[The following article was written in response to "Restoring Trust In The CFP Mark," by Somnath Basu.]
Dr. Basu's column on "Restoring Trust In The CFP Mark" (April 6, 2009) covers a number of important issues related to the financial planning profession. While it's unreasonable to expect a short piece of this type to address these issues in a comprehensive manner, I wanted to address some of the generalities and misconceptions that appeared in Dr. Basu's editorial and take exception to the fundamental premise of the article.
The sad truth is that anyone can call himself a financial planner. There are an estimated 300,000 "financial planners" in the U.S., but only 59,000 have demonstrated the broad-based competency to provide financial planning services and adhere to a fiduciary standard of care that allows them to call themselves Certified Financial Planner (CFP) professionals. That is by design: The CFP certification is intended to be the standard of excellence for personal financial planning.
By lumping CFP professionals in with other financial intermediaries such as stock brokers, financial advisors, or chartered financial consultants, Dr. Basu repeats and reinforces the all-too-common misconception that CFP certification, like all-too-many designations, is as easy to attain as a driver's license. The contention that someone can "earn" their CFP mark within months of completing undergraduate studies ignores the required three years of documented experience that must be completed before being awarded the CFP certification, as well as the valuable hands-on education that CFP certificants receive as they complete that experience. It also ignores the rigorous CFP certification examination (almost Darwinian in nature) that nearly half of all first-time takers fail. In short, there is no easy way to become a CFP professional. The implication that many CFP certificants do not have a college education is false: Ninety-six percent of certificants have at least a bachelor's degree.
The CFP Board's curriculum is not product-based. The curriculum includes a broad range of topics that go well beyond investment products. Topics include economic concepts such as supply and demand, fiscal and monetary policy; time value of money concepts and calculations; business law and consumer protection laws; and quantitative investment concepts. The list of required topics is updated every few years through a job analysis study designed to identify the subject areas CFP professionals actually use in their practices. And while the subject areas are reported by practitioners, the curriculum is developed by task forces that include academics. Dr. Basu is program director of the CFP Board-registered financial planning education program at California University and led the committee that most recently updated our model curriculum. He has contributed much to the ongoing development of CFP Board's educational standards
The education requirements for attaining certification are the same for all students, whether they study at a college or through a certificate program. To dismiss the self-study option as the "path of least resistance" ignores the reality of achieving CFP certification. There are many paths to reach the same end. Many who opt for distance learning options are preparing for a mid-life career change; typically they are adults with families or jobs that prevent a full-time return to the classroom. Can we say that Abraham Lincoln was less of a lawyer because he was largely self-educated?
In fact, CFP certification is a career-long process, unlike other, mostly academic-based designations. Once certified, CFP professionals are required to abide by our ethical standards as long as they hold the mark, or face sanctions if they don't. And they must undergo a biennial recertification process that cannot be completed without 30 hours of continuing education. When it comes to ethical behavior and a commitment to putting clients' interests first and providing financial planning services with a fiduciary duty, CFP certificants lead the way. CFP certificants realized the need for a fiduciary standard of care long before the current economic turmoil
One point on which we are in complete agreement with Dr. Basu, however, is the need to regulate financial planning's ethics and competence. In our view, the best way to restore the public's trust-and to protect the public from unscrupulous or unethical financial intermediaries-is to require any financial professional who offers advice to adhere to a fiduciary standard, which places the interests of the client ahead of the interests of those who offer the advice. That is why the CFP Board has joined forces with NAPFA and FPA to convince policymakers in Washington, D.C., that any financial services reform must ensure that consumers who seek the advice of financial professionals are presented with a true fiduciary standard, which requires placing the clients' best interests first with full accountability and transparency.
Finally, I'd like to applaud Financial Advisor magazine for publishing work from the academic community that supports the financial planning profession. The CFP Board is committed to maintaining strong educational standards for the CFP certification, and we appreciate public debate of new concepts and methods that could help ensure that financial planning education is delivered in ways that bolster public confidence in our profession.
Kevin R. Keller is the chief executive officer of the Certified Financial Planner Board of Standards, Inc.