Can The CFP® Mark Become The Legally Required Minimum
Standard Of Education For Financial Planners ?

by

Nigel B. Taylor, CFP®

I should preface my remarks here by stating that I am not a proponent of the CFP® Mark as the "holy grail" in financial planning and have the greatest respect for other educational and licensing programs in the financial planning field such as the Chartered Financial Consultant. My discussion here begins with an overwhelming "consumer" need for a single, recognizable standard in financial planning. As such, these thoughts seek to discuss our developing profession from a consumer, and not professional perspective in terms of "need". I have always felt that, if anything, the CFP course of education needs to be the "minimum" standard for anyone who would call themselves a financial planner. I defend it vigorously against those who would berate and denigrate the quality of education provided because despite the shortcomings, it is an excellent credential, even if the "system of government" if you will, is flawed and in need of an overhaul. I have vigorously defended the CFP mark against the CFP Board of Governors (BOG) itself by, together with many supporters, successfully defeating initiatives such as the CFP Associate designation. In fact at one point during 1999 I was so disappointed by the BOG actions, that I changed position on the "minimum educational standard" to read, "the course of education required to sit for the CFP Board 10 hour comprehensive examination", rather than the mark itself. I further suggested that, if the CFP Board remained firm on their associate CFP designation, we should support individual state licensing with the California State University certificate program "Personal Financial Planning Certificate" (PFP) at the center of a state sponsored educational program. Thankfully in September 1999, The CFP Board rescinded all their initiatives that would have weakened the CFP® marks, choosing to once again concentrate on the mark itslef as a mark of choice. Shortly thereafter, Bob Goss resigned as CEO, leaving the way open for new leadership in the form of Lou Garday who currently heads up the board.

I've had lively discussions with other professionals in the past regarding the advantages of a Federal "license" vs. State licensing and while I agree that it's convenient to have a federal "license", its hardly practical for many reasons, not the least of which is that States would fight intrusion into their bailiwicks, object to the loss of licensing income and control over a profession operating within its borders. I also personally believe that differences in local State taxes and State laws should preclude financial planners from practicing "comprehensive planning" in various States without first proving their State-specific competence in these areas. I support the idea of a body such as the CFP Board developing State specific make-up examinations for licensees who desire to practice across borders, much like the FINRA with their blue sky license, but any examination should be more comprehensive and in depth than the FINRA license. I guess I'm pretty much alone in my way of viewing this though. People like the idea of a federal license it would seem, because it would alleviate the obligation to meet state specific requirements in order to practice.

Bob Goss, (former President of the CFP Board Of Governors) recommended a terrific little booklet to me a while back entitled "Questions a Legislator Should Ask", (Shimberg & Roederer) published by the Council on Licensure, Enforcement and Regulation. This, together with other reference manuals suggested therein, has given me a little more clarity on the entire issue of pushing for too much regulation, too soon. Other references I have read seem to suggest exactly the same. While I'd be more than happy to see the introduction of a "higher standard" in Financial Planning, I have come to recognize that many legislators and lobbyists feel the CFP mark is far too high for a minimum requirement, and frankly, at this time we do not have the money or public pressure to overcome the barrier created by consumer apathy and the insurance and securities lobby.

According to Shimberg and Roederer (and many others) legislators tend to believe that licensure;

"should be used only as a remedy of last resort, that the government should provide only the minimum level of regulation, whether the unlicensed practice of an occupation poses a serious risk to the consumers' life, health, safety or economic well being, whether potential users of the service can be expected to possess the knowledge needed to properly evaluate the qualifications of those offering the services and whether the benefits to the public outweigh any potential harmful effects such as a decrease in the availability of practitioners, higher costs of services, or restrictions on optimum utilization of personnel."

Other useful research tools include references such as "State occupational and professional licensure, the book of the States (Council of State governments) and "The Costs and Benefits of occupational regulation" (Bureau of Economics, Federal Trade Commission) If we couple this prevailing attitude with the traditional "reactive" as opposed to "proactive" form of government we have in the U.S. where nothing effective seems to get done until there's been a massive disaster and, the omnipresent "life Insurance" and "Securities Industry" lobbies who wait patiently on the sidelines always ready to strenuously oppose changes that would prove detrimental to their way of doing business, it becomes almost an impossible task to consider the educational requirements for CFP certification as having a chance of prevailing against far lower standards that would be supported by these lobbyists and others should this come as far as legislative discussion on possible licensing for Financial Planners.

