Last week, proposed changes to the Experience requirement for CFP certification quietly took effect, including both the elimination of the Capstone course requirement for CFP exam challengers, and more controversially a change to the definition of what constitutes “experience” for the 3-year requirement to include both direct and indirect support.
What’s significant about the new “indirect support” rule is that, by the CFP Board’s own statements, virtually any job in the entire financial services industry will now qualify as “financial planning experience”, including an employee benefits administrator, a compliance attorney, and even a journalist who simply writes about financial planning topics!
The change is even more significant given the CFP Board’s introduction of the 2-year “apprenticeship” option for the experience requirement in 2012… which means that over the past several years, the CFP experience requirement has slipped from “3 years of financial planning experience” to “2 years of financial planning experience, or 3 years of any job remotely related to the financial services industry”!
Sadly, while the CFP Board’s prior changes to the experience requirement in 2012 included a public comment period, this time the CFP Board acted unilaterally without stakeholder input, as it continues to push aggressively for growth in the number of CFP certificants. And notably, the FPA and NAPFA have remained remarkably silent about the change as well, suggesting the organizations either tacitly support cutting the experience requirement for CFP certificants, or that they have lost any ability as membership associations to hold the CFP Board accountable.
Ultimately, though, perhaps the most ironic aspect of the CFP Board’s change is the fact that it comes after 4+ years – and $40M+ in spending – on a public awareness campaign to communicate to the public that the CFP marks are the highest “gold standard” in financial planning… even as the CFP Board’s growth strategy makes it easier and easier to obtain that standard.
“Expanded” CFP Board Experience Requirement Takes Effect
Late last December, the CFP Board announced two changes to the experience requirement for CFP certification, which would take effect on/around July 1st of 2015.
Eliminating Capstone Course Requirement For Challenge Status
The first change under the new rules is that those who are eligible for “challenge status” – which means they already have a Ph.D. in business or economics, a law degree, a CPA license, or the ChFC, CLU, or CFA designations – no longer have to take the “Capstone” financial plan development course to complete the CFP educational requirement. Instead, the challenger can submit a sample financial plan to the CFP Board, which if accepted by CFP professional reviewers, will satisfy the Capstone requirement. (Of course, the advisor must still have otherwise completed the rest of the CFP educational requirement through a CFP Board Registered Program.)
Allowing Indirect Support Experience For Financial Planning
The second change under the CFP Board’s new experience rules was that while in the past the Experience requirement could only be fully satisfied by teaching financial planning, or by the personal delivery, supervision, or direct support of planning to a client, under the new rules a wide range of “indirect” support would be permitted as well.
What constitutes “indirect” support? Examples from the CFP Board’s announcement included positions such as employee benefits administration, a compliance officer, or writing about financial planning as a journalist. Ultimately, the CFP Board declared that indirect experience qualifications will be judged on a case-by-case basis by submitting details about the applicable job experience to [email protected].
A Two-Step Process Of Gutting The CFP Experience Requirement To Two Years
While the Capstone change is arguably quite reasonable (as I’ve noted in the past), as there was little sense in requiring a ChFC (or other credentialed and practicing financial planner) who’s been delivering financial plans to clients for many years to take a “financial plan development course” at this point, the change to the direct experience requirement, and introducing “indirect” support, is far more problematic.
The significance of the CFP Board’s decision to include “indirect” support as experience must be viewed in the context of its 2012 introduction of the 2-year “CFP apprenticeship” option to satisfy the experience requirement. The apprenticeship option came about after the CFP Board proposed it (along with other changes to the experience requirement) back in 2011, and was implemented despite at least some opposition during the comment period (including yours truly, who suggested that the 2-year apprenticeship experience would be too little for effective training of a financial planner).
Thus over the past 3 years, the CFP Experience requirement has gone from 3 years of experience directly related to financial planning, to only 2 years of experience directly supporting financial planning [or 3 years of indirect experience].
And as the CFP Board noted in its own press release, it appears that virtually any job in the broad financial services industry will count as experience now! As mentioned earlier, jobs including employee benefits administrator or compliance attorney will now count towards the experience requirement, despite having no direct relationship to financial planning aside from being part of the broader industry. Even a journalist who simply writes about the financial planning topics now qualifies! (Nothing against journalists; it’s just that we wouldn’t accept a doctor whose only experience was writing about the medical industry in a newspaper or magazine, and it’s not an appropriate way to satisfy experience as a professional financial planner, either!)
In other words, rather than continuing to bolster the quality of the CFP marks as financial planning grows, the CFP Board’s two-step progression of cutting the direct experience requirement by 1/3rd in 2012, and then allowing any experience connected to the industry to qualify, has effectively gutted the experience requirement for the CFP marks.
