NAPFA, In Saying Only CFPs Can Become Members, Snubbed The AICPA, Exposing Fractures In The Movement To Professionalize
Monday, December 10, 2012 17:55
The American Institute of CPAs, in a letter emailed to its financial advisor members last Friday, shrugged off an announcement earlier week by the National Association Of Personal Financial Advisors to accept only CFPs as NAPFA members.
“As the professional home for CPA financial planners, the AICPA stands behind our members and the qualifications and expertise they bring to supporting their clients,” said the email to AICPA Personal Financial Planning (PFP) Section Members & CPA/PFS credential holders.
AICPA’s response to NAPFA was muted, considering that NAPFA had snubbed AICPA just a few days earlier.
NAPFA, an association of fee-only financial planners, in a press release Tuesday announced that after December 31, 2012, only CFPs would qualify as members.
“The NAPFA National Board recognized the need to support the emerging profession of financial planning by rallying around a singular professional designation in the same way the public trusts that those holding a CPA, MD, or JD are meeting education, training, and ethics requirements,” NAPFA said in explaining its action.
NAPFA’s decision certainly did not single out any designation for exclusion from membership and its move attracted little coverage in the trade press. However, the effect of NAPFA’s decision was to toss out a single credential that had been accorded special status by NAPFA: The CPA/PFS designation awarded by the American Institute of CPAs.
Until now, NAPFA’s specialized education requirement accepted CPA/PFSs as well as CFPs for NAPFA membership. The CPA/PFS, in fact, had been the only designation other than the CFP that qualified an advisor for NAPFA membership. Put another way, there are seven professional credentials that can be accredited as CFPs by challenging the CFP Certification Examination, and thus become eligible for NAPFA membership. CPA/PFSs until now were exempt from challenging the CFP exam in order to qualify for NAPFA membership. AICPA is in good company, however.
Despite its 109,000 Charterholders worldwide, CFA Institute is placed in the same category as CPA/PFSs. CFA Charterholders, too, must challenge the CFP exam to be licensed as CFPs and accepted as NAPFA-Registered Advisors. In fact, the following credentials do not qualify for NAPFA membership without challenging the CFP exam:
Ph.D.s in business or economics
Doctor of Business Administration
Licensed attorney
Licensed Certified Public Accountant (CPA)
Chartered Financial Consultant (ChFC)
Chartered Life Underwriter (CLU)
CFP certification from the Financial Planning Standards Board Ltd. (FPSB)
(Conspicuously absent from this list are about 8,000 professionals who hold credentials administered by the Investment Management Consultants Association (IMCA), another credentialing body in the financial advisor profession.)
All the credentials listed above have long been required by NAPFA to prove their professional qualifications by challenging the CFP exam. Only AICPA’s CPA/PFS holders were directly affected by last week’s decision to remove their special treatment by NAPFA.
NAPFA said it made the decision to only allow CFPs as full members because the CFP designation “best represents financial planning professional standards.”
“The NAPFA National Board recognized the need to support the emerging profession of financial planning by rallying around a singular professional designation in the same way the public trusts that those holding a CPA, MD, or JD are meeting education, training, and ethics requirements,” NAPFA said in a press release this past Tuesday. “NAPFA’s decision can be viewed as an important consumer issue in an environment where the public is bombarded by an alphabet soup of designations that only professionals can be expected to understand.”
To NAPFA’s supporters and members, the decision to only accept CFPs as members without a challenge exam represents just the latest step in the association’s long history of trying to do what’s best for consumers. NAPFA’s brand is associated with many of the best ethical and professional practices in the profession. Lining up behind the CFP in an effort to create a single designation for financial advice professionals can be seen as a sincere effort by NAPFA to aid consumers. But how realistic is that?
NAPFA has 2,447 members, but that includes academic and financial service affiliates as well as retirees who are “sustaining members,” and provisional members—students who intend to become NAPFA-Registered members. NAPFA Registered Advisors—professional members—must accept a “fiduciary oath,” not accept sales commissions, meet continuing education requirements, possess at least three years of experience and submit to peer review of a financial plan. (You may submit your own work product for the plan, or work you supervised.) Currently, there are 1,500 NAPFA-Registered Financial Advisors.
