NAPFA Makes The CFP Designation A Requirement For Membership; Does That Decision Match Up With NAPFA's Mantra To Uphold The Fiduciary Standard?

Wednesday, December 05, 2012 08:00
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NAPFA Makes The CFP Designation A Requirement For Membership; Does That Decision Match Up With NAPFA's Mantra To Uphold The Fiduciary Standard?

Tags: CFA | CFP Board | fiduciary standard

If you want to become a NAPFA-Registered Financial Advisor, you will now will have to have earned the Certified Financial Planner (CFP®) designation.

 
The National Association of Personal Financial Advisors (NAPFA) says its decision is the next step in raising the professional status of the industry. Critics say the CFP® may not be the most appropriate standard bearer for the financial advisor profession.

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NAPFA was founded in 1983 and since its inception, a variety of advisor designations has been accepted as qualification for membership.
 
The CFP® designation is awarded to professionals across industry business models and holders including registered reps and insurance agents who currently are only held to a suitability standard rather than a fiduciary standard.
 
NAPFA's decision is intended to set the CFP® apart as the designation that best represents financial planning professional standards.
 
NAPFA has a history of collaboration with CFP® Board in addressing issues that face the industry, including the fiduciary standard.
 
The timing of NAPFA's move to publicly support the CFP® designation is propitious. The CFP® Board made news last month after its chairman resigned following accusations he misrepresented the way he was compensated on the FPA's find-a-planner lead-generation website. In addition, as first reported on A4A, CFP® Board Standards of Professional Conduct say a CFP® is a fiduciary only when performing  comprehensive financial planning but not when performing "single subject" financial planning. 
 
Ron Rhoades, assistant professor of business at Alfred State College said unless a mandate is established requiring CFP®s to adhere to fiduciary standards at all times, regardless of the service provided, the mark will fail to be recognized by both professionals and consumers as the premier mark of industry professionalism.

 

Rhoades was slated to serve as the next chairman of NAPFA until it was discovered that he failed to register his firm with the state of Florida in a timely fashion, a paperwork error that made him feel compelled to resign to avoid any appearance of impropriety by a NAPFA chair.

 

The CFP® Board itself just emerged from a brouhaha involving its chairman, Alan Goldfarb, and two members of the group’s Disciplinary And Ethics Commission. All three resigned amid allegations that they violated the very CFP® Board rules they were supposed to enforce.

 
Not surprisingly, American College of Financial Services, which certifies advisors with the ChFC, CLU, CASL, LUTCF designations, criticized NAPFA's embrace of the CFP® mark,  saying that even though NAPFA’s scope is limited, its attempt to support a monopoly on advisor credentials restricts legitimate professional education and would be a disservice to consumers and to the profession.
 
Incidentally, the CFA Institute’s Chartered Financial Analysts (CFA) designation is held by over 100,000 professionals across the globe and is considered by some to be a more difficult credential to earn than the CFP® and more valuable to RIAs than the CFP®.
 
What’s your view? Which credential better represents the fiduciary standard for your industry?
 
Should NAPFA continue to accept the CFA and other designations without requiring the CFP®?
 

 

Comments (4)

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andym615
The funny thing to me is this. We have all heard of the CFP. Who is NAPFA? So, I don't think this is much of an issue. The big 3 are CFA, CIMA, and CFP.
andym615 , December 06, 2012
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lisagray
I'm sure there are others who agree with you...the American College of Financial Services certainly seems to.

What's interesting to me is that the CFA charter has been around longer than the CFP and is well known in the industry for its rigorous fiduciary and ethical standards.

lisagray , December 06, 2012
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agluck
CFPs will argue that they're best suited to handle wealth management issues because they are not focused on investments the way CFAs are and on insurance, the way some believe ChFCs and CLUs are. IMCA will say CFP is not focused enough on high-net-worth individuals the way CPWA is. And CPAs will say the PFS designation is the most well rounded and difficult to achieve.
All of these groups are silos. Would be good if they could all listen to one another and cooperate to come to an agreement to do what's best for consumers.
agluck , December 06, 2012
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This is a perfect example of what is inherently wrong with our industry and why we must always work so hard to get a prospective client’s trust in the first place. We have so much smoke and mirrors and will never be taken seriously until we demand accountability in our field. An accountant doesn’t have to explain 16 different designations and why he does or doesn’t have one. An attorney doesn’t have to explain the 3 different kinds of attorneys he competes against. A doctor doesn’t have multiple compliance entities that may or may not oversee him and his following of the rules. As long as there is so much division in our industry we will all be seen as glorified insurance salesman and stock brokers. This is a disservice to our industry and the people we hope to help. Let’s start by eliminating about 95% of designations and require a minimum threshold in order to call yourself a financial professional. Then let’s stop acting like salespeople and getting rid of the salespeople that work in our industry and their phony awards and credentials.
This e-mail address is being protected from spambots. You need JavaScript enabled to view it , December 10, 2012

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