In the mid-20th century, the first phone call for a person who needed guidance on saving or planning for retirement was likely to be to a stockbroker or a mutual fund or insurance salesperson. But while some of these salespeople may have certainly been able to provide sound advice, there was really no way at that time for a consumer to know which among the many brokers and agents out there were actually capable of giving true and sound advice that would help them reach their goals. So, in the late 1960s, a movement began to organize and promote best practices that would establish financial planning as a true profession. As a result, in 1973, a group of 35 planners became the inaugural recipients of the CFP marks.
In this guest post, CFP Board Chair Dan Moisand reflects on lessons learned on the 50th Anniversary of the first class of CFP certificants (which has seen the number of certificants grow from that initial 35 to approximately 97,000 active CFP professionals today), assesses the current state of CFP Board and its multipronged approach towards both serving the public and promoting the financial planning profession, and lays out what's needed for financial planning to continue its evolution towards becoming a 'true' profession on the same levels as law and medicine.
The rising popularity of CFP certification was thanks in large part to CFP Board's setting of rigorous educational and examination requirements that established a high bar of competency for those who wished to use the CFP marks. Gradually, CFP Board also raised the ethical standards for CFP professionals, introducing a fiduciary standard on financial planning in 2008 and, in 2020, an expanded fiduciary standard that applies whenever the certificant is giving financial advice. And despite occasional setbacks (such as the 1999 introduction of an "Associate CFP" designation, which was poorly received because it was seen as lowering the standards applicable to those who called themselves CFP certificants) and a highly publicized 2019 Wall Street Journal article that found numerous CFP certificants with undisclosed disciplinary histories (which exposed the limitations of allowing certificants to self-report their own disciplinary events, leading to an overhaul of how CFP Board oversees the investigation and enforcement of disciplinary cases), CFP Board's efforts to expand public awareness has led to widespread recognition of and preference for CFP certification among the audience of potential consumers.
Looking ahead, CFP Board's main challenge involves balancing the need to maintain (and, where necessary, raise) the competency and ethical standards for CFP certificants against the urgent demand for more financial planners, and also to increase diversity within the profession to serve a wide range of financial planning needs among the general public. Which has led the CFP Board not only to review various standards that relate to obtaining and maintaining the right to use the marks, but also to split itself into a new 501(c)(6) entity (that can more directly promote the financial planning profession itself – both to consumers and potential CFP certificants) alongside its existing 501(c)(3) entity (that will continue to serve for the public benefit).
Ultimately, as the number of CFP professionals projects to surpass 100,000 in the next 12–18 months, CFP Board will inevitably encounter challenges in upholding its standards among an ever-widening base of certificants – made more complicated by the fact that, as a non-regulatory authority, its ability to enforce its standards is essentially limited to being able to prevent someone from using the CFP marks if they violate the standards. However, as CFP certification and public awareness continue to grow, the value of certification will grow in kind, which serves as its own motivation to continue to serve the public well for CFP certificants – which, in turn, will continue to help financial planning move towards an 'established' profession that benefits both the general public and CFP certificants themselves!
Editor's Note: While professionals who have earned the CFP marks may be required to use the registered (®️) symbols (as individuals who are marketing themselves to have CFP certification), publishers who are only discussing the designation are not required to do so because we are not using the designation for commercial purposes (e.g., to solicit clients).
2023 marks the 50th Anniversary of the first class of CFP certificants. Today, financial planning is closer to being a true profession in the eyes of the public and policymakers than it has ever been, in large part because the CFP marks have evolved into much more than an educational credential. CFP certification is the mark of the profession and the standard for financial planning. However, there is much more to be done, and neither CFP Board nor any other organization can provide the means to professional status alone.
The Current State Of CFP Board: Where We Are Today
CFP Board exists to benefit the public by certifying financial advisors and holding them to high standards. There is clear value in this effort. Despite talent shortages in the industry, CFP Board has consistently grown the number of CFP certificants. In 1995, the CFP certification program became the first financial planning credential accredited by the National Commission for Certifying Agencies (NCCA) and remains one of only a few financial-related accredited programs. In 2021, there were an estimated 330,300 personal financial advisors with approximately 97,000 CFP professionals, which means nearly a third of financial advisors are CFP professionals.
