CFP Board Picks New Chief Of Exams And Education
Carol Lee Roberts this month takes over as managing director of examinations and education at the Certified Financial Planner Board of Standards Inc., at a time when the "alphabet soup" of financial designations is under scrutiny and the CFP designation is striving to rise above the din.
"I think making sure the public knows what these initials mean and what goes into getting that designation is a crucial part of making sure that the public is well-served," says Roberts, who assumes her new duties on November 5. Prior to joining the CFP Board, she spent the past six years as program manager at DePaul University's financial planning certificate program and was a director of DePaul's office of continuing and professional education. Before that, she held various positions at Merrill Lynch for 16 years.
Roberts will oversee development of the CFP examination and support of the more than 300 financial planning education programs in the U.S. that are registered with the CFP Board to prepare financial planners for CFP certification. In September, after a Senate panel grilled the financial services industry on the various credentials and designations used by less-than-credible "advisors" to defraud seniors, the CFP Board announced it formed a task force to determine if its own continuing education requirements encourage high-level financial planning.
"My job is making sure the examination and education retain the high-quality requirements of the past and that we continue to advance that," says Roberts. She adds that current criticism about the CFP test's failure rate-roughly 45%-is off the mark. "Do you want someone who passed a less-stringent exam to be the person guiding you toward retirement? Financial planning involves so many different aspects of an individual's life. It's not an easy profession to master, and it shouldn't be an easy profession to enter."
The difficulty in attaining the CFP mark, coupled with its high standing within the industry, doesn't necessarily score points with the general public if they don't know what it all means. Roberts recalls how thrilled she was after she passed the CFP exam when half the people in her cycle didn't. "I called my parents and my dad said, 'Congratulations honey, what's a CFP?'"
Roberts says her job is to maintain examination and education standards, not grab a bullhorn to promote the CFP designation. She adds that job is left to the leadership team at the CFP Board as it aims to increase the organization's public presence through advertising, awareness campaigns, and partnering with other organizations at financial planning clinics. In that vein, the CFP Board's recent move from Denver to Washington, D.C., is part of efforts to raise its national profile and play a greater role in public policy debates about the financial services industry.
Roberts will relocate to Washington from her native Illinois, where she recently served as programming director with that state's Financial Planning Association chapter. She holds a bachelor's degree in public administration from Augustana College in Rock Island, Ill., and a master's degree in applied professional studies with a focus in financial planning from DePaul.
Are Regulators Losing Their Mojo?
Are Regulators Losing Their Mojo?
Before the Financial Industry Regulatory Authority (FINRA) was created this past summer with the merger of the regulatory arms of the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE), its predecessor bodies had curtailed their headline-grabbing sanctions and extracted smaller fines during the past couple of years.
It begs the question whether more of the same is on tap at FINRA, the regulating body for brokers selling financial products and investments.
It also begs another question: Are
regulators getting lax?
"It's not so much that they're getting lax," says attorney Brian Rubin. "It's more that there aren't any problems du jour" such as market timing/late trading, directed brokerage (in which firms provide preferential treatment to mutual funds in return for brokerage business) or the improper sales of mutual fund Class B shares.
Rubin, a former enforcement staffer at both the NASD and the Securities and Exchange Commission, and now a partner with the law firm Sutherland Asbill & Brennan LLP in Washington, D.C., in October wrote a paper with fellow partner Deborah Heilizer that explored possible enforcement trends at FINRA.
Among their conclusions is that FINRA will likely continue down the path to bring "more rationality and predictability to its enforcement program" by focusing more on traditional types of violations based on settled principles and less on rule-making by enforcement. The latter occurs when regulators create new conduct standards by bringing enforcement action without prior warning that the action is a no-no.
Gingrich, Ford: Save New York City
Former House Speaker Newt Gingrich, speaking at FSC Securities' and Advantage Capital's annual conference in Atlanta, urged members of the financial services industry to adopt a grassroots campaign to save New York City as the world's financial center, a cause that may soon be embraced by his tax-exempt group American Solutions for Winning the Future.
"London may pass New York in a few years as the world's financial capital," warned the former House speaker on October 3. He made his remarks in a panel discussion with former Democratic congressman Harold Ford Jr., now a vice chairman at Merrill Lynch, and the panel was moderated by Fox News host Fred Barnes, before 1,200 financial advisors in a conference sponsored by FSC/ACC. If the American government doesn't adopt what Gingrich dubbed a "Keep New York First" package, which he said should address measures such as revising immigration controls, curbs on lawsuits against corporations and how Sarbanes Oxley is implemented, "we will pay for it for generations."
Losing New York's exclusive global positioning, he says, "will have dire implications across the country, from increasing the costs to underwrite municipal bonds that finance schools, hospitals, and bridges among other public works to maintaining domestic stock exchanges that attract international investors and issuers."
Though both Gingrich and Ford recently participated in a forum held in New York City sponsored by Mayor Michael Bloomberg to discuss strategies to ensure the city's premier ranking, they said it was not just a regional issue, but one that financial professionals around the country should embrace. "Write your congressman, write your local newspaper, explain it to the Kiwanis club," Gingrich advised his audience, adding that his nonpartisan American Solutions organization may be adding the issue to its current agenda of Internet workshops that bring together citizens, activists and legislators around the country in political dialogue aimed at finding innovative solutions.
