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Choosing a financial advisor is difficult, and as a result it's helpful to provide the public with guidance about how to select one. Unfortunately, though, in recent years recommendations to the public from many organizations have increasingly focused on whether the advisor is a fiduciary, without any acknowledgement of whether the advisor has the training, education, and experience to provide effective financial advice. Consequently, the public increasingly runs the risk of being poorly served by a well-intentioned advisor whose advice is totally incompetent. Ultimately, protecting the public will require setting forth a standard that meets fiduciary and competency requirements. And as it standards right now, the clearest choice for a professional minimum standard appears to be the CFP certification. While the CFP marks - as with any standard - don't unequivocally mean someone will get the best and most optimal advice because the advisor has the CFP, that's not the point; in the end, the purpose of such a standard is not to define a best practice, but instead the minimum acceptable standard to ensure the fundamental protection of the public.

The inspiration for today's blog post was some recent Twitter conversations I've had with other planners regarding the standards that we put forth to the public when selecting an advisor. In recent years, as the regulatory debate has heated up, there has been an increasing focus on the importance of being a fiduciary when providing advice. And while I don't disagree with the public benefits of holding advice to a fiduciary standard - in point of fact, as I've written in the past, I don't think there IS such a thing as non-fiduciary advice, only non-fiduciary sales - I'm increasingly concerned that in the process, we're letting the pendulum swing too far and are exposing the public to a wide range of legally-well-meaning-but-totally-untrained advisors who will wreak harm and havoc on the public, not through ill intent, but through sheer incompetence.

The Importance Of Competence

The reality is that when the fiduciary standard alone is the minimum standard we set forth to the public, there's no particular requirement that the individual actually be competent at what they do, especially given that the current fiduciary standards are overseen by the SEC (or state-registered investment regulators) and pertain only to the delivery of investment advice.

Thus, it is most likely true that an advisor whose sheer incompetence led to the recommendation of putting a client's life savings into a particular high-risk stock would probably be "busted" for his/her incompetence, in failing to meet the established standards for prudent investment diversification.

However, the challenging reality is that in the financial planning world, we discuss far more than just the allocation of investments in a portfolio. In that regard, the investment-adviser-based fiduciary standard has little if anything to say about all the other advice provided. Yet hopefully most would agree that since anyone can get an RIA registration regardless of having any education, training or experience whatsoever, it's probably not the best idea to get insurance, tax, estate planning, debt, spending, and saving advice from someone who has no requirement for one iota of actual knowledge about any of those subjects. Just being a fiduciary doesn't mean you know how to recommend the amount of life insurance someone should have, or the rules that pertain to IRAs, or how to properly structure retirement account beneficiary designations for young children, or any number of topics for which advisors provide advice outside of the raw construction of a portfolio.

In turn, this means that merely being a fiduciary actually says remarkably little about one's capabilities to be an advisor. Simply put, acting as a fiduciary should be a necessary criterion to select an advisor, but is an entirely insufficient one to come to any conclusion about whether the advisor is actually capable of delivering effective advice and positive results for clients.

Measuring Competence

Of course, this discussion immediately raises the question: so what would an appropriate standard for competence actually be? Given the current landscape in financial planning, it seems to me there is one clear answer: the CFP certification.

Although the CFP marks have had a varied history, the standards for the certification have been consistently raised over time, and while the CFP certification arguably still has a ways to go, the fact remains that it is by far the best option available. The CFP certification requires both an increasingly broad and rigorous educational curriculum, and mandates a certain minimum level of experience. It requires a comprehensive exam, which includes questions that demand test takers actually apply the knowledge to pass (i.e., the test is more than just the regurgitation of rote memorization). And perhaps most important, the CFP Board - unlike virtually every other organization that puts forth a standard of care - actually has a process to enforce the CFP certification Practice Standards (albeit a process that the CFP Board could still improve further) and can censure and suspend certificants or even revoke the certification.