I have great respect for some of the financial services designations available to financial planners, and I know many excellent financial planners who have chosen not to pursue designations. But CFP certification has clearly won what was known as the "Designation Wars" when I first became a certificant in 1994. CFP certification is the dominant financial planning credential among independent financial planning firms, RIA firms, brokerage firms, insurance companies, and the broader retail financial services industry.
When firms invest in professional development for their employees, they focus on the CFP certification education program. Unlike most designations whose curricula are derived from a single source, there are extensive degree programs and registered programs for aspiring CFP professionals. CFP Board devotes considerable resources to institute best practices in exam design, administration, and validity. Demand from the employees largely drives the growing trend of firms supporting their employees on the pathway to earning their CFP marks, as financial planners who invest the substantial time and effort required to attain a credential want it to be of high value. And the rewards are well worth the effort, as CFP professionals tend to perform better in terms of overall client acquisition cost and revenue growth and have higher compensation than those without the CFP credential.
In 2022, CFP Board, CFP Board Ambassadors, and CFP certification had 27,295 media placements, a 27% increase from the previous year. Furthermore, when articles and news stories covering personal finance include quotes from a CFP professional, and personal finance writers recommend that consumers work with a certificant because of CFP Board's rigorous competency standards for financial planning, the public is more likely to turn to a CFP professional for advice.
Today, it is rare for a consumer finance article not to quote a CFP professional as the subject matter expert. And while there is always room to grow, when Queen Latifah's character tells Jennifer Garner's character she is studying to be a Certified Financial Planner professional in the movie "Miracles from Heaven," and the CFP marks are a Jeopardy! question, we know the CFP certification brand has hit a new level of awareness and acceptance as the standard for professionals providing financial advice. The mark is now table stakes both for working as a financial planner and for hiring one.
The CFP mark is also so well regarded because of the high ethical and practice standards certificants agree to abide by. The only standard of conduct for a true profession is the fiduciary standard. With its most recent update to the Code of Ethics and Standards of Conduct, CFP Board became the only body I have seen that attempts to address the issues that arise when financial professionals switch roles from advice to sales.
The combination of high quality, competency, and ethical practice standards is unique to CFP certification. And it is expected that CFP professionals will meet and uphold these standards. While CFP Board may have its shortcomings, its work to uphold its standards is unmatched for a non-regulatory body. Though most have a code of ethics, few of the over 200+ financial credentials listed on the FINRA website have a comprehensive enforcement program. Even fewer make their sanctions known to the public. This enforcement function is an underappreciated driver of value for the marks.
Today, CFP Board is a professionally run, data-driven organization making decisions based on actionable information. This is important for operations, but it also reflects CFP Board's commitment to measuring the impact financial planners have on their clients' well-being. As part of its current slate of strategic priorities, CFP Board is launching a first-of-its-kind longitudinal study to showcase the value of working with a CFP professional.
CFP Board is uniquely positioned to lead the profession. In fact, due to a significant change earlier this year, "advancing the financial planning profession" has become an explicit part of the organization's mission. Because CFP Board was originally structured as a 501(c)(3) nonprofit established for the public's benefit, its messaging was restricted to focus on its benefits to the public. However, CFP Board recently reorganized itself into 2 entities: 1) CFP Board of Standards, a new 501(c)(6) nonprofit professional organization, and 2) CFP Board Center for Financial Planning, renamed from the original existing 501(c)(3) entity. And because of this reorganization, the new 501(c)(6) entity (CFP Board of Standards) can use messaging that is clearly meant to benefit CFP professionals, directing its communications to those in (or aspiring to join) the financial planning profession about the benefits of earning the right to use the marks; at the same time, the 501(c)(3) CFP Board Center for Financial Planning can continue to be direct in its communications to the public about the benefits of working with a CFP professional.
CFP Board is an organization with a strong record of execution. When CFP Board takes on a new initiative, the industry and profession take notice and expect the effort to succeed. For instance, the feedback on the recent formal encouragement of pro bono work indicates that because of CFP Board's resolution, pro bono activity will increase significantly in the coming years.
How We Got Here
We've gotten here via a series of incremental changes. While not a comprehensive list, below are key advancements and some setbacks.
There is a science to developing and administering a high-stakes professional exam. CFP Board committed to adhering to that science more than 30 years ago when it implemented a single comprehensive exam to replace a series of shorter tests. This pursuit of a scientifically valid exam dramatically improved the competency level of financial planning.
