One Profession, One [Minimum] Designation

Posted by Michael Kitces on Monday, October 29th, 11:03 am, 2012 in Planning Profession

After years of wavering, the Financial Planning Association has recently re-focused itself back to specifically supporting financial planners who pursue the CFP certification and advocating for the CFP to be recognized as the one true designation, recalling back the famous "One Profession, One Designation" refrain first uttered by financial planning luminary P. Kemp Fain nearly 25 years ago. Yet the reality is that while the CFP certification has advanced significantly since Fain's first comments in 1987, so too have many "competing" designations, some of which represent very high quality advanced educational content, albeit often in narrow and focused specialties under the financial planning umbrella. Nonetheless, many "bogus" designations have also proliferated over the years, contributing significantly to consumer confusion. As a result, while there is still virtue to having the CFP certification as a minimum baseline designation to cut out the other bogus designations, there needs to be room for the advanced specializations that have begun to emerge as well. Which means perhaps it's time for the FPA to extend Fain's famous speech one step further, from "One Profession, One Designation" to "One Profession, One [Minimum] Designation" - where the CFP certification serves as a minimum baseline for anyone who wishes to become a financial planner, but beyond which a growing number of "post-CFP" educational programs can flourish to support the emerging fields of financial planner specialization.

One Profession, One Designation

The origins of the "One Profession, One Designation" phrase, as explained in the book "The History of Financial Planning" by E. Denby Brandon and H. Oliver Welch, was a white paper written by financial planning pioneer P. Kemp Fain in 1987, which was extended into a speech of the same name at one of the major financial planning conferences in 1988. Fain, who at the time was chair of the IBCFP (the predecessor organization to the current CFP Board), made the case that to become a profession, financial planning needed to rally around a single designation, and that the CFP certification was in the best position, because of the rigor of the education, examination, and experience requirements, its mainstream public awareness (and its standing as one of the few certification programs at the time that actually maintained legal trademark protections). 

The fundamental point of Fain’s speech was that there needs to be a uniform minimum standard that the public can use to identify a true professional; otherwise, it's a never-ending fight to stamp out imposters who use bogus alternative credentials to falsely imply credibility and trustworthiness. And in point of fact, this is true of any recognized profession – they all have a single entry point, as a minimum standard, that serves as both a way to certify that an individual does in fact have the basic competency necessary to be a professional, and to create a barrier to entry that prevents individuals as holding themselves out to the public as a professional until they meet that minimum standard. In Fain’s view, the CFP certification represented the best available option at the time as such a minimum standard.

As I have written in the past, in today’s world I still find that the CFP certification represents the best available option as a single, uniform, minimum standard for financial planning to establish itself as a profession – a view that has recently been (re-)embraced by the FPA, which has revived Fain’s “One Profession, One Designation” refrain. However, at the same time the world today is not quite the same as it was when Fain made his speech nearly 25 years ago. While there has been a proliferation of "bogus" designations, there has also been a significant growth in legitimate designations that provide comparable, or even deeper and more specialized knowledge, than the CFP certification itself.

As a result, it seems that perhaps the new refrain for the 21st century should actually be "One Profession, One [Minimum] Designation" instead.

One Profession, One [Minimum] Designation

The point of "One Profession, One [Minimum] Designation" is to make it clear that while every recognized profession needs a single, uniform, minimum starting point, the reality is that one educational program alone clearly cannot encompass all possible aspects of the professional body of knowledge, especially if/when/as that body of knowledge grows. Most professions provide the opportunity for voluntary advanced education beyond a baseline minimum: Lawyers have LLM degrees for specialization after their JD degree; doctors have board-certified specializations; and so, too, will financial planners need "post-CFP" education as the body of knowledge grows and allows for increasingly focused specializations with business models to support them.

And in reality, there is already a growing list of designations, certifications, and educational programs that provide a genuine depth of knowledge, beyond merely what the CFP certification teaches, that represent viable and bona fide specialized designations to hold in addition to the CFP itself. In today's marketplace, these include the CFA, the CIMA and CPWA from IMCA, the CLU and ChFC and many of the other educational programs from the American College, not to mention professional licenses and degrees in complementary areas like the CPA or JD.

