The relentless march of technological change is slowly taking its toll upon undifferentiated financial advisors, casting a bright light of transparency on questionable products, commoditizing simple investment transactions and even somewhat more complicated portfolio construction, and forcing advisors to move up the value chain to providing real, substantive, high-quality financial advice to justify their cost. Yet at the same time, the push towards providing financial advice to solve complex problems creates a demand for advanced educational programs to provide advisors the knowledge they need to deliver those solutions.
Despite the opportunities created by this changing environment, though, the recent announcement by the American College of changes to its flagship ChFC program spent as much time continuing to fight its ill-fated ChFC versus CFP designation wars as it did talking about its own program – an odd juxtaposition given that the CFP marks now have 50% more designees than the ChFC, 5 times the consumer awareness, and for all the recent criticism that the CFP Board has taken regarding the enforcement of its compensation disclosure rules at least it has an enforcement mechanism to publicly sanction its designees or even revoke the certification, unlike the American College.
Against this backdrop, today’s blog post is about both the future of advisor education for all the institutions that teach financial advisors, and is an open letter to the American College in particular, its new leadership, and its board of directors, to take advantage of the unique opportunity presented with the organization’s transition to incoming CEO Bob Johnson to finally move past its ill-fated ChFC versus CFP designation wars, its hypocritical criticisms of the CFP marks that the organization itself teaches, and strategically reposition itself to support the emerging need for deeper post-CFP specializations and niche educational programs for financial advisors... or leave the door open once again for other institutions to step up.
Changing (Educational) Trends In Financial Services
The pressure is growing for advisors to demonstrate the value of their advice, as the profession’s product-based roots continue to be undermined. The internet and online discount brokers have long since obliterated the traditional “stock broker” of old (once actually compensated to provide stock quotes and “hot tips” and then take ticket orders over the telephone), the percentage of life insurance that is (higher-commission cash-value) permanent coverage has declined drastically in the past 20 years from over 55% in the early 90s to barely 25% today, the increased availability of technology tools to analyze the (often poor and costly) performance of active mutual funds is driving a decline of fund managers and the advisors who recommend them, and even a shift of advisors away from mutual-fund-picking towards portfolio management is now being pressured by the rise of “robo-advisors” that are commoditizing the assembly of a strategic diversified asset-allocated portfolio (supported by technology-driven automatic rebalancing and tax-loss harvesting) at a very low cost.
The good news is that even as every ‘traditional’ advisor product channel is slowly and steadily undermined, the value of holistic financial planning advice to weave it all together and help clients actually change their financial behavior for the better remains. The “bad news” for many advisors, though, is that it takes a lot more skill, experience, and raw knowledge to deliver effectively on the personal financial advice value proposition. Which means as advisors are driven further up the value chain to justify their cost, there is a need for greater technical competency and expertise, and educational programs to help get us there. Accordingly, it’s no surprise that the market share of CFP certification amongst advisors overall has more than doubled since the early 2000s.
In fact, the shift towards financial planning has been so significant than amongst financial planners, a crisis of differentiation is emerging because it’s no longer enough to just be a financial planner; being a credentialed advisor with years of experience who delivers customized, individualized comprehensive personal financial planning advice to clients is becoming mere table stakes to have a chance to work in an advice relationship with a high net worth or even a mass affluent client. Instead, it’s becoming increasingly necessary to pursue a “post-CFP” education towards a particular specialization to maintain differentiation and a competitive advantage.
Fortunately, a number of educational institutions and even some startup training/education organizations are stepping up, carving out deeper specialized knowledge programs in subject matter areas like to retirement income planning, Social Security, or wealth management, or fully focused niches like planning for LGBT couples to divorce planning to working with doctors. As more and more niches and specializations are established, the demand for programs can only grow, and enterprising educational institutions have an opportunity to lead the charge and help advisors define effective niches by crafting and rolling out educational programs to support them.
And notably, this potential proliferation of specialized designations is quite different from today’s glut of sometimes questionable advisor designations; historically, such programs have thrived amongst “advisors” who didn’t want to go out for more rigorous educational programs but wanted some “letters” after their name to imply greater expertise and credibility. But when the education always starts with CFP certification and then goes beyond it to specialize, there’s little value to specious designations (who really needs to add some bogus letters to their name after they already have a CFP?); the only educational programs that survive are those that add genuine value for the advisor (and therefore generally the consumer as well) above and beyond the core CFP educational curriculum.
The American College’s Failing ChFC Versus CFP War
Yet despite all of this incredible opportunity for moving the ball forward on advancing advisor education, the American College has remained stubbornly entrenched in its one-sided war with the CFP Board over the American College’s proprietary ChFC designation versus the CFP Board’s much-more-widely-adopted CFP certification. Thus, when the American College recently announced its latest program changes to the ChFC designation, including new coursework on issues like divorce, retirement income, and planning for GLBT couples, the organization took the announcement as an opportunity to take digs at the CFP marks for everything from having more advanced training to more “hands-on” instruction to making content that is compensation neutral. And taking swings at the CFP marks is hardly new for the American College.