While there are other credentials in the financial planning space, none seem to maintain the particular combination of competency standards that the CFP Board puts forth, including especially the comprehensive exam (which the ChFC doesn't require) and a process and commitment to enforce the standards of those who maintain the certification (which the PFS lacks). Also notable is the fact that unlike many other designation programs, the CFP Board continues to elevate its standards over time. It's certainly possible that some other designation, or a new one that doesn't even exist yet, could step up to surpass the CFP certification at some point in the future; as it stands now, though, the leading choice seems rather clear.

The Challenge Of A Competency Standard

Of course, the reality is that having a CFP certification alone does not unequivocally mean someone is going to get the greatest/best/optimal advice. That is true of any standard. Not only because there will be people from time to time who violate the standard (just as there are criminals who violate the fiduciary standard, steal client money, embezzle, etc.), but because a minimum standard is not meant to be a sign of best competency but simply minimally acceptable competency.

Most people have already experienced this in the context of other professions. Just because a lawyer has passed law school and the bar exam does not mean every lawyer has the same depth of expertise and experience. Similarly, not all doctors provide the same quality of results because they have gone through medical school and residency, and passed the medical board exams. There are still some lawyers and doctors who are better than others, even though all of them passed the same professional entrance requirements.

Nonetheless, we certainly don't suggest to the public that if your neighbor has steady hands and some offhand knowledge of anatomy that he'd be a good surgeon to remove your appendix or repair a heart valve. Nor is it a good idea to retain someone as your trial defense lawyer simply because he happens to be articulate and a good debater. Although it's certainly possible that someone out there who hasn't gone through a legal or medical educational, experience, and testing standards might actually turn out to be as good as the people who have, it doesn't change the fact that when recommending a professional to the public, we don't recommend those who haven't met the minimum standards, because the likelihood and risks of incompetence to the public are too great.

In a similar manner, it's time for the financial planning profession to set forth its minimum unified standard for the public in terms of not just a requirement for fiduciary, but also for a minimum level of competency. Not because having the CFP marks automatically means the advisor will deliver the perfect, best advice in any and every situation, but because it's a hazard to recommend to the public that they seek out advice from someone without determining if that individual has met any actual minimum standards for financial planning knowledge or experience. Especially since in reality, the CFP certification accomplishes both goals, as it already is a requirement for anyone with the CFP certification delivering material elements of financial planning!

And ultimately, if you want to set forth a minimum standard to the public, it needs to be a minimum standard, not a series of options. As P. Kemp Fain said many years ago, if we want one profession, we need to have [just] one designation.

So what do you think? Is it time for the profession to focus less on "just" fiduciary and focus instead on competency? Which do you think is better: an experienced CFP broker not subject to the fiduciary standard, or an uneducated RIA fiduciary? Is the CFP certification a reasonable standard of minimum competency? Is there a different/better alternative? Is it a good idea to have a minimum standard for competency? 

  • Robert Vogel

    Great post and I definitely agree that expanding the conversation to include competence is much needed. I think some might say that to be truly competent to provide advice, one must or should be a fiduciary, but that is a different discussion.

    I agree that the profession, if that is what it is, would benefit from a unified standard of competence. For lack of anything better I suppose the CFP works. The main issue I have is that in this industry where salepeople masquerade as advisors, the fact that anyone can use the marks, whether or not they actually act in an advisory capacity, muddies the waters. The insurance salesperson who sounds like he is giving advice has CFP after his name, so how is a consumer supposed to discern that he is acting in a sales capacity rather than as an advisor? Additionally the ‘experience’ requirement is laughable. If you talk directly to clients in virtually any capapcity you can satisfy the requirement. I have seen people who were customer service phone reps pass the requirement. What kind of relevant experience is that? If the mark are to be a minimum competency test for the financial planning profession, that the experience requirement should only be satisfied by planning experience. A pilot cannot pass the flight time experience requirement by being a flight attendant…..

  • Alan Moore

    So I guess we should just continue to refer consumers to NAPFA Registered Advisors, who meet both the competency and fiduciary requirements that you advocate, and are also fee-only.

    I like not having to make any adjustments :-)

  • Robert Henderson


    I think the conversation is a good one. As Robert Vogel pointed out above, one of the issues is that virtually anyone in any capacity can use almost any title. Financial Planner, Financial Advisor, Retirement Planner, Retirement Specialist, Financial Consultant, etc. I think Investment Advisor is the only “title” that is really dictated by regulation.