In contrast, AICPA, has 360,000 CPA members and its PFP Section has 5,000 members. The Institute has accredited 4,500 CPA financial planners with the Personal Financial Specialist (PFS) designation, three times the number of NAPFA professionals. AICPA is a key stakeholder in the movement to make financial planning a profession.
NAPFA’s decision to force CPA/PFSs to challenge the CFP exam to gain full membership starting next year exposes the fragmented interests of groups trying to make a profession of the financial advisor business. In backing CFP Board, NAPFA is in the unenviable position of aligning with a credentialing body that is out of step with NAPFA’s commitment to the fiduciary movement. While CFP Board and NAPFA together posture publicly about their commitment to establish a single fiduciary standard based on the Investment Advisers Act of 1940, CFP Board’s Rules of Professional Conduct say a CFP does not owe a client a fiduciary duty when performing single-subject engagements, such as retirement planning, college planning or estate planning, as reported here two months ago. So NAPFA, in backing the CFP designation, is aligning with an accrediting body that does not share its high standards.
What do you think? Is NAPFA serving consumers well by supporting the CFP designation as the premier credential for financial advisors? Would a broad coalition of CFP Board, CFA Institute, AICPA, IMCA, and other professional licensing bodies serve consumers better?
The Investment Management Consultants Association (IMCA) last week planted a stake in the ground and defined - for what it says is the first time ever - private wealth advice or wealth management for the financial services industry.
IMCA, which is a nonprofit professional association and credentialing organization with more than 8,700 individual members, also released a white paper detailing the findings of a comprehensive job analysis that defines the practice of wealth management.
“This job analysis clearly defines wealth management as a distinct practice of advising high-net-worth clients with specialized expertise and skills,” Sean R. Walters, CAE, executive director and CEO at IMCA said in a release “Financial advisors without this knowledge who work with affluent clients are doing them a disservice.”
Wealth management is a distinct practice. Advanced competency in this discipline may be practiced by financial planners, accountants, estate planning attorneys, or investment professionals.
$5 million is the minimum net worth a client must possess to be considered a high-net-worth client.
The knowledge required to provide competent wealth management incorporates 169 topics within four knowledge domains: human dynamics, wealth management strategies, client specialization, and legacy planning.
The fundamental tasks and the process that private wealth advisors use in working with clients may be similar to financial planning—and many other client-oriented professions—but an advanced and unique set of knowledge and skills is needed to effectively serve high-net-worth clients
Advisers, meanwhile, had mixed reaction to IMCA’s definition of wealth management.
Some IMCA members expressed full support. “I am in complete agreement with Sean Walters and the findings of the study,” says Brian Ullsperger, CIMA, AIF of WTAS LLC. “I am of the strong belief that true wealth management is a comprehensive, integrated and ongoing process that blends investment, tax and estate planning into a cohesive strategy to achieve an individual’s or more often a family's goals over multiple generations. This requires a broad array of skills and ongoing training. The CPWA certification provides the foundation for an advisor to develop the knowledge required to build a wealth management practice.”
Richard Rosso, MS, CFP, CIMA, a senior financial advisor with Clarityfinancial, also expressed support."There needs to be a clearer definition, or path to understanding the needs of the wealthy and IMCA in my opinion, is well-equipped to forge the way," he says. "I believe increasing external change will affect this segment more than any other group going forward, especially on the tax and legacy-planning front so this structure will be necessary."
What's more, Rosso said IMCA will be able to further identify and clarify the process of advising the wealthy. "Segmenting into the four knowledge domains will be very effective," he says. "Understanding the human dynamics of the wealthy and their families and to sharpen the skills needed to spur dialogue among family members will be crucial guidance required by today’s advisor. Enhanced EQ skills will be required."