Since its creation in 1973 at the College for Financial Planning, the examination requirement consisted of a series of 6 tests, each covering a different group of topics: foundations of financial planning, insurance/risk management, investments, tax, retirement planning, and estate planning. In 1989, the Board of Examiners, the body most similar to today's Council on Examinations, started planning to create a single comprehensive exam to replace the 6-part serial exam.
The 10-hour comprehensive exam, first introduced in 1991, was designed to test the integration and application of the knowledge from the financial planning curriculum, transitioning the exam's purpose from educational testing to a measure of competence to practice financial planning. By 1994, the 6-part serial-format exam had been completely phased out for anyone who began the series in 1991 or earlier.
A mere 163 people took the first exam in November 1991. In 2023, the number of exam takers may exceed 2021's record of 8,795.
CFP Board's certification program is valid, reliable, and legally defensible. Approximately every 5 years, CFP Board surveys thousands of CFP professionals through a comprehensive Practice Analysis. Through this research, CFP Board's comprehensive examination reflects the current practice of financial planning. The exam and its results are replicable and repeatable. The exam is legally defensible, as we are NCCA Accredited. Our accreditation is evidence that CFP Board follows best practices in the certification industry.
Almost 80% of those who pass the exam say they spent 11 hours or more studying for the CFP exam every week, many studying 3–6 months prior to the exam. Exam passers also cite the importance of practice exams and review courses.
Ethics And Standards
My entire career, I have believed the fiduciary standard is the only standard on which a profession can be built. However, for most of the CFP mark's history, the fiduciary standard did not apply. It was only introduced for financial planning in 2008, but not for other activities. This was shortly after the Financial Planning Association (FPA) won its lawsuit against the SEC over exemptions from registration under the Advisors Act of 1940 and the fiduciary duties that apply to investment advice.
The most recent update to CFP Board's Code of Ethics and Standards of Conduct states that the fiduciary standard applies when giving financial advice, not just when conducting financial planning. As far as CFP Board is concerned, the standard of care exercised by a CFP certificant should not change regardless of whether the certificant is engaged in financial planning or giving financial advice. "Financial Advice" is defined broadly by CFP Board and includes activities that are often outside the scope of financial planning, such as some sales activities to which governmental regulators do not apply a fiduciary standard of care. This significantly raises the bar and is entirely appropriate for a profession. This enhanced standard just became enforceable for incidents occurring after June 2020.
At the same time, the new ethical standards were updated, and so were the Practice Standards. It is rare for holders of other designations to be held to standards regarding how they conduct their financial planning activities and provide financial advice. As CFP Board upholds its standards, the importance of the Practice Standards should be better appreciated over time.
Public Awareness Campaign
For as long as I can remember, when CFP professionals were asked to identify top priorities for CFP Board, one of the most common responses has been to raise awareness about CFP certification. In 2009, CEO Kevin Keller began a listening tour, traveling the country to meet with CFP professionals. The results of those meetings, combined with the results of a 2010 feasibility study, revealed that certificants overwhelmingly agreed that growing awareness of CFP certification should be a top priority for CFP Board.
Certificants were supportive of a fee increase to fund such an initiative, and in 2011, the first Public Awareness Campaign launched consisting of national paid advertising, integrated public relations, social media, and a consumer-facing website. In its various forms over the years, the public awareness campaign has seen significant success. Since 2011, total awareness of CFP certification among the target consumer audience has increased from 75% to 90%, and "preference for" a CFP professional increased from 22% to 84%.
Boosting awareness remains one of the top priorities of certificants. And because of CFP Board's recent creation of a 501I(c)(6) organization, the 2023 public awareness campaign can take a more direct tone, positioning the CFP mark as the must-seek credential when hiring a financial advisor. Its tagline is "It's Gotta Be A CFP®". The breakthrough campaign has set all-time high records for awareness metrics.
CFP Board Center for Financial Planning
Advancing the financial planning profession is a multi-faceted endeavor. If financial planning is to become an established profession, it must cater to a broader demographic of clients and incoming talent. This means not only growing the number of planners but also growing the number of more diverse planners.
Originally kicked off in 2015 with an effort to bring more women to the profession, the Center for Financial Planning is a 501(c)(3) nonprofit organization that has grown to take on an array of initiatives. In addition to the Women's Initiative (WIN), the Center drives the "I am a CFP® Pro" campaign, the Diversity Summit, other diversity, equity, and inclusion efforts, scholarships, a mentor program, and research initiatives including the annual Academic Research Colloquium and the publication of the academic peer-reviewed journal, Financial Planning Review.