    I agree that there should be minimum education requirements. I’m not sure the CFP is the right designation, as I think that should be reserved as an “advanced” designation for advisors that plan to make financial planning part of their focus. But I do think that re-visiting the “CFP-Lite” concept has merit, especially for advisors that want to be strictly investment-focused, that still need a minimum level of knowledge in order to properly recommend investments.

    I have also advocated for years that there should be an “apprentice” period for those responsible for advising client directly – similar to what is required of CPA’s (in most states that I am aware of). Or maybe the CFP can be used in lieu of an apprenticeship period. Lots of possibilities. Getting the Series 7 (or insurance license) and teaching “advisors” how to cold call does not make for a very qualified advisor.

  • Ron Rhoades

    A good blog post by Michael Kitces. Some further observations follow:

    I concur with Alan Moore’s suggestion, above. For consumers, at the present a referral to a NAPFA-Registered Financial Advisor may provide the best prospects for competent, non-conflicted advice. That does not mean that there are not many, many others in the financial advisory community who do good work for their clients. But fee-only members who meet NAPFA’s requirements are more likely to possess both competence and act in the client’s best interests.

    Consumers should expect not only competence (i.e., adherence to the fiduciary duty of due care), but also strictly acting in the best interests of the client (i.e., adherence to the fiduciary duty of loyalty) and acting with complete honesty and candor (i.e., adherence to the fiduciary standard of good faith).

    Yet the issue is how to “raise the bar” for all members of the financial planning and investment advisory (emerging) professions. The CFP(r) certification – perhaps with some adjustments in its content – is most aligned with the baseline level of competency all consumers should expect of their financial advisors.

    But is the CFP(r) certification a mark upon which consumers can rely? Whether fiduciary status occurs, according to the CFP Board’s interpretation of its Standards of Professional Conduct, varies depending upon whether “2” of the financial planning practice areas is implicated. As I understand it, from attending CE Ethics lectures, one could undertake a “retirement plan” for a client, including discussing the (ancillary?) beneficiary designations and tax consequences of funding / defunding qualified retirement plans, and yet only be working in “one area” and hence not (in the view of the CFP Board) be considered a “fiduciary.” Since “retirement planning” is, by its nature, quite comprehensive (some would argue that it is the CORE of financial planning), this does not seem to make sense. In other words, if the advisor is preparing a “retirement plan” then, by definition, financial advice is being provided, and the fiduciary standard should attach. (Fiduciary status likely attaches under state common law, applying the fiduciary standard where a relationship of trust and confidence exists, regardless of the licensure of the advisor undertaking the retirement plan, and regardless of the CFP Board’s treatment as fiduciary or non-fiduciary.)

    Another problem exists in “holding out.” If one describes oneself as a “financial planner” [or CFP(r)], “financial consultant,” “wealth manager,” “financial advisor” or with similar terms denoting an advisory relationship, then the fiduciary standard should attach. (Using such a title is a factor in finding fiduciary status under state common law, per the case law.) Indeed, one might surmise that to hold oneself out as serving in an advisory capacity, but then denying fiduciary status, is a type of fraudulent conduct.

    “Fiduciary status” denotes a comprehensive set of legal requirements – including the duty of due care (addressing competency) and the duty of loyalty. While preserving “fiduciary” as a legal standard to which all those providing advice (as opposed to product sales, as Michael Kitces alludes to), the term “fiduciary” is admittedly not understood by the public. Yet this is no reason to abandon the use of the fiduciary terminology – at least for legal purposes, and within the industry.

    I believe as a profession we have a long way to go, to achieve true status as a profession:

    1) We must agree that all those who hold themselves out as advisors should be held to account as such (including the use of any designations or certifications which denote an advisory relationship).

    2) We must agree that all those who engage in the provision of advice (beyond describing a financial product or security) should be held to fiduciary status.

    3) We must agree that fiduciary status, once it attaches to the relationship with the client, extends to all aspects of that relationship (as occurs under state common law).