Is The CFP Board Lacking Accountability – No Stakeholder Input, And FPA And NAPFA Silence?
Perhaps most concerning about the CFP Board’s latest change to the experience requirement is that it appears to have been done with no input from CFP certificant stakeholders.
While the introduction of the two-year apprenticeship option was part of the 2011 proposals to the experience requirement – which included a public comment period for stakeholders – the idea that the three-year experience requirement would subsequently be gutted to include any form of indirect experience across the entire financial services industry was not. And it’s hard to imagine that CFP stakeholders would have accepted the apprenticeship option knowing that it was such a stepping stone to cutting the experience requirement overall. (And in point of fact, we don’t even know how widely the apprenticeship option was supported in the first place, as some including yours truly opposed it at the time, and despite the fact it was a “Public Comment” period the CFP Board never actually released the comments to the public!)
In fact, given the significance of the rule change, it’s hard to understand why the CFP Board would not honor its own historical precedents of putting such significant proposals out to stakeholders for comment… unless the CFP Board already anticipated the change wouldn’t be supported and didn’t want to invite the criticism. It’s also notable that even the CFP Board’s announcement of the proposal was released in a manner that would minimize its visibility and make it harder to mount objections – delivered as a press release on December 30th, during the notoriously slow news cycle between Christmas Day and New Year’s Day, when hardly any reporters were around to cover it, and few CFP stakeholders were around to read it!
Of course, in situations where the CFP Board stampedes forward on a questionable change to the rules, we would hope that the advocacy efforts of our membership organizations – the FPA and NAPFA – would still speak on behalf of CFP stakeholders and the financial planning profession to object to such a change. Yet despite repeated inquiries to the leadership of both organizations from yours truly, both the FPA and NAPFA has remained completely silent on the CFP Board’s changes to the experience requirement – ostensibly an expression of tacit support for the CFP Board’s new experience requirement, even though the FPA and NAPFA did nothing to poll their own membership to confirm their desire to support such a controversial change! Or alternatively, perhaps the sad reality is simply that FPA and NAPFA have lost such power with the CFP Board that they can no longer fill the crucial role of holding the CFP Board accountable in the first place?
On the “plus” side, the change to the experience requirement should help the CFP Board to continue to grow the ranks of CFP certificants, as its Board of Directors has increasingly emphasized the importance of growth in recent years. Yet at the same time, it’s more than a little ironic that the CFP Board has spent the past 4 years – and over $40M of CFP certificant dues – funding a public awareness campaign to hold out the CFP marks as the “gold standard” in financial planning, even as it dramatically diminishes the strength of the experience requirement necessary to earn the marks in the first place.
All of which raises the fundamental question: Is the CFP Board’s ambitious growth efforts coming at too much of a potential cost to the integrity of the marks?
So what do you think? Was the CFP Board’s expansion of the experience requirement to allow any indirect financial services industry experience to qualify a good thing for the sake of growing the marks? Was it an appropriate change to enact without a public comment period? Should the FPA and/or NAPFA have taken a position on the issue on behalf of their members? Is the CFP Board lacking in accountability? Share your thoughts in the comments below!
Debbie Gallant says
While these changes certainly make it easier and faster for folks to become a CFP, I believe it is inconsistent with their marketing campaign. It degrades what took me 5 years, lots of work, and thousands of dollars to attain. I wonder who is going to reap the benefit of this. As for NAPFA, I’m not sure anyone is at home at national anymore. I can’t tell what is happening with NAPFA, but the communication with members is way down and dissatisfaction as indicated by member posts on the NAPFA forum are up. Members post that the new website doesn’t work and no one returns calls from HQ, and no response from National. FPA seems OK, though I’m not hearing much from them either.
While I don’t think everyone needs years and years of experience to be a good planner, I completely agree that the marks will become more questionable. Anyone that’s a member of any of these organization forums can witness that with career changes who have never experienced issues posting on forums. Nothing wrong with not having experience, but the marks were meant to represent the ability to work independently on holistic planning as I was taught it… I have little faith in what I’ve read from some that they’re able to change careers or come from ‘similar’ ones.
This dumbing down on some level is happening with CPA requirements as well so perhaps it’s competition… but I’m not overly pleased.
FPA / NAPFA aren’t taking any positions any longer. NAPFA has been out to lunch the last year.
It would be nice to see XY create a class for experienced planners who don’t need some of the technology, and may have experience and not want the NAPFA membership.