The Center is also where CFP Board's pro bono financial planning volunteer efforts reside. Hopefully, the recent resolution unanimously passed by the Board of Directors, encouraging (not requiring) CFP professionals to commit to 20 hours of pro bono work annually, will help foster a culture in which pro bono is a normal activity of the profession. The resolution also encourages employers of all sizes to support pro bono work. Whenever I ask about pro bono, I hear the most amazing and uplifting stories. My goal is that in the near future, "Where did you do your pro bono hours?" will be a common conversation within the profession. Learn more about the pro bono program and opportunities to volunteer at CFP.net/probono.
Setbacks We Faced
CFP Board has had its setbacks. But many setbacks often come with a silver lining. 2 in particular stand out during my career because, despite the apparent negative outcomes of these situations, they led to significant advancements for the organization and the profession.
The Failed 'CFP Lite' Creation Of An Entry-Level Designation
In 1999, CFP Board unveiled an entry-level designation, the Associate CFP. At the time, the Institute of Certified Financial Planners and the International Association for Financial Planning were merging to form the Financial Planning Association on the premise that the profession should unite behind the idea that the CFP mark should be the standard for the profession – "One Profession, One Designation" as P. Kemp Fain famously urged. Though common in other countries, CFP certificants in the U.S. overwhelmingly rejected the idea of a junior designation. They wanted standards raised, not another designation at a lower standard. When this initiative was unveiled, the CFP professional community had an immediate and strong negative reaction to the concept and deeply resented implementing the lesser designation without discussion.
CFP Board quickly halted the program, but trust in the organization suffered. The reaction to the lower-level designation was the genesis of a rough patch for the organization, exacerbated by a series of ineffective CEOs from 2000–2007. I was on the original Board of Practice Standards, the committee that created the original set of Practice Standards for CFP Board, when 'CFP Lite' was introduced. I was also on FPA's national board from 2003–2007, and I saw firsthand the negative effect this had on CFP Board. For instance, during my last year on the FPA board, I received several calls from CFP Board employees who described various forms of internal dysfunctions and wondered if there was anything I or FPA could do to help get the organization back on track.
CFP Board resolved to make whatever changes were necessary for the organization to be more effective. Kevin Keller was hired as CEO in 2007 and moved the organization from Colorado to Washington, D.C., the epicenter for nonprofit organizations and associations.
Keller's start was far from smooth. A year after his hire, 5 members of the Disciplinary and Ethics Commission (DEC) resigned in protest, largely over governance changes made without substantial conversation. Nonetheless, Keller's arrival was the start of a new era for the organization. Over time, CFP Board transformed.
The Wall Street Journal Article
Before the DEC resignations, certificants who appeared before the DEC got a fair peer-driven hearing… and that remains the case today. The quality of the hearings was not an issue; however, hearings are just 1 step in the disciplinary process. Changes were made to bring more consistency and efficiency to all steps of the process for the growing organization. Examples of these changes would be various amendments to the Procedural Rules and the development of Sanctions Guidelines and Fitness Standards.
Despite arguably the most robust enforcement program of any non-regulator, an important weakness was publicized by the Wall Street Journal (WSJ) in 2019. CFP Board's consumer website to search for a CFP professional included individuals with disciplinary histories on FINRA's BrokerCheck or the SEC's Investment Adviser Public Disclosure (IAPD) database that had no disciplinary history with CFP Board. This was largely due to an overreliance on self-disclosure by CFP certificants to initiate investigations.
CFP Board took corrective action quickly by creating an Independent Task Force to review its enforcement program, which made their report public, and updated the website to include direct links to a CFP professional's BrokerCheck and IAPD profiles so consumers could more easily see those records. CFP Board continued to make changes and significant investments to improve the enforcement program over the following 3 years.
Discrepancies between BrokerCheck and CFP Board records will continue to exist for a variety of reasons, including the simple fact that the standards for inclusion are different. This is neither a sign of incompetence nor a sign of neglect. Still, the criticism at the time of the WSJ article was valid that CFP Board was not looking for cases that could be detected and investigated and was not providing the enforcement program with the resources that it needed.