For his part, Rosso says he does financial planning “plus,” for affluent investors. "You begin with the basics and then move into areas of specialization like stock option exercise strategies, legacy/gifting implementation, retirement income withdrawal maximization and the unique behavioral threads that tie all this together," he says. "For IMCA to create a formal direction with a robust body of knowledge would be welcomed."
Meanwhile, others say IMCA's findings are convenient and self-serving.
“It appears to me that IMCA has conveniently drawn the line of what makes a high-net worth client at the point of the current estate tax exemption,” says Chris Lipper, CFP, CIMA, president and chief investment officer at CPF Texas.
“If the exemption drops to $3.5 million or $1 million next year, will that be the new point of demarcation?” ask Lipper, who for the record holds the other designation administered by IMCA, the CIMA.
Lipper agrees that estate and legacy planning requires a higher level of competency. “However, as a CFP certificant, and more importantly, with almost 18 years of experience working with high net worth clients, I have the expertise,” Lipper says. “Holding the CPWA designation does not bring instant qualification, nor do those without the designation lack expertise.”
Others also took issue with IMCA’s findings.
For instance, Stephen Horan, Ph.D., CFA, CIPM, who is head of university relations and private wealth at CFA Institute, says the study’s methodology and interpretation are curious. “The process of removing advisors with clients less than $1 million and then concluding from the analysis that wealth management is the practice of serving clients with more than $5 million is tautological,” Horan says. “The investigator effective determines their conclusion by the design of the study. Despite the design bias, fully a third of respondents, put the minimum below $5 million.”
Horan also says the origin of the 43,000 financial professionals to whom the survey was sent is unclear. “So, it is difficult to interpret the results without understanding the characteristics of the population to whom the survey was sent,” Horan says.
Plus, Horan notes that the 400 responses, which was filtered down to 250, represent a response rate of less than 1% and weaken the validity of the report’s conclusions.
And Horan says the firm-type of the respondents does not reflect the industry. “It is heavily weighted toward brokerage and private banks and less on independent RIAs, which are growing in significance,” he says.
Horan also says the comparative analysis in Tables 1 and 2 (see below) list topics in the CPWA not covered in other most other programs, but does not list those programs. “The CFA program was apparently not included because it, for example, covers tax-aware investing, asset-protection strategies, advance stock option planning and strategies, endowments and foundations, and legacy planning,” Horan says.
Says Horan: “I’ve performed a detailed comparative analysis of the CPWA program with other credentials. The CPWA has no coverage of economics, financial statement analysis, equity valuation, or fixed income valuation according to its website. Its coverage of derivatives is cursory compared to the CFA program.”
By way of background, the CFA Program – according to its website – is a “globally recognized, graduate-level curriculum that provides a strong foundation of real-world investment analysis and portfolio management skills along with the practical knowledge you need in today’s investment industry.”
In sum, Horan says IMCA’s study does help focus attention on the complexity and diversify of wealth management, but it is ultimately “ill-designed, superficial, erroneous, and self-serving.”
For its part, IMCA said in its release that, in addition to clarifying what constitutes a private wealth advisor, it will use the analysis to refine the experience, education, examination, and ethics requirements of its CPWA certification program. The organization, who members collectively manage more than $1.6 trillion on behalf of 1.3 million clients, has administered the CPWA certification since 2007, and the program was operated as a certificate program since 2004.
IMCA said in its release that the procedures used in the job analysis study complied with all relevant technical and legal standards for professional certification and licensure as well as the requirements for accreditation by the National Commission for Certifying Agencies (NCCA) and the American National Standards Institute (ANSI).
In response to critics, Walters said IMCA didn’t conduct the analysis to be self-serving. "We facilitated a process to codify the body of knowledge and skills necessary for competent performance of “wealth management” as defined by practitioners in the field," he says. "The job analysis process is a best practice for certifications, and a requirement to be accredited under ALL third-party personnel certification standards. Every valid certification body, regardless of industry, defines the body of knowledge required for a certification using this process. When a designation program purports to define a body of knowledge using the intellectual property of an individual or a handful of academics, it is not a legitimate certification program and should not be treated as such.”
