What The CFP Board Needs To Do From Here

I’ve held off on commenting about the Wall Street Journal revelations that the CFP Board gave the impression on its website that advisors had a clean record when SEC and FINRA websites showed otherwise. Like most of you, I wasn’t at all surprised that there were unscrupulous CFP advisors– I think we’ve all encountered a few.

Q2 hedge fund letters, conference, scoops etc


mohamed_hassan / Pixabay

What surprised me was the scope.

Approximately 6,300 advisors with disclosure events out of just over 70,000 CFP practitioners was more than I would have expected, and having 140 advisors touting their CFP credentials when they have major felonies on their record suggests that more than a few consumers have been harmed by advisors waving the CFP credential in their faces.

It’s more than enough to make reasonable people want to carry torches and pitchforks into the streets, particularly those who have tried to warn the CFP Board about dirtbag CFP advisors in the past, and seen nothing happen. Some of us are still a bit angry over the fact that the Board allowed thousands of brokers to reclassify themselves from a misleading “fee-only” checkbox without consequence, so this just adds more fuel to the anger.

But before I piled on with yet another scathing article taking the CFP Board to task, I wanted to spend a little time thinking, not about what should have been, but what needs to be going forward. I’m not sure the CFP Board’s approach, so far, has been as terrible as the emotions we’re all feeling regarding the embarrassing article.

From its inception, the CFP Board’s initial goals have logically been to gain scale for its mark. By “scale,” I mean three dimensions that all lead to ultimate credibility. You need enough financial resources to fight against anybody who decides to add “CFP” to their business card and claim that it means something like “Cute Friendly Planner,” and you absolutely have to be able to afford the legal expenses when somebody is legitimately ousted from the mark and decides to fight back.

You also need to get enough advisors to agree to meet reasonable but not-easy standards and obtain the mark, so that when (this is not a hypothetical example) the brokerage firms tell you to back off of fiduciary standard requirements, you can hold firm in the reasonable expectation that they (with thousands of their top brokers at stake) will blink first.

Finally, you need the public to recognize that there is something special about a financial planner who has the designation. The CFP Board definitely got over its skis on claims about its standards, but it was engaging in a necessary effort to promote the mark among consumers who need financial advice.

If you believe that the profession really does need to create a designation like the MD or CPA from the ground up, and that this has to happen before it can be a profession, then this is the crucial first set of goals. You cannot start enforcing standards when nobody cares. You will have trouble motivating people to achieve the mark when it’s only a small niche credential. You won’t be able to stand up to the brokerage community if you haven’t motivated many of its top people to become CFP advisors.

The CFP Board has only very recently reached this stage of its existence. This may actually be a year or two premature. The CFP Board was able to stand firm against the brokerage firms about implementing its new set of standards, and the brokerage firms had too many CFP advisors in their fold to feel comfortable about insisting that those advisors renounce the credential. But then the Financial Planning Association joined with SIFMA and the FSI to request that the Board delay implementation until after Reg BI goes into effect. Anybody who thinks the CFP Board is all-powerful should notice that it mustered a strategic retreat (and they will hate that I’m calling it that) in the face of this united opposition.

But now, the CFP Board has no choice but to embark on the second phase of its journey. It needs to more carefully vet the holders of the CFP mark and ensure that they meet professional standards. The question is how far it will go.

At a bare minimum, in the wake of the Journal’s revelations, the Board will have to scour public sources and require each advisor to post disclosure events. This sounds like a herculean task regarding 70,000 certificants. But it only takes 1-2 minutes to pull up the SEC and FINRA pages of any advisor. So we’re talking about the cost of one diligent staff person’s annual salary to check everybody once a year, and the cost of somebody else who will have to inform recalcitrant advisors that they haven’t posted what is required. This is not a crushing financial commitment, and I think we can all agree, pitchforks raised in unison, that it should have been done before now.

Read the full article here by Bob Veres, Advisor Perspectives

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