Since I joined the Board of Directors of CFP Board in 2020, I have seen significant changes. The organization has invested in staff and technology; proactively monitors public regulatory, criminal, and civil databases; revised the procedural rules; improved the function to file complaints; created an independent Appeals Commission; instituted third-party assessments of enforcement and disciplinary functions; and most importantly, restructured governance to give CFP Board oversight of the disciplinary and enforcement program.
During this time, CFP Board created its Strategic Priorities for 2022-2026. With a focus on 5 blocks – Standards & Certification, Workforce, Awareness, Access, and Community & Regulatory Engagement – it also created the previously mentioned 501(c)(6) CFP Board of Standards to allow for communication highlighting the benefits of careers in financial planning, expanded its commitment to promoting pro bono work, is updating the Sanction Guidelines and Fitness Standards, and created a Competency Commission that is conducting the first comprehensive review of the competency standards for CFP certification.
Where We Are Going
The move from an "emerging profession" to an "established profession" will continue, and I believe we will get there eventually. Proper handling of personal finances is too important for it not to happen. Financial planning education can have a very negative impact on Americans if not provided by competent and ethical financial planners. What needs to happen? Plenty, including the continued growth of an academically valid body of knowledge… but 4 things in particular stand out to me.
Regardless of a client's wealth level, financial planning is a crucial element in making the most out of one's life savings. I think the opposition to CFP Lite was largely due to the importance of the subject matter; helping clients achieve the goals that are most meaningful to them – whether that means retiring in luxury or finding a way to navigate hardship to make ends meet – is serious business. Putting a stamp of approval on a lower standard was simply not palatable.
The competency standards comprise the Education, Examination, Experience, and Continuing Education required to earn and maintain the right to use the CFP mark. They have evolved by building upon the existing set of standards. These episodic additions include the comprehensive exam, the college degree requirement, the accelerated apprenticeship path to meeting the experience requirement and adding relevant knowledge topics such as those related to the discovery process, and the new Psychology of Financial Planning domain as part of the curriculum and covered on the exam.
To ensure the standards keep up with the times, especially with today's tech-fueled rate of change, and to reduce the need for massive revisions, a comprehensive review of the standards should be done on a more frequent basis. To that end, the first comprehensive review of the competency standards in CFP Board's history began this year by establishing the first Competency Standards Commission. This is a huge project because there are so many factors to consider. While the Commission is examining a range of topics, from what work should count toward the experience requirement to what should be added to the exam, the 2 items that come up the most when I talk about this project are CE and the college degree requirements.
Review Of CE Requirements
Financial planning, by its nature, touches on many different topics, yet the only topic with a mandated number of CE credits is the Code of Ethics and Standards of Conduct, requiring 2 CE credit hours out of the total 30-hour requirement. A certificant may opt to get the other 28 hours required in a single subject, such as investments or tax. Some say that is fine, others think mandating a minimum per subject is critical, and some worry that adding more requirements could be a hassle to track.
There is also great debate about the number of hours required. Some say 30 hours is too few. Some say it's too much. Others say increasing the number of hours would provide a financial boost to CFP Board and CE providers like member associations or even this site. Others still argue that improving the quality is more important than increasing the number.
Review Of Bachelor's Degree Requirement
In September of 2001, the Board passed a resolution adding the attainment of a bachelor's degree to the pre-certification standards with an effective date of January 1, 2007. The thinking was that other professions required advanced education, so adding a bachelor's degree requirement aligned with that.
Today, in many circles, the degree is viewed as an unneeded barrier to entry. It doesn't have to be a degree in financial planning or in any particular subject. The percentage of underrepresented populations that earn a degree is lower, making it harder to improve diversity in the profession. In addition, opponents to the degree requirement often say there is a difference between book learning and real-world experience, so someone with many years of professional experience should be able to use that experience to replace the degree requirement.
What do you think about these issues? You will be able to express your opinion. The Competency Standards Commission gathered early feedback on the project during the summer, and it is anticipated to present its recommendations to the Board of Directors in 2024. The Board will then seek public comment and use those comments to make their final decisions on any revisions to the competency standards.
High Ethical Standards
Ethical standards must continue to evolve to stay at appropriately high levels and stay relevant. As mentioned, the most recent review of CFP Board's ethical standards resulted in the adoption of the fiduciary standard for CFP professionals whenever they give financial advice, not just when doing planning. Additionally, the Practice Standards were updated and revised.