By way of history, the financial planning industry has for years been trying to define financial planning with some success. In 2011, after two years of work, major firms affiliated with the FPA developed this definition: “Financial planning is the process of developing a strategy or program to assist in the achievement of at least one financial goal or need. The process starts by gathering and analyzing relevant financial data, client values and goals, and it results in an action plan or recommendations, including acknowledgement of other financial issues that may deserve attention.”
Forrest Gump was fond of saying, “I’m not a smart man, but….”
Well, I'm inclined to repeat that phrase, especially when I look at the table and bar graph below that shows the percent of people holding the CFP designation by age. (See also CFP® Certificant Profile.)
I’m not a smart man but the table and bar graph seem to suggest at least three things to my way of thinking:
Good news for young and/or new CFPs
If you are a young planner or someone who just received your CFP regardless of age, you’re in a great position. Older CFPs who might want to hire or retain you will have to pay up for your services because there are not of CFPs like you. You'll benefit from salary, or stock, or some other benefits, or some or all of those forms of compensation.
Michael Kitces and others agree. It’s “certainly a VERY good position for any young person coming in today,” Kitces said. “Aging out practitioners means big demand on small young-person supply! J”
And Harry Starn, Jr., a professor in California Lutheran University's MBA in Financial Planning Program and associate director of its California Institute of Finance, had this to say: “One of the thoughts that I pull from the chart is that new planners will have the opportunity to take over existing practices.”
By the way, the median income for CFP professionals is $144,850, according to a CFP Board survey.
For the record, it’s not all that easy for someone in their 20s to get a CFP. Not only do they need an undergraduate degree, but they also need total of three years of full time qualifying experience, or the equivalent 6,000 hours, to satisfy the CFP’s “Experience Requirement.”
There is, however, a larger question to be answered, according to Ron Rhoades,JD, CFP, the curriculum coordinator for the Financial Planning Program at Alfred State College, SUNY. “Will there be the types of jobs that new advisers desire?” he asks. “Most desire to work in true financial planning firms, in which financial planning is done. And they prefer to work in a fee-only or fee-based environment. And new planners desire to be mentored, within such an environment. Right now the number of jobs which offer the foregoing is below the quantity of those desiring such jobs. The ‘product sales’ jobs still dominate, but most new financial planners only take such jobs as an interim measure if they cannot get a job with a fee-only or fee-based firm that actually undertakes comprehensive financial planning.”
Will there be enough CFPs to replace those retiring?
The second takeaway is this: There just doesn’t seem to be enough young CFPs to replace the ones who might be retiring or semi-retiring over the next decade or so. Consider: Some 49% of CFPs, including 153 who are 80+, are age 50 and older. But there are just 45.72% under age 50. (We don’t know the ages of some 3,534 CFPs so that could change things.)
But in the main, it doesn’t appear that there will be enough young CFP professionals to replace those older ones.
Of course, not all agree with this assessment.
“First, many financial advisers never really ‘retire,’ says Rhoades. “They retain clients they really like dealing with, and perhaps stop taking on new clients. They may work with a junior adviser, but still handle much of the relationship themselves. Most financial advisers – especially those on the fee-only or fee-based side, love what they do so much, they don’t really want to retire.”
Second, Rhoades says there are more than 100 undergraduate programs with Certified Financial Planner curriculums now. “As more and more students discover the joys of counseling others about financial matters, and the great job prospects for graduates, these programs will continue to grow,” says Rhoades. “In time, we will be graduating from colleges and universities far more financial planning majors than we are currently.”
Others concur. “In our CFP education courses, we are seeing a trend to a much younger student demographic,” says Joyce Schnur, CFP, ChFC, a vice president with Kaplan Schweser. “However, if the needs are to be met, I believe that more advisers need to recognize this profession as a viable option directly out of college.”
And Starn says this: “I think it is positive to see even a small percentage of 20-year-old students entering the field. That percentage will be augmented by a continuation of career transition.”
And three, in the interim, Rhoades says we will still see career changers move into financial planning. “Most new CFPs already have a college degree and take a certificate course of study, in order to sit for the CFP exam,” says Rhoades. “Not only are more and more CPAs are moving into financial planning – but also engineers, retired pilots, and many others.”