    4) We must agree that the fiduciary hat, once assumed, is extremely sticky; i.e., it is highly unlikely that fiduciary status can ever be removed by the advisor. (For an example of when fiduciary status might be lifted, one can imagine a client saying, “I don’t need and want advice any more, but I want to use your firm for execution-only services.”)

    5) We must go a long, long way to establishing best practices for due diligence – from mutual funds to exotic products.

    6) We must encourage advisors to aspire to even higher levels of continuing education and designations. The 60 hours of CE required every 2 years by NAPFA is a start down this road. The emergence of advanced competency designations, or specializations with advanced designations reflective of higher educational requirements and/or experience requirements, would also be progress in this area, and should be encouraged. We need to provide financial advisors with higher goals to aspire to, beyond the baseline competency which appears to be measured, most succinctly, by CFP(r) certification.

    7) Peer review (of which there are several different types) should be made part of your culture.

    8) Of course, legislative fiat is necessary, to ensure that those who practice financial planning / investment advice, or who themselves out as such, are properly licensed (and meet minimal standards of competency, and are subject to fiduciary standard).

    Thank you.

  • David Jacobs

    Requiring a CFP is a good start, but is way too low a standard in the long run. Financial planning is easily as complex as medicine and I certainly wouldn’t trust a doctor that had only taken six classes of training.

    The field needs much deeper training and adopted practice standards so that people can expect similar experiences and answers from different practitioners (something that is sorely lacking today).


    • Roger Wohlner

      David, I couldn’t agree more. I am a CFP and proud of the designation, but at the end of the day getting the CFP is about being good at passing a test, it has little to do with be a good financial advisor in practice. I heard this from my CFP review instructors and I said the same thing to my students when teaching a review class for the comprehensive final exam.

      • Michael Kitces

        The CFP certification has never been held out as a standard for being a “good financial advisor in practice” – in fact, I specifically pointed out this is not its purpose in the blog post.

        The question is what represents a MINIMALLY ACCEPTABLE standard for knowledge and competence. And notably, the requirements include more than just the test.

        How exactly would you propose to test knowledge without including a test in your standard, though?

        In point of fact, EVERY professional standard, credential, or license in the country includes a test of knowledge as a part of setting the bar for minimally acceptable competence.

        Are we really going to suggest that the public would be better protected if we did NOT test the knowledge of practitioners and determine whether they can demonstrate basic competency with the core body of knowledge? How would that be an improvement?

        David’s comments are about expanding the experience requirement and practice standards – which I don’t disagree with, as I noted the CFP standard still has some distance to go. But I simply don’t understand how bashing the exam possibly advances the situation over NOT having an exam.
        – Michael

  • jim schwartz


    I couldn’t disagree more with making the CFP the standard given its history. (See the coverup ups, anti trust activity alleged ((structural barrier to trades)), interlocking directorates in the past with IBCFP, lack of quality control – Bad Math, Bad Advice Forbes,see Barons, etc and the College being both the trainer and examiner in the past). Furthermore,the College for Their Own Financial Planning got $100 million – now NEFE for these efforts rather than disgorging to the CFPs wrongly trained)

    Born in sin – missing the mark etc.

    Unless there is an outside objective monitor on the CFP – its quality control – given its history – it should not be given the monopoly status in essence of the gold minimum standard.

    So where is the checks and balances – the CFP Board? Give me a break given their history.

    And the College had to – no matter what they say – disgorge the mark – some say government may have been around the corner – which has never been proven to date…

    The NCAA – as bad as it is – is doing a better job – than the CFP Board every did on quality control.

    • Michael Kitces

      The CFP Board has no staff members from that time, no CEO from that time, and no board members from that time.

      Notwithstanding the troubled roots of the CFP Board – and I don’t mean to dismiss them entirely – but at what point do we move past the past and acknowledge the present, which appears to be an entirely different organization than the one from 20-30 years ago.

      – Michael

  • jim schwartz


    your point on the history is well taken. However, there is still the question of quality control oversight which I made. Recall for all those years – the faulty retirement training went unchallenged even with Potts and others on the board (even using the flaw of averages – they determined the need on one basis – after tax as I recall and solved on pretax – amongst other errors.)