Incremental advances have been a strength of CFP Board, but frequent reviews of and discussion about these standards are needed to keep them relevant in a fast-changing world and reduce the need for major overhauls. In addition, CFP Board works to make the peer-driven disciplinary process credible to the public and fair to those whose conduct is being evaluated. As such, efforts are underway to demystify the disciplinary process.
A new set of proposed Sanction Guidelines and Fitness Standards is currently out for public comment through December 5, 2023. CFP Board wants your thoughtful opinions, and to aid in this effort, the comment page links to a survey designed to elicit feedback in key areas. This, too, was an enormous project, but it is important that the sanctions the Disciplinary and Ethics Commission (DEC) imposes are appropriate for the violations found.
In May, I delivered a presentation outlining CFP Board's enforcement and disciplinary process, from detection to appeal, at the Spring conference of the National Association of Personal Financial Advisors (NAPFA) and again at the Financial Planning Association's national Annual Conference in Phoenix in September. To my knowledge, this is the first program at these conferences that aims to help advisors better understand the CFP Board disciplinary process.
While disciplinary proceedings are confidential, the peer-review process described in the Procedural Rules is not, and CFP Board can do more to help educate planners about the process. Accordingly, CFP Board plans to roll out a Respondent's Handbook and a series of videos that link to the Procedural Rules to enhance the understanding of respondents, who are those accused of violating the Code of Ethics and Standards of Conduct (Code and Standards). These new resources are an excellent complement to the already significant tools available to help certificants comply with the Code and Standards.
In June, CFP Board released an Ethics Report. This report reflects CFP Board's ongoing commitment to upholding the high standards that make CFP certification the standard for financial planning. Over the last several years, CFP Board has invested significant resources – both financially and operationally – to strengthen its work to uphold the Code and Standards. The organization improved procedures, clarified functions, and recruited top talent to handle those functions. It developed a robust library of resources to assist CFP professionals in understanding their obligations under the Code and Standards. And it solicited third-party evaluations of the program so that outcomes would be credible to the public and fair to those whose conduct is evaluated. The Ethics Report details CFP Board's work in these areas and acknowledges the scores of talented volunteers and staff professionals who have committed their time and talents to strengthen CFP certification.
These and other CFP Board resources in the works will enhance the credibility of the process in the eyes of both certificants and the public by shedding light on CFP Board's processes to uphold its standards. I cannot praise the CFP Board staff enough for driving the visibility of their work to uphold our standards.
Growing The Financial Planning Profession Workforce
Over my career, I've seen incredible technological innovations that make getting information and acting on information easier than ever. But personal finance has only become more complicated. The need for competent, ethical, and objective advice has never been higher, and it is growing. We need more people who have proven an acceptable level of competence and are accountable to a proper set of rules and standards of behavior. We need more CFP professionals and more diverse CFP professionals.
I am hopeful that CFP Board can make progress in this area.
More Flexibility To Promote The Profession
Career changers and students interested in the financial planning profession want to know what's in it for them. I can't imagine myself trying to acquire clients without the ability to tell them about all the benefits of working with me. This is precisely what CFP Board has faced in the past. No more.
Prior to its reorganization into 2 separate entities, CFP Board was not allowed to promote benefits to the practitioner. For years, it could not emphasize the benefits of becoming a certificant. Meanwhile, other professions have not faced these marketing and communication limitations, and our profession was losing out on talent.
But now, by partitioning CFP Board Center for Financial Planning as a separate 501(c)(3) entity from the 501(c)(6) entity that is now CFP Board of Standards, CFP Board has the flexibility to promote the profession more directly. You can see this difference in the new Public Awareness Campaign advertisements, which direct consumers to "Find your CFP® professional at…" instead of a call to action to "Learn more at…"
Recruiting For Diversity
CFP Board has hired a Director of College and University Relations and a Manager of Student Engagement. They are tasked with helping existing Registered Programs grow and establishing new programs around the country, working with sites including Historically Black Colleges and Universities, Hispanic Serving Institutions, and other campuses with high numbers of underrepresented portions of the population.
Getting people interested in joining the profession is one thing. Helping them develop their skills and keeping them in the profession is another. And while asking them to prove their competence and committing to an ethical code is important, it's simply not enough. The profession needs to do more by expanding its offering of consistent training and development regimens.