To his way of thinking, Starn says the above chart and table reveal the interesting fact that many of today’s financial planners are career changers (2nd or 3rd career). “Thirty years ago financial planning was a start-up profession, and I doubt if you saw many 20-year-old financial planners in 1980,” he says.
For his part, Joe Pitzl, CFP, of Intelligent Financial Strategies, doesn’t' think there will be enough CFPs to replace those retiring. "Based on the current demographics, no, there will not be enough," he says.
However, like Rhoades and Starn, Pitzl says career-changers have been helping with this and will continue to moving forward.
"In addition, as firms continue to develop better ways to bring young talent into firms to support the planning process rather than handle administrative tasks, these numbers will begin to shift," Pitzl says. "There are a lot of larger firms doing this very effectively already, and smaller firms are beginning to grasp this as well. However, it may ultimately require a bunch of younger firm owners to really mainstream career paths to in smaller practices."
Others also see the bar graph/table as a reflection in the growth in career-changers. “When I see (the bar graph/table) it is a logical outcome of the push by the large firms to focus recruitment on ‘career-changers,’” says John E. Grable, Ph.D., CFP, a professor and Athletic Association Endowed Professor of Family Financial Planning at the University of Georgia.
Over the last 10 years, Grable says we have seen fewer large firm efforts at developing young talent. “Rather than spend resources to create clear career paths, the large firms are basically cannibalizing off of each other and other industries,” Grable says. “That makes sense since the job market, nationally, has been so bad.”
But once the job market turns, he says these firms are going to be stressed because they have not spent time developing relationship with universities to recruit the best and brightest students. “The good news is that the small/regional firms have stepped in and grabbed the 20- to 30-year old planner market,” says Grable. “In the future it will be these firms that prosper.”
And then there are those who acknowledge that the numbers in the graph/table may look somewhat distressing, but suggest that they are trailing numbers and do not represent what the future may hold. “Clients are more selective than they were 10 or 20 years ago, and they expect more from their advisers,” says Jim Pasztor MS, MSF, CFP, vice president of Academic Affairs at the College for Financial Planning. “Information is everywhere but what is reliable? Or relevant to a particular client? This argues for a more educated adviser, and the CFP designation is the flagship designation. Even the Financial Planning Association is talking about “one profession, one designation.”
Says Pasztor: “I think that you will see more and more advisers taking the CFP designation route, realizing that the old model of limited knowledge heavy on sales is not what the marketplace wants.”
The third point: Will there be enough CFPs in general to meet demand?
Now it might be true that more students will discover the joys of studying for the CFP exam. But at the moment, it doesn’t seem that we are minting nearly enough CFPs to meet the likely demand for advice that will grow over the next 20 or so years as some 5 million people per year turn age 65.
Consider: Right now we have about 67,000 CFPs, about 2,000 or 3% of whom decide to drop their designation each year for whatever reason – retirement, among them.
We also know CFP exam pass rates. Just 3,175 people passed the CFP exam in 2009; 3,240 in 2010; nearly 5,000 in 2011; and (my rough guess) some 4,000 to 5,000 might pass in 2012 (2,000 already have). See CFP® Certification Exam Statistics. According to Dan Drummond, the CFP Board’s spokesman, the number of CFP professionals has risen 22% over the last five years.
What to make of this? Well it could mean there’s not enough CFPs to meet the demand for advice that exists and will continue to exist for many years to come.
Then again, it might not matter.
“Right now consumers look at financial services professionals and largely don’t differentiate between the ‘advice providers’ and the ‘sharks,’” says Rhoades.” “While organizations such as NAPFA and Garrett Planning Network have found their niche in gathering up fiduciary-only, comprehensive financial advice providers, these organizations don’t dominate the marketplace.”