Yet what's notable about these programs is not that they are "alternatives" to the CFP - as I've noted recently, programs like the CLU should not be held out as CFP certification alternatives. Such programs lack the comprehensiveness of educational knowledge that's necessarily to deliver comprehensive financial planning. However, the mere fact that programs like the CLU represent partially overlapping but substantively different knowledge areas isn't meant to be a denigration of the CLU and similar programs, but simply to note that they represent specializations beyond the CFP certification, not alternatives to it.

In other words, while the CFP is still a strong standard as a comprehensive minimum baseline for comprehensive financial planning, programs like the CLU represent an emerging world of "post-CFP" specializations. Which means there is actually a place for more than literally one designation - there may be one as a minimum baseline, but then there can be others that serve as a series of beyond-the-minimum specializations.

Current CFP Certification Is A Waypoint, Not An Endpoint

It's important to note that while I continue to agree with Fain from 25 years ago that the CFP certification is in the best position to become the baseline minimum standard for all financial advice, that does not mean the journey of the CFP certification itself has reached an endpoint.

In point of fact, the CFP certification itself is a standard that is still being advanced over time. It took on the fiduciary standard for the delivery of financial planning just a few years ago, and still allows CFP certificants to avoid a fiduciary obligation by merely providing a single area of advice and implementation (a gap that in my opinion must be closed, and will be discussed in a future blog post!). The CFP Board is just now in the midst of raising its continuing education requirements, adjusting its enforcement process and developing sanction guidelines, and refining its experience requirement. Notably, the CFP certification comprehensive exam, now recognized as one of the more rigorous aspects of the CFP certification process, wasn't even introduced until 1991, several years after Fain's famous speech; at the time, the examination process was merely a series of standalone exams for each of the individual educational classes.

In other words, the point here is simply that the CFP certification is still advancing to a true professional standard; it's not there yet. But at the same time, it already represents the best option out there, and it has continued a remarkable ongoing progression towards becoming the standard for financial planning over the past 25 years since Fain's speech. Which means it may perhaps be more deserving than ever to become adopted as the standard - with an appropriate transition process over time to accommodate those who may be experienced and educated practitioners but who, in the past, did not get their CFP certification. 

Nonetheless, the CFP certification becoming the entry point standard for all financial planners doesn't mean that the CFP certification would become the one and only designation that exists in the financial services world. To the contrary, when financial planning is a recognized profession, I would anticipate that the CFP certification would merely be the starting point in the career path of a professional, which would include a wide range of "post-CFP" designations for even more in-depth, specialized knowledge.

The bottom line, though, is that until we can set one clear measure for the public to understand who is and is not a professional, confusion will remain and the public will be harmed as a result. That doesn't mean we need to eliminate all other forms of advanced education and designations, but having a single hallmark for professional status is the best way to help the public separate the wheat from the chaff. Fain recognized this 25 years ago, and it remains just as true today.


  • Ron Rhoades

    Excellent blog post, Michael.

    I concur that the CFP(r) certification is an acceptable minimal standard, in terms of competency, for entrance into the profession. However, if financial planning ever becomes regulated, some adjustments are likely necessary to the exam content. The current emphasis on some topics (such as GST) may not be relevant in an entry-level exam for licensure purposes, and the relatively low pass rate (relative to Bar exam and CPA exam pass rates) must improve, or the CFP exam could be seen as too burdensome (and hence "anticompetitive" and "promoting a monopoly or guild").

    While the CFP educational and exam process is first-rate, I'm wary about endorsing the CFP(r) certification as the "standard for the profession" until the huge loopholes are fixed, in terms of the application of the fiduciary standard. It's difficult to "rally around" the CFP mark when it is used so often by some advisors in violation of the trust and confidence granted by consumers, which the CFP mark engenders. I look forward to your future blog post discussing this issue.

    I hope that the CFP Board, FPA and other groups embrace the fiduciary standard more fully in the months and years to come. Only then will we have the true foundations for a profession of financial planners.

  • http://thelegacyfinancialgroup.blogspot.com/ Eric

    I am biased, but I don't think the CFA can be lumped into that list of other designations.

    If the CFP becomes a requirement for financial planning, what is stopping the CFA Institute from wanting the CFA to be a requirement to manage assets?

    Seems to open up a door to potential issues and fights between designations.

    • Michael Kitces

      Eric,
      Remember, the point here is about MINIMUM standards, not best practices.