Accessibility To High-Quality Training & Development Opportunities
The legal, medical, and accounting professions all have well-worn training and development paths. Financial planning does not. And while there are some financial planning firms that have adopted 'residency' programs, the profession is hampered by narrow corporate training or the make-it-up-as-you-go training approach of many independent firms. The CFP certification coursework is a great start, and passing the high-stakes exam confirms technical competence… but real-world training and good development programs offer so much more.
While CFP Board identifies the knowledge needed and certifies that a level of competence has been reached, creating training programs is not something in the organization's wheelhouse. What CFP Board can do, though, is help elevate planner training by collaborating with other organizations, convening thought leaders, conducting research, and disseminating information about what works.
For instance, CFP Board did not invent or create financial planning career paths or job descriptions, but by bringing talented people together, it produced resources about career paths in financial planning that have been used by firms of all sizes to help create or improve their own career paths. A similar process could be applied to creating resources to foster more effective training programs.
The topic that represents the biggest obstacle that financial planning must overcome to fully become a profession is the identification of a different regulatory structure. That structure must marry an appropriate set of standards with a higher level of authority than is currently applied.
CFP Board's ethical standards are strong and address the essential elements of practicing financial planning. While improvement is coming, what is in place today is a solid foundation on which our profession can evolve. Despite this, CFP Board has received criticism over the years for its efforts to uphold standards. And while some criticism is justified, I believe some is misdirected, especially when it comes to the level of authority that CFP Board is permitted to exercise.
The Limited Authority Of CFP Board As A Non-Regulatory Entity
Examples of such criticism include, "Given the number of CFP certificants, there should be more cases," and "CFP Board just slaps the hands of violators because it only puts out news releases about issuing letters of admonition, suspensions or revocations." These criticisms, often levied with a tone of frustration or outrage, usually ignore the simple fact that CFP Board has limited authority because it is not a regulator.
Neither CFP certificants nor CFP Board want incompetent or unethical people using the mark. CFP Board's disciplinary process is excellent… once a complaint against a respondent is filed. The public can rely on CFP Board to evaluate a respondent's conduct properly and fairly through a peer-driven process overseen by the Disciplinary and Ethics Commission (DEC). But it all starts with a complaint.
The number of cases derives from the number of complaints received and matters discovered. Many clients don't want to file a complaint for various reasons. Some just want to move on. One payoff to a client who files a complaint is extracting a measure of justice, but that is not enough for some. Aggrieved clients often want to get money back from the offender, and if they do not believe that will happen, they will not file a complaint.
Financial planners do not like to file complaints either. Few today realize this, but it used to be an ethical violation for a CFP certificant to not report a fellow CFP professional if they were aware of substantial evidence of a violation (Rules 603 & 604 of the pre-2008 Code of Ethics). That provision was tempered by another provision in the Code and Standards not to use this duty to harass one's competition (Rule 611). However, both those standards were nearly impossible to enforce and were eliminated when the Code and Standards was revised in 2008.
CFP Board has more detection capability than ever after the post-WSJ update of enforcement functions, and it does not ignore any complaints. Under the post-WSJ article governance reforms, CFP Board uses third-party reviews of the enforcement program to ensure its processes are sound and policies are followed. Nonetheless, the capabilities of CFP Board's detection team are still limited.
What CFP Board can do is to determine who can use the CFP mark. The only punishments available that can be administered by CFP Board revolve around the right to use the marks. CFP Board can prevent someone from using the marks, but it cannot fine, compel restitution, imprison, or ban an individual from financial services more generally. It does not have the authority to inspect a certificant's operations, and it does not have subpoena power.
The Shortcomings Of Existing Regulatory Authorities With Financial Planning Oversight
While existing regulatory authorities can take many of the disciplinary actions that CFP Board cannot, their current jurisdictions and regulations do not encompass financial planning. As far back as 1987, through its Release No. IA-1092, the SEC said that if an individual holds out as a financial planner, they must be an Investment Advisor Representative (IAR). Many states have similar statutes. I am aware of only one case of enforcement on this issue by any state or Federal regulator.
To a degree, this lack of enforcement is beside the point. Being an IAR brings in fiduciary duty, but only with respect to investment advice. Regulators have long allowed IARs to switch roles and switch standards to that of a salesperson. The latest revision to the CFP Board Code and Standards is clear that in the event of a complaint, even if the certificant changed roles, the standard of conduct by which the Disciplinary and Ethics Commission will evaluate the certificant's actions will not change. CFP® professionals are held to the same fiduciary standard by CFP Board regardless of whether they are engaged in financial planning or delivering "Financial Advice" – as defined by CFP Board.