It is my belief that this is one of the main reasons the CFP Board of Governors continues to consider developing a "minimum entry level standard" for financial planners, although the mark "CFP" would no longer be used in any such future initiative. The BOG feels they need to develop such a mark to protect and benefit consumers. I vehemently oppose this position. The BOG should not care whether individual States develop minimum entry level standards for financial planners. Truth be told, these minimum standards already exist in the form of the investment adviser exam, and frankly, that's akin to no standards whatsoever. I was, and remain, extremely disheartened by the CFP lite controversy, even though we eventually prevailed and shut the Board's initiatives down. Why, simply because 20 very intelligent people on the CFP Board came to the conclusion, after numerous meetings and voluminous correspondence over the years with State and Federal regulators, that these politicians and other groups wouldn't even entertain the CFP level of education as a "minimum standard of education" for licensure, the motivating factor (along with the back room deal with Merrill) for the introduction of CFP lite in the first place. It seems strange that most politicians would want someone highly qualified to perform their financial planning tasks, but they seem to follow Shimberg and Roederer's theory that licensure should be used only as a last resort. The attitude among politicians is one of "Caveat Emptor". I guess one major difference is, legislators have the requisite knowledge and education to analyze the qualifications of their planners. It's a pity their constituents don't, for the most part. Let us not forget that States have developed insurance licenses and Registered Investment Advisor registration and examination but, this has not stopped us from recognizing that these State requirements are insufficient to practice comprehensive financial planning. My thoughts are simply, if States introduce such a license requiring no more work than what was to be required of the Associate CFP program, CFP® licensees will be well positioned to make clear to consumers just how lacking this license is in protecting them. After all, consumers come to CFP® licensees to purchases stocks, bonds and insurance and the CFP license, in and of itself, does not permit any of these transactions. CFP licensees must first possess State or federal licenses before offering these products. It has not, and will not stop us from maintaining our "educational edge" over those who desire to "do the absolute minimum". Consumers are unknowledgeable regarding our profession perhaps, but they are not stupid, otherwise, the CFP mark would never have gained such popularity in the first place.

Certain facts remain clear, in my mind at least, after all this. We have little support at this time in any Federal or State legislature for truly tougher or meaningfully higher standards in financial planning. We have two powerful lobbies before us, the Insurance and securities industry lobbies. We have the FINRA and SEC who would both like to regulate financial planning, and while they would probably be the worst of choices, unfortunately they have a greater chance at prevailing than a private nonprofit corporation from Denver. However, it is also clear in my mind from all the books and consumer publications I read, as well as news and sound bytes from industry, local and national television, that the CFP® Mark is the most well known financial planning designation in terms of consumer exposure and media recommendation. I do not believe that meaningful legislation will have any chance of overcoming the lobbyists or political apathy, particularly since many have never experienced what a true "down market" and depression looks like. (I don't count the last two years thru October 2002) Until everything falls apart and people end up on SSI and the welfare roles, put in the poor house by those unknowledgeable individuals who would call themselves financial planners without the slightest hint of credentialing, I conclude that the very least we can do is support a course of education that is by no means "bad", nor "severely" lacking when compared with "what could be" if we allow the States to be influenced by the lobbyists. I would need seriously convincing that the American Consumer is more aware of any other financial planning credential over the CFP® mark before shifting my support of the mark as the minimum standard. Unfortunately, if Harry Dent is right and his predictions of a Dow 35,000 come true over the next few years, who the hell is going to care whether financial planners are competent?? Not a soul. It's easy to make money in great markets. They will only be screaming bloody murder when the market tanks down the road and they are all left destitute with no hope of recovery during their lifetimes. At least then, I and the many others who discuss, argue and debate each other in financial planning bulletins boards and elsewhere will be able to say with one united voice.

"WE TOLD YOU SO, WAY BACK WHEN IN 2000!!"

In fact, I keep many of the message exchanges from these bulletin boards on a Zip disc to print out in 2020 (If I'm still alive) just to show the "consumer" press that we, the Certified Financial Planner® licensees, were extremely concerned, but that they (the press) showed absolutely no interest in helping us promote the idea of "one profession - One Credential", (in whatever form) and the establishment of a profession of financial planning. That we tried to inform unsuspecting consumers who have been sucked in by fantastic stock market returns and claims by the CFP Board, NAPFA and others that, just because they have some sort of "trademark to license", it constitutes meaningful "regulation" of an entire industry.

In conclusion my undying support for the CFP mark as the minimum standard is based on its unchallenged popularity with consumers and the need for us not to reinvent a wheel that's already round. Sure, over time we'll make improvements to the wheel, replaces spokes, smooth lines and make it stronger, but I still feel it's the roundest wheel of the bunch, although the bike it's attached needs overhauling. I don't think that's a wrong attitude. The CFP® mark and the educational requirements are dynamic in nature, as the introduction of a ten hour comprehensive examination has shown. Certainly the 45% who failed the last examination don't think the standards are all that low I would hope!? Surely they can't keep attributing the percentages to "it's hard to know what they want from us on the exam" and this certainly doesn't explain the lower passing averages over time. This entire examination process will develop and mature, given time and the involvement of professionals on the CFP Board of Governors that truly care about what we do. This involvement and passion for our profession will, however, not be possible until the Oligarchy has been replaced with meaningful representation and the ability of "different" thinking people to stand for election and, furthermore, be allowed to participate in the process of election without some biased "election committee" to hinder their aspirations. The next great concern for all CFP licensees over the horizon is the recent recommendation that the CFP Board be halved and that CFP licensee involvement be cut to a minimum in favor of consumers and consumer group representatives. Talk about the lunatics taking over the asylum! If consumers and legislators cannot recognize just how low minimum standards currently are, how can we allow them to "regulate" the CFP® mark in the future. So in conclusion, Can the CFP® mark become the statutory minimum standard of education for financial planners in America? Probably not in the near term, but who cares, consumers love us and we are committed to consumers and their well being and that's always a really good place to be!

CFP®, CERTIFIED FINANCIAL PLANNER™ and the CFP® flame logo are federally registered services marks of the CFP board of Standards, Inc. CO.