      But frankly, if the CFA institute wants to fight for the position that no one should be allowed to analyze investments until acquiring their designation, I suppose that's their prerogative. I'm not sure I see how it's very directly related to the CFP certification, though. The core job tasks of CFAs and CFPs are completely differently, including the fact that most CFAs by numbers still work internal to investment management firms doing investment analysis (it is, after all, a Chartered Financial ANALYST), not providing retail investment advice.

      Nonetheless, most professions that DO have direct involvement with the retail public from a position of expertise and trust - law, medicine, accounting, etc. - have minimum standards for public protection.

      Respectfully,
      - Michael

  • jim schwartz

    One Profession One Designation is theoretically an ideal but in reality - foolishness continuing to lead to insularity, structural barriers to trade and trade protectionism- UNLESS - there are real checks and balances.

    The CFPgate of the past covering up deliberate wilful malpractice for fear of product liability (the math in retirement training of 40,000+ CFP's was wrong), the wrongful use of tax exempt status - for monopoly purposes (The College for Financial Planning - the trainer - controlling the CFP Examiners and Board) - are just examples of what has occurred without real checks and balances.

    The checks and balances: - majority outside of the business representation on CFP Board and disciplinary committees. Acceptance of a real fiduciary standard. Forwarding legislation that requires for transparency an estimate of all compensation upfront and actuals quarterly and failure to do so resulting in being under consumer protection acts which can give up to 3x in treble damages.

    Otherwise - even the minimum standard and one designation one profession - is just marketing self protection practices of another business / trade association holding itself out as a profession.

    Professions require accountability - and an assured level of competency (something those in charge historically of the CFP have neither shown - nor made amends for in their harmful practices)

  • http://www.amgplanning.com LeGrand S. Redfield, Jr. CLU, ChFC, CFP®

    Although I agree with most of your point of view, one aspect or stumbling block is those people who achieved other designations, such as CLU and ChFC, long before the CFP became the current standard, really don’t have much interest or need for it now. The CLU designation may have been achieved by a preponderance of insurance agents, but they learned as much, if not more, on how to do be of help to their clients, in areas that were far wider than just insurance needs. Many people have built practices based on the combination of what they learned under those programs, with the ChFC designation at one point being harder to achieve than the CFP, and their years of experience. As we move to a single minimum designation, some thought should be given on how to incorporate those individuals who have been practicing for years, who have significant amounts of both knowledge and expertise and how to best incorporate their years of knowledge without alienating them in the course of creating a better profession. It is disingenuous to say that those who do not have a CFP are more professional or are doing harm to the public. If we were to start the profession from scratch, having a minimum designation would be fine, but since many people have been doing this far longer than the CFP mark has been around, some way of keeping all the professionals in the fold should be considered.

    • Michael Kitces

      Lee,
      Thanks so much for your comments on this.

      There are ways to transition for existing CLUs and ChFCs (and whatever other credible designations you want to include in the category).

      The first is to allow them to skip the educational requirements and just sit for the exam to prove their knowledge, which the CFP board already does.

      The next is to simply grandfather, particularly if this is codified in regulation, current CLUs and ChFCs at the time, but require the CFP going forward, which is a pretty standard model for most professions as they build (in point of fact, it's the same framework that allowed existing CFPs to be "grandfathered" even after the exam requirement was adopted for all new certificants going forward).

      That doesn't necessarily mean a magic wand is waved and everyone is a CFP certificant with the exact same background, but this is how the path towards professionalism ultimately progresses.

      Of course, time helps as well. In practice, most people getting their CLU and ChFC in the past 10-20 years or so have been doing the CFP first anyway (in fact, I believe the American College is still one of the largest providers of CFP education in the country), so most of the CLU/ChFCs who are NOT CFP certificants will retire out of the profession over the next 10-20 years anyway.

      So at SOME point, we have to draw a line in the sand and set a standard to move forward, since we can't really go back and start from scratch at this point. We can create reasonable transition rules and grandfathering where appropriate to help people through the transition. And then at some point another decade or two down the road, we'll have more uniformity and consistency in the minimum standards to better serve and protect the public.