    So what objective quality control really is there without it being a revolving door of the quality reviewed for a period of time being the quality reviewer???

    Until there is real quality review – without a revolving door – given the history of the CFP – the past will continue to haunt…

    PS Mike – and what has the CFP Board done to disgorge the ill gotten gains of the old College? Proof of the monopolistic activity using structural barriers to trade – the cost of the CFP is roughly the same as it was when disgorged – and thus, given inflation has declined in many instances from then. The CFP Board did nothing to gain restitution from the old College, Mike – and the name changed successor NEFE got what $125 million on the backs of CFPs overcharged and poorly trained.

    Thus, my concern about the quality review and the CFP Board’s lack of seeking redress


    PS The CFP Board, by the way, Mike, never apologized. I’m retired from practice as you know, but the CFP Board also to get grandfather required the Registry Members (which was much more difficult at the time) to waive any rights to sue. Were you aware of this? Mike, I was upheld by Forbes, Barons, WSJ, Consumer Federation of America, and John Allen Poulos – world reknown mathematician and to this day – the new – 10-20 years later CFP Board has done nothing to clear the record – and you want to make them the standard of professionalism – which means ‘an assured level of competence’ for which there is the doctrine of ‘substitute reliance?’ And wasn’t this the CFP Board that wanted to do CFP Lite just a few years ago???

    Sorry, Mike you can’t DeStalinize the history of the CFP Board and The College for Their Own Financial Planning…

    Show me real external – no conflicted with real teeth – quality control – otherwise, history despite what mutual funds put as a disclaimer – is a predictor of future results.

    I’d admire your work, Mike — hope you bone up on the history a little more and call for real quality control with teeth. I look forward to your suggestions as to what teeth are necessary and how they are applied to create trust in the mark given it’s history.


  • jim schwartz

    One more point, Mike.

    Then and to date – the CFP Board has fought tooth and nail – full disclosure of compensation preferring the method of compensation.

    This is ‘fool disclosure.’

    Furthermore, it was Roper of Consumer Federation of America that stated ‘all fraud and abuse is a matter of compensation.’

    If the above is true – regardless of fiduciary status definitions – before the horse is out of the barn – an estimate of total compensation to be received to clients and prospects as well as an actual quarterly – subject to treble damages under each states’ Consumer Protection Act for those (including CPA’s) holding themselves out and acting FUNCTIONALLY as financial planners – would minimize and interdict better than ‘after the fact’

    And who fought it – the CFP Board – holder of the CFP mark.

    And this is the organization who should have the standard of profession mark without real checks and balances????

    Mike – really the political Clintonesque arguing ‘that was the past’ doesn’t deal with the question – where is the checks and balances on the CFP Board etc with real teeth, without self dealing – the this mark and it’s enforcement should indicate ‘as assured (minimum) standard of competence’ and allow substitute reliance???

    Where’s the meat, not the assertion, Mike?

  • Eric

    The CFP is a great place to start for minimum competency, as long as the CFP knows a CFA they can call to explain the more complicated investments. 😉

    I’m kidding. I think the CFP and CFA probably complement each other well.

    I think a great place to start would be a requirement to have something more than a bachelor degree and your Series exams. An MBA with concentration Financial Planning, a CFP, a CFA, etc. It could evolve from there.

    Another thought is hurdles that must be accomplished based on the complexity of the financial instruments being used. Maybe a minimum gets you in the door to Financial Planning and then if you want to use derivatives a more advanced degree is required.

    To a T, EVERY person I encounter pushing VA’s have NO extra qualifications and can’t properly explain how they work. This is a problem.

  • Ben

    Do we really want another FINRA? Because in the end we would end up with some bloated regulatory orginization that hampers the growth of small and mid size RIA’s. Licensing bodies are great at doing 2 things: (1) limiting entry to new participants & (2) passing more rules and regulations.

    There are plenty of regulations from the SEC (More to come) and few private licensing groups like the CFP. What is needed is better policing and a better informed public.

  • Todd

    My CFP instructor always said the CFP was the bare minimum required to practice financial planning services unsupervised. And he made sure to point out it was a minimum; that it hit the areas enough to give you enough to raise the questions.

Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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