Sunk Cost Fallacy– the idea that a company or organization is more likely to continue with a project if they have already invested a lot money, time, or effort in it, even when continuing is not the best thing to do. AKA Throwing good money after bad.
In March 2013 I earned my Certified Investment Management Analyst (CIMA®) designation, a designation focused on evaluating funds and constructing portfolios for clients. The process was both expensive and time-consuming—it consisted of a pre-exam, a week-long course at the downtown campus of The University of Chicago, and a post-exam. I enjoyed the coursework, learned important lessons regarding portfolio construction, and at the time, felt the designation complemented my CFP® designation by bringing additional credibility as I contemplated the next steps in my career.
I’ve maintained the designation for the last 5 years, and now that it’s time for this year’s renewal, I’ve decided to let my CIMA® designation lapse. It was a tough decision, but I’ve come to the conclusion the ongoing expense and CE requirements are no longer necessary at this stage of my career. I’ve learned portfolio construction, continue to learn through the books and blogs I read, and have e conversations with some of the smartest investment minds thanks to Twitter. The CE I sludge through is nowhere near as informative.
I’ve fallen victim to the sunk cost fallacy for long enough.
Since I’ve added the CIMA® to my business card and hung the certificate in my office, I can honestly say I am not able to attribute one new client to the designation; that’s not to say there was no value in the education I received while earning it, but there has not been much value to the designation since. It’s ROI is low—probably negative, if I’m being honest. And as investment management and portfolio construction continue to become commoditized, it’s value will continue to decline.
Unfortunately, despite partnerships with some of the top colleges like Chicago, Penn, and Yale, outside of wholesalers and some financial advisors, the Certified Investment Management Analyst is virtually unknown. The public does not seek an advisor with CIMA® on their business card; the public does look for CFP®, CFA®, or CPA®.
I don’t mean to dump on the CIMA® designation because it is great coursework and gave me confidence earlier in my career—and confidence is hard to put a dollar value on. If you are a young advisor or new to the industry, the coursework would be extremely beneficial—although, if you filter your Twitter feed properly and do a little networking, you can learn everything you need to know from FinTwit.
Why Share This?
For the last few years I’ve contemplated not paying my dues and not completing my CE, but I’ve thought about the money spent, the time dedicated to CE, and as silly as it sounds, removing the certificate throwing the balance off the frames on my wall—ok, that last one has not carried much weight, but it was entered my mind.
I’ve finally accepted that those dollars and hours have been spent—they’re gone. If I’m looking forward, will my dues and time spent on CE yield positive or negative returns on my investments? I’ve already shared what I’ve concluded—negative.
The past has no bearing on the future.
There’s a good chance you’re carrying on with something in your life because of sunk costs. It could be financial—like carrying on with a designation that is no longer necessary. It could be personal—like continuing a relationship that you know has no future, but the past keeps you around. It could be emotional—continuing to bear a cross for something that occurred years ago. Whatever it is, join me in no longer allowing sunk costs to prevent you from deploying your dollars, time, or emotions in ways that will help you grow–not keep you stagnant, or even worse, hold you back.
Ok, now I need to go cram the last of my CFP® CE in before the 28th!
Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimer page.