What’s more, Rhoades says this: “While the Certified Financial Planner is increasingly known as a certification in which a level of educational attainment is achieved, all CFPs are not required to be fiduciaries at all times. Until financial planning becomes a true profession – in which everyone who holds themselves out as a ‘financial planner’ or ‘financial consultant’ or ‘financial adviser’ is required by law to act in the best interests of the client, and with a high degree of expertise, at all times, then demand for financial planning may continue to be much less than it would otherwise. But, if all financial planners are mandated to adhere to bona fide fiduciary standards, then demand for financial planners will soar. Thereafter, it may take some time to educate enough new advisers to fulfill the increased demand.”
NAPFA announced it elected a new chair, Lauren Locker, CFP, to fill the position recently vacated when another advisor who was set to take the reins stepped down due to a regulatory paperwork glitch.
Locker, who founded Locker Financial Services, LLC in Little Falls, New Jersey in 1992, assumed the post effective immediately, according to a release by NAPFA.
Two weeks ago, Ron Rhoades, a prominent spokesman in the investment-advisor fiduciary movement resigned after learning he had made a registration filing error. Rhoades' resignation over the filing error prompted one leader of the fiduciary movement earlier today to call on NAPFA publicly to rescind its decision to accept Rhoades' resignation.
Locker was licensed as a CFP practitioner in 1994 and joined NAPFA in 1998. She is the immediate past-Chair of NAPFA’s Northeast/Mid-Atlantic Board and previously served on NAPFA’s National Board for the past two years.
According to the release, Locker will focus on promoting the NAPFA brand, professional education, and promoting NAPFA’s fiduciary effort nationally.
"The current debate regarding oversight and regulation of our industry presents NAPFA members with a unique opportunity to bring their commitment to the fiduciary standard to the forefront," Locker said in the press release. "Our members already pledge to employ full disclosure, transparency and accountability in every interaction with every client. We can’t let uncertainty about regulatory issues cause us to lose that all-important focus.
"We need to forget about ‘business as usual,'" Locker added, "and begin to think in terms of business as it should be: to meet the needs of the public who have their eyes open and their expectations set high.”
Most Advisors Favor CFP Board’s Proposal To Grant CE for Practice Management
Tuesday, August 28, 2012 17:28
The majority of advisors are in favor of the CFP Board’s recent proposal to grant continuing education credit for practice management content, according to an informal A4A survey. Slightly less than half are against it while some are seemingly indifferent.
In the case of IMCA’s designations, the CIMA and CIMC, non-technical topics that may be accepted for continuing education credit include Building Your Business (if related to investment or wealth management) and Leadership Programs (if related to investment or wealth management).
According to National Association of State Boards of Accountancy’sLearning Market, “Certified Public Accountants (CPAs) must adhere to the continuing education requirements set forth by the State Board of Accountancy of the state/s where a CPA license is held. The requirements for continuing professional education vary from state to state. The American Institute of CPAs (AICPA) requires certain CPE for maintaining membership.” State Board’s do grant CE for practice management content, though it’s limited.
According to Judith Neil, who is the director of PACE at the American College and whose job it is to make sure its graduates are in CE credit compliance, if the topic relates to the management of areas covered by the subject matter included in American College educational programs and the management of people who work in financial services, practice management courses are acceptable for PACE credits.
Still, in proposing these changes, the CFP Board is moving away from what other organizations, such as the CFA Institute, are doing with regard to practice management and CE. “At CFA Institute we do not award CE for marketing and promotion topics nor for topics related to software systems and other operational topics related to firm management,” said Stephen Horan, Ph.D., CFA, CIPM who heads University Relations and Private Wealth for the CFA Institute. “We offer CE for developing skills beyond those covered by the CFA program, such as leadership, communication, personnel management, and client relationship skills. Our fundamental principle for determining what qualifies for CE is whether it builds a skill rather than being operational.”
Here’s a glimpse of what advisors are saying in reaction to the CFP Board’s proposal.
Not in favor
Slightly less than half of the advisors who responded to my email inquiry are not in favor of the CFP Board granting CE for practice management content. “I’m not in favor of it,” says Bill Garrett, CFP of Garrett Financial. “The 30-hour biennial requirement is not difficult to achieve. I feel consumers should regard our CE requirements as keeping our planning skills up to par and not our business skills.”
