: www.
harrisinteractive.com/news/allnewsbydate.asp?NewsID¼976 (accessed 10 October 2005).
US Department of Labor (2005), Preliminary Private Pension Plan Bulletin, Abstract of 2000,
Form 5500 Annual Reports.
Weston, L.P. (2008), 8 Things Your Financial Planner Won’t Tell You, available at: http://
articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/8ThingsYourFinancial
PlannerWontTellYou.aspx (accessed 14 September 2008).

Further reading
Rattiner, J.H. (2005), Getting Started as a Financial Planner, revised ed., Bloomberg Press, New
York, NY.

About the authors

David S. Murphy PhD is a Professor of Accounting at Lynchburg College in Lynchburg, Virginia in
the USA. He received his doctoral degree from Washington State University. He has also earned his
CPA, CFS and CFP designations. He has published extensively and his research interests include
financial planning and higher education finance. David S. Murphy is the corresponding author and
can be contacted at: Murphy.D@Lynchburg.edu
Scott Yetmar PhD is an Associate Professor of Accounting at Cleveland State University in
Cleveland, Ohio in the USA. He received his doctoral degree from Oklahoma State University and
has published in numerous journals including The Tax Adviser, The CPA Journal and the Journal of
Business Ethics. Scott Yetmar has earned his CPA, CMA, CFM and FLMI designations.

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