Or, a sister organization with higher experience requirements that perhaps goes after more professionals? I would love to see an organization that had 5-10 years experience requirements. Make a requirement that all compensation is disclosed, open it to accountants, insurance pros, estate planners, etc., and I think both FPA and NAPFA could be displaced by a lean competitor that focused on marketing like you guys are doing with XY.
The profession is craving something new that actually knows what members want… our message out there with the public. NAPFA and FPA’s declines have been very disappointing and they probably mean very little to CFP Board.
Kristine M. Lansing, CFP(r) says
The experience requirement absolutely should not be watered-down. Even after 3 years of direct experience, there is still lots to learn. This is not the time to water-down the requirements. This is the time to hold all new candidates to the current standards and continue elevating the mark’s value or prestige!
Michael Kitces says
Unfortunately Kristine, this isn’t a proposal or a hypothetical. It’s already been implemented. :/
Interesting. I wonder if it has anything to do with the fact that leaders of these organizations have seen fit to lock arms (i.e. form the Financial Planning Coalition) for ostensibly good reasons (at least at the outset) that require much more political action. In most cases, involving one’s self in the nuance of politicking begins with righteous intent and quickly slips into a distasteful-yet-requisite pattern of horse trading at the expense of one’s soul. Deals get made and principles get compromised. Political capital is exchanged often with a hush component to the quid pro quo transaction.
Although I expect FPC leadership initially engaged advocacy with the best intentions, I wonder if they have been “asked” for something costly in return….like widening the net perhaps? If favorable progress is to be made with the fiduciary rule, is FPC being asked to make it easier for the other-siders to join the ranks by lowering the barrier of entry? Are lawmakers not brokering the deals, pledging legislative support for a fiduciary mandate, yet having to answer to a much larger, much deeper-pocketed lobby (insurance and traditional brokerage) whose argument is weak but whose money/political clout is too precious to ignore?
As pointed out, the unilateral decision-making and implementation, the holiday timing of the news release, the not-so-public “public” comment period….this is all more or less atypical behavior for these three organizations. I can’t say for sure, but something is amiss here. If my hunch is at all correct, I would expect a collective response from these organizations to be either: 1. continued complete silence (which implies, “We don’t owe you, our members, any explanation”) or 2. denials with little or no explanation (which shows no contrition, no admission of conducting themselves in a less-than-accountable fashion). Neither is acceptable.
Charlene Overell says
Disappointing move I feel. Here in New Zealand we are trying to encourage higher standards and I have advocated the CFP mark for many years now (whilst here and previously in the UK). Watering down the requirements I believe is detrimental to our profession. Do we see other professions such as law and accountancy making their entry to qualification easier? If we are to be seen as professional amongst our peers and importantly, the wider public, I do not think this change has helped our industry unfortunately. Big shame it has come to this.
If we (the collective “we” of financial planners and CFP in particular) want to continue to establish, and “re-win,” trust with the public after 2008, I’m not sure how watering down the requirements to obtain and use the CFP mark is going to accomplish that. If anything, the requirements should become more stringent so that we don’t end up like the legal field (which I used to work in as an attorney) that churns out tens of thousands of new lawyers each year into an industry that can’t support that many people.
I’m not sure they should focus on simply increasing the number of CFPs, but rather the focus should be on increasing the number of quality CFPs, and I don’t see how lowering the standards required to obtain and use the mark is going to help in that regard.
I am in the process of deciding whether to get my CFP. (Ironically, I waited to meet the three-year experience requirement, which I would at the end of this year.) Given this watering down of the experience requirement and expected dilution of the brand, I wonder if Michael or anyone else could weigh in on whether another mark might now be more meaningful.
Michael Kitces says
In my view, there’s really no good alternative to the CFP marks as a basis around which we can stake the financial planning profession.
So ultimately, I don’t view this change in the CFP marks as a reason to abandon the CFP marks. I view it as a reason why we as CFP stakeholders need to more loudly insist that our voices are heard (and that the CFP Board engages in public comment periods for major changes like this).
And why we also need to make our voices heard to the FPA and NAPFA that they are doing a poor job of representing CFP certificants as our advocates. :/
Mohamed Dabo says
Bravo, Michael for a well-reasoned argument. You made your point logically and convincingly.
Unfortunately, you failed to write a balanced account of the issue. Did the CFP leadership (people who have presumably worked hard for years to build this organization) wake up one day and decide: “Oh, let’s water down the CFP to get more people in”?
I hardly think so. What about telling your readers the CFP leadership’s side of the story. What is their rationale (whether you agree with it or not) for making these changes?
The fact that those organizations you take to task (FPA and NAPFA) did not apparently fight the changes, suggests they may see some benefits in the changes which you don’t see.