However, even if the government applied fiduciary duty as CFP Board does, the existing regulatory structures are inadequate for the public and the profession. The Series 65 is a test of knowledge about investment advice rules. Passing the Series 65 to gain registration may qualify you to use the title "financial planner," but it is woefully inadequate in determining competence as a financial planner. The same can be said for the common sales-related exams such as the Series 6 & 7 and state insurance licenses.
Beyond the competency issue, none of the roles these tests cover include any requirements to perform financial planning or any standards about how that planning is done. CFP professionals have standards that require proper descriptions of the scope of their work and Practice Standards that apply to how they do that work.
Tackling CFP Board's Challenge Of Enforcing Its High Standards
Put that all together, and we see that CFP Board has excellent standards but limited enforcement capability. The government has strong enforcement capability but no ability to determine what constitutes competent and ethical financial planning. This all begs the question: How do we get to a structure with the high standards we demand and the enforcement we need to uphold those standards that will be appropriate for our profession?
First, frankly, I don't see it happening anytime soon. Neither the financial services industry nor government nor CFP Board are keen to pursue the changes required, not to mention most CFP certificants themselves.
The financial services industry is highly regulated and, by and large, sees itself as overregulated. Similarly, legislatures lean toward reducing or eliminating regulations, not creating new ones, and governmental regulatory entities are quite protective of their respective turf. And for CFP Board, regulatory reform is not a priority. Its current Strategic Priorities for 2022-2026 include "Community and Regulatory Engagement." That is "engagement," not "reform." In my 4 years on the Board of Directors, there has been no conversation or actions related to CFP Board making a change to its regulatory role within the profession.
The current environment is such that time, money, and other resources are much better utilized when focused on improving the quality and value of CFP certification, upholding our standards, and acting in areas CFP Board believes it can have the most impact, such as workforce development, awareness, and access to planning for more Americans.
I am a member of the Financial Planning Association, the National Association of Personal Financial Advisors, the Association of African American Financial Advisors, the Society of Financial Services Professionals, and the Association of Latino Professionals for America. Without a doubt, there are some, like me and many readers of Nerd's Eye View, who are so passionate about elevating the status of our profession that we would accept some sort of a financial planning inspection in addition to an examination by the SEC, a state regulator, FINRA or an insurance regulator to ensure that we are adhering to the high standards we value. But anecdotally, those of us willing to do that are a significant minority in all those associations.
So, what is the answer? I will have to leave the various possible models, discussion of who would likely support or oppose such models, and possible paths to implement the work for another time. Those matters would take a write-up of their own. Regardless, getting anything through government will be an arduous task and one that simply should not be undertaken today.
Yes, the public's need for a better structure is growing, but the necessary support to fill the need does not exist, at least not yet. A lot more conversation and consensus-building are needed before that effort ensues.
What We Can Do Now
For now, the best thing CFP professionals can do is keep serving the public well. Keep up your skills. Be clear with your clients about what you will and will not do for them and about your compensation and fee structure. Meet your fiduciary obligations by avoiding conflicts of interest and, after obtaining informed consent, managing the conflicts you can't avoid in your client's favor. Stick to a sound process. Perform at least 20 hours of pro bono financial planning and encourage your employer, peers, or staff to do the same. Participate in the life of the profession and help it advance – join the Financial Planning Association and, if fee-only, join the National Association of Personal Financial Advisors.
Sometime in 2024, there will be 100,000 CFP professionals in the United States. CFP Board will continue to work to keep the value of the marks high. With CFP Board's help, consumers will become increasingly aware of the value of working with a CFP professional. And as consumer demand for CFP professionals continues to rise, the value of CFP certification will increase with that demand, helping the profession to advance.
CFP Board plays an important role in helping to advance the financial planning profession. Doing so is an explicit part of the mission of its 501(c)(6) organization. And while CFP Board is more capable than ever, it cannot do it alone. It can lead by example, and it can foster a dialogue among interested stakeholders to move the financial planning profession from "emerging" to "established" and the role that they can play in helping us become such for the public.
What a long, strange trip it's been these last 50 years. I can't wait to see the profession advance even further. The public needs us more than ever.