During the hour-long discussion, Gingrich and Ford won both applause and laughter from their audience as they tackled questions about the future presidential election and economic and financial issues. Though of different parties, their perspectives often converged. Both agreed raising corporate or individual income taxes, as some presidential candidates have proposed, would be harmful to the economy, and both cited the need for income tax reform measures. Gingrich quoted two polls taken by his American Solutions group that showed a majority of participants favoring an optional flat tax that only exists in Rhode Island today and a near majority in favor of completely abolishing the capital gains tax.
Both also favored some form of privatizing Social Security through personal saving accounts as well as urged solutions for balancing the soaring budget deficit and reforming healthcare. They also handicapped the 2008 presidential race, agreeing that New York Senator Hillary Rodham Clinton is not only likely to be the Democratic nominee, but will win the election.
Gingrich criticized the current Republican slate of candidates as lacking "passion," and facing an "investment equation problem" in terms of financing a winning candidacy across the country. He predicted the Republican race could end up a "glorious mess," with the two leading candidates, former New York City Mayor Rudy Giuliani and Massachusetts Governor Mitt Romney, splitting the field with Sen. John McCain, former Senator Fred Thompson and former Arkansas Governor Mike Huckabee
in future primaries.
Gingrich told the crowd that he dropped the idea of running for the 2008 Republican presidential nomination just a few days before when he learned that he would have to give up chairing American Solutions, which he had spent the last year building, due to the McCain-Feingold campaign finance law. "It was a firewall of stunning proportions," he said of the regulation. "I had a Web site set up and was ready to launch on Monday and had a couple of million dollars in pledges." He made his decision while en route to one of the first American Solutions workshops which was simultaneously broadcast on 2,000 internet sites. "How could I walk in and say, 'We're leaving?'" - Linda Keslar
Staffing-Not Clients or Revenues-Is Advisors' Big Challenge
The advisory business has an enviable challenge: It's caught between rising revenues, an abundance of new clients and a shortage of talented staff.
"The real competition is for employees, not clients," says Philip Palaveev, a principal of Moss Adams, which spotlighted the situation in its 2007 Compensation and Staffing Study of Advisory Firms, an annual benchmarking study of 700 firms that allows advisors to see how they stack up in terms of revenue, income, growth and staffing. "If you find good employees to work for you, you'll be successful," says Palaveev. "If you don't, you won't."
The average revenue per advisory firm nearly tripled in the period from 2000 to 2006, increasing from $632,000 to over $1.6 million. Average pre-tax, per-owner income rose from $228,267 to $370,000 in the same period, Moss Adams found. The average firm now serves 171 clients, up 17% over last year.
"One of my favorite statistics in the study found that owners of larger firms are now generating over $1 million in personal income per owner annually," Palaveev says. "That's a sign of tremendous success, but also an indicator that some of that equity has to be shared with staff and advisors if you hope to retain and recruit people who will continue to help you grow."
Compensation for good advisors has risen 44% in the past two years alone. The pay for a lead advisor this year is $150,000, up 41% over 2005 numbers. Those numbers will continue to be driven by the dearth of talent. As firms grew in the past six years, they steadily added staff, creating what Moss Adams deems "intense competition" for advisors and other professionals and administrative staff. Targeted and carefully designed employee retention and recruitment practices, as well as successful employee compensation plans, will become more critical to growth than ever before, Palaveev says.
At the same time, he gives the industry high marks for adapting well over the past six years. Firms have evolved from an advisor's solo "book of business" to an actual business, with two advisors/principals and two to three support staff, on average, says Palaveev. But with sharply increasing demand for advisory services, coupled with a shift in assets from wirehouses to independent advisors, adding staff will be a critical determinant of future growth. While one in four firms added a new professional last year, 37% expect to hire at least one professional in 2007.
401(k) Version 2.0
The evolution of 401(k) plans is changing the way the funds are invested and the roles that participants and managers need to fill, according to the recently released Russell Retirement Report 2008. The report, prepared by the Russell Investment Group in Tacoma, Wash., says that 401(k)s were historically viewed as supplemental savings but are now entering a new phase of quickly becoming the go-to retirement savings vehicles for millions of Americans.
"Before our eyes, and at a quite remarkable pace, a new breed of 401(k) plans is being designed, built, tested and launched," says Bob Collie, Russell's director of investment strategy. "What's happening is really a redefinition of every aspect of how a 401(k) plan ought to be run."
As 401(k)s morph from a source of supplemental savings to a chief source of retirement income, the report says that managers need to consider if participants are automatically part of the system or if they have to opt-in as in the past. For high-net-worth individuals where the 401(k) is only part of the retirement and non-retirement assets, more options for selecting investments may be desired and more risk may be tolerable than for a person relying solely on the 401(k) as a retirement vehicle.
The 401(k) plans of the future may need a standard default investment option; a pre-mixed, diversified portfolio option that reflects a range of risk profiles from which to select; and an open-ended, flexible brokerage window that allows individual daily investment decisions. The open-ended option would require the fund manager to provide adequate information to participants to make informed decisions, the report says.
"As defined contribution plans come into the spotlight, I expect the effects of daily liquidity to be thrust into the spotlight," predicts Brian Roberts, director of transition management in the Americas for the Russell Group. "Industry (will) debate about the need for safeguards to prevent behaviors that can negatively affect retirement plans' performance relative to their stated goals."