      Respectfully,
      - Michael

  • #4 LeGrand S. Redfield, Jr. CLU, ChFC, CFP®

    I don't disagree so long as you give credit to those who have been invested in their client's futures for years. You mention 10-20 years. What about 30-50 years? There are a number of professionals who have practiced for years, long before the CFP meant anything who have served their clients well and certainly know more about helping clients than a recent CFP certificant. I am not as eloquent as you are, but the problem is that our industry has grown not just from CFP's helping people but a number of people who have helped thier clients through difficult times who had nothing more than other designations. Those designations may not be perceived as valuable now, but at the time, we're the only designations available. Making those people sit for an exam, may seem like the right thing to do, but frankly, their clients don't see the need, so it doesn't happen. Grandfathering them might be a solution for the profession, but my point is that you need to take into account all those peolple who are being well served by professionals who may not have thier CFP, but know a great deal more than any recent certificant, and implying in any way that they are doing a disservice to their clients is nothing more than a lack of understanding about those who have been doing this job for years, well before the CFP had any credibility. This may be a topic for another conversation, but your time frame is too short. You have practiced financial planning for a lot less time than many, and perhaps one of the problems that many of the older professionals perceive is that they have done thier job well for far longer, and no designation in particular, makes one a better planner. In fact, many of our older professionals know a lot more about not only how to be of assistance, but how to run businesses that provide financial planning. Going forward, I agree that having one designation as a minimum would be extremely helpful, and in fact , I believe it is the minimum required by most firms, but you need to take into account many people who have been doing this far longer than 10-20 years. Our profession is young, but not that young.

    • Michael Kitces

      Lee,
      The start of my comments was to grandfather EVERYONE with a CLU and ChFC if it's necessary (because they don't want to just sit for the exam). It doesn't matter if they've had it for 5 years or 50 years. The point is simply that you set SOME start date - 2017, 2022, whatever - and say "from this date forward, people must get the minimum certification - CFP - to call themselves a financial planner. Everyone who got a different certification [from some approved list] prior to this date is grandfathered, and can [still] call themselves a financial planner if they want."

      My point about 10-20 years is simply that if we DO this, by the time we're 20 years out from now, it will be 2032. Even a 60-year-old CFP practitioner who's got 40 years of experience will be someone who had to sit for the CFP exam (the exam will have been around 41 years at that point). The people who got CLU and ChFC back in the days when the CFP certificant wasn't up to snuff will have long since retired. If we have to grandfather those experienced practitioners in from now until they retire, so be it. It's a manageable transition period.

      That being said, if they're willing to just go sit for the exam and get their CFP certification anyway, all the better. In reality, it may help their businesses anyway, because the rising public awareness and visibility of the CFP certification means at some point, prospective clients really WILL start asking "if you're a planner, why don't you have a CFP?"

      Respectfully,
      - Michael

  • http://www.amgplanning.com LeGrand S. Redfield, Jr. CLU, ChFC, CFP®

    With that said, I concur completely.

  • Brian Foster

    Sorry, writing on a tablet and not used to the sensitivity of keys.

    I was going to say, i think youngerentrants are going to seee financial planning as a profession worth joining and take the CFP early, perhaps even straight out of uni.

    The profession will then develop over time.

    Thanks for the post
    Brian

    • Michael Kitces

      Brian,
      Indeed, for the most part that is already happening.

      Much of the divide about CFP-centricity or not in the US is essentially a generational divide. The younger people entering planning today routinely get the CFP, but there are many experienced advisors who didn't get the CFP originally, don't want to go back for it now, and are resistant to focusing on CFP as a benchmark for financial planning (because it implies they are not "real" planners).

      But CFP seems clearly to be where things are going here in the US. At best, we need to work out a transition plan to accommodate experienced practitioners who didn't get their CFP in the early years. At worst, in another decade or so most of them will have retired out of the business and it will be increasingly CFP-centric anyway.
      - Michael

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  • Michael Kitces

    Ron,
    Thanks for the feedback.

    Interesting point about pass rates and anticompetitiveness. But my impression was that in many states, the pass rate on the Bar exam is also in the 50%-60% range, which is comparable to the CFP certification. And the average pass rate on the CPA exam is below 50% (see http://www.aicpa.org/becomeacpa/cpaexam/psychometricsandscoring/passingrates/downloadabledocuments/passrates2012.pdf). It would seem to be that from this perspective, CFP is consistent in difficulty, but not particularly MORE onerous than the others?

    As for the current state of the fiduciary standard as applied by the CFP Board... indeed, more to come in the next few weeks. Stay tuned. :)
    - Michael

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