Former CEO Larry Barton was even more pointed two years ago when criticizing the Financial Planning Association for (re-)asserting its focus on the CFP certification, ironically characterizing the FPA’s endorsement as supporting a “monopoly” despite the fact that the CFP marks are taught openly by more than 300 registered programs while it’s the American College that holds an exclusive monopoly over its own proprietary ChFC marks. With similar hypocritical hubris, the American College has:
- Criticized the CFP Board’s enforcement of compensation disclosures even though it has no enforcement process of its own against ChFC charterholders (when was the last time you saw an announcement of a CLU or ChFC being investigated by the American College and having his/her credentials revoked after a finding of guilt?);
- In a stunning example of schadenfreude (and outright unprofessionalism), mocked the organization after it CFP Board chair Alan Goldfarb resigned amidst then-allegations of compensation disclosure improprieties, and used the opportunity as an excuse to call for “an independent, national body to review and certify designations” despite the fact that CFP Board itself had already proposed a similar solution;
- Maintained it has the highest standards yet opposes the expansion of a fiduciary standard for all advice and does not even require a comprehensive exam (which the CFP Board long since recognized is a key for establishing a professional standard over 20 years ago), such that many advisors pursue the ChFC specifically because it's a longer but "easier" path (with no daunting comprehensive exam at the end);
- Refuses to recognize the value of having a minimum competency standard for financial planning advice for consumer clarity despite the fact that the American College’s entire existence is built upon Solomon Huebner’s vision of establishing a similar advanced education competency standard of life insurance professionals when the CLU was launched nearly 100 years ago.
Of course, for all its bluster about requiring more courses than CFP certification and even launching its “ChFC Highest Standard” website, Cerulli Associates estimates that there are nearly 50% more CFPs than there are ChFCs (of course it’s hard to know for certain because the American College is not as clear and transparent about the count and demographics of its designees the way the CFP Board is), and in the latest IPSOS brand tracking study the CFP certification has more than five times the consumer awareness than the ChFC amongst the mass affluent, despite the fact that the ChFC has been attempting to outgrow the CFP marks for over 30 years now (likely exacerbated by the American College's strategic stumble in rejecting its Society of Financial Services Professionals relationship that left it without a membership association to advocate on behalf its programs to the public and the media the way the FPA and NAPFA have advocated for the CFP marks!)!
In short, the American College continues to fight a war against the CFP marks that it has clearly already lost, which again is ironic given that the American College – the sole organization to offer its proprietary ChFC program – is also one of the leading programs offering distance-based education for the CFP marks themselves. In other words, the American College simultaneously bashes the CFP marks as being inferior to its own ChFC, even while the organization funds a significant portion of its proprietary designation programs with the profits generated by providing education for CFP certification in the first place!
Will Bob Johnson End The ChFC War And Move On To The Future Of Post-CFP Financial Advisor Education?
As the American College goes through its first change of leadership since 2003 in these times of change for the entire advisory industry, there is a significant opportunity with the retirement of Dr. Larry Barton and the addition of incoming president Dr. Bob Johnson to help the organization take on a new brand and role: to build upon its existing base as already being one of the leading providers of the CFP marks themselves, and become the leading educational institutional for post-CFP designations.
After all, the ChFC’s own educational curriculum essentially is the CFP certification education, plus several additional classes – which means the American College has already institutionalized its ChFC program as a post-CFP certification (literally, you take the ChFC classes after finishing the core CFP curriculum!), even while trying to contend that it should be a competitor, and not recognizing that simply having additional coursework doesn’t make up for a lack of a comprehensive exam or any enforcement of standards. Yet as a leading educational provider of post-CFP designations, it’s not necessarily a problem that the ChFC doesn’t have a comprehensive exam nor any enforcement of its credential-holders; the American College doesn’t need to be the standards-setting nor the enforcement organization for the competency of financial advisors, when it can simply do what it does best and be an institution that advances the education of financial advisors up to a CFP certification minimum and then beyond it.
In point of fact, the American College is arguably already the best positioned in the industry to lead the charge for post-CFP designations (though the College for Financial Planning isn’t far behind and could catch up soon!), with its wide range of advanced educational programs from the venerable CLU on life insurance to its ChSNC designation for Special Needs planning to the explosive growth of its RICP retirement income designation and most recently the launch of its Ph.D. program. As a leading educator for the CFP curriculum itself, the organization is especially well-positioned to take students into its CFP program and then extend their education beyond with post-CFP specializations; the depth of the American College's niche programs also allows it to attract the growing number of new financial planning professionals who begin their careers having already completed their CFP curriculum in college, but now need to focus and specialize beyond that point to build their career. Yet despite all of this, when the College announced its latest ChFC changes, it still spent as much time bashing the CFP marks as it did talking about how the ChFC extends educationally beyond them.
Nonetheless, a strategic shift to explicitly focus on delivering the CFP certification as a uniform base (growing its CFP enrollees), and a wide range of post-CFP certification specializations (along with “pre-CFP” programs like its Paraplanner certificate) beyond that point, is arguably not actually all that significant in the substance of the American College's programs, although it is clearly a dramatic shift in focus and messaging that is long overdue. The approach would allow the American College to work constructively with the CFP Board, continue to grow its key CFP enrollment without simultaneously bashing the designation (and instead by steering all students through the CFP program as a gateway and pre-requisite to take more advanced programs beyond that point), and build an ever-widening base of focused niche and specialization knowledge that can improve outcomes for consumers through better-educated advisors while simultaneously providing todays undifferentiated advisors a clearer and more structured path to find their niche/specialization.
Personally, though, I’ll admit that as an alumnus of the American College myself, I’d just like to stop being ashamed of where I got my own designations and a Master's degree, and instead be an alumnus of an institution I’m proud of – one that recognizes that the emerging profession of financial planning is simply an extension of founder Solomon Huebner’s vision of elevating life insurance salesmanship to a profession, and in turn calls for Huebner’s never-ending “quest for expert knowledge” to be fulfilled through both a profession defined by one uniform minimum standard for competency and a myriad of ways to specialize with post-CFP education in niches and specializations beyond.