And Dick Wagner, JD, CFP of WorthLiving LLC gives it a thumbs down saying CE is more aimed at keeping advisors current with regard to technical content. “I have always believed that the 1040 trumps the CE in terms of attraction but not for CFP credit,” he says. “Which is to say that CE ought to pertain to your professional creds but not your abilities to stay in business profitably. Honestly, that is not CFP Board's problem.”
Others take a similar stand. “I have to admit I’m not a supporter for practice management for CE,” said Michael Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL and publisher of the The Kitces Report. “Someone who owns their own financial planning practice should be capable of making the personal investment of one hour of practice management content every six months simply for the sake of his/her own practice, regardless of whether it is eligible for CE,” Kitces wrote on his blog last week. “And given that the fundamental purpose of Continuing Education is to maintain one's technical competence and skillset, I fail to see the relevance of practice management content as continuing education for a professional certification. In fact, this new rule arguably creates an odd double-standard for practitioners; those who decide to own their businesses can get four hours of CE credit for practice management and only require an additional 36 hours of other credit, while those who are employees in a practice are expected to get all 40 hours from traditional CE content (given that most practice management content has little relevance for the huge number of planners who don't own or control their practice in the first place). Why can't investing time and effort in good practice management content be its own reward for someone who chooses to own his/her own business?”
In favor
More than half of the advisors who responded to my inquiry, however, are in favor of the CFP Board’s proposal. Giving CE for practice management is, they say, necessary if only for this reason: If advisors don’t acquire the knowledge to run a financial planning business, they likely won’t be in business to provide financial planning services.
“I'm in favor of a limited amount of practice management CE credit,” said Tom Duffy, CFP, a principal with Jersey Shore Financial Advisors. “Advisors need training on how to run their businesses efficiently and effectively. We have a duty to stay in business to continue to serve our clients. Being proficient in business management practices makes good business sense.”
What’s more, Duffy says requiring a certain amount of training in this area makes sense, especially considering how many career changers and recent college grads are entering. “From a compliance standpoint -- policies, procedures, checklists, work flows all contribute to a successful client engagement -- successful for both client and advisor.”
Others say offering CE for practice management will help planners become more effective. Eric Toya, CFP of Trovena is in favor of practice management CE, too. “A significant amount of time that we spend working for our clients is not face-to-face, but behind the scenes,” he says. “Becoming more effective and more efficient in the areas of practice management will only strengthen our ability to serve our clients well.”
Carl Richards, CFP, of Prasada Capital Management and BehaviorGap.com, agrees: I do think that CFP's can only serve clients if they are still in business and therefore practice management is a very important issue for the CPF and the public.”
Another advisor who had a chance to see the problems that CFPs have firsthand also says CE for practice management can go a long way toward helping advisors stay in business. In my opinion, there are a whole lot of issues surrounding practice management that are critical to effective compliance,” says Chuck Robinson, CFP, who formerly chaired the Appeals Committee of the CFP Board.
In that role, he frequently heard appeals on cases where the CFP practitioner had gotten into trouble because they quite frankly did not understand how to structure and manage their practice. “They had not put in place the automatic procedures and practices that would have protected them and their clients,” says Robinson.
Jim Barnash, CFP, joins the chorus as well. "Like any profession you need to stay in business to be able to help your clients or customers," he says.. "Marketing, general business skills, being a manager of others, all of these are necessary to run a successful business. These items are not natural for most people and financial advisors are no different. However, these skills can be learned and developed and help make stronger practices which become capable of being a business at some point."
And still others say the CFP Board’s proposal is long overdue and necessary. “In fact, to help CFP Board truly deliver on their mission to protect the public, CFP Board should be actively growing the number of CFP® professionals each year, says Joseph Gillice, CPA, CFP and president of Dalton Education. “To that extent, practice management is an important component to any successful practice, especially for young planners entering the profession.”
Gillice also says the CFP Board might go one step further and require Board-registered education providers to include practice management as part of the required education curriculum. “This would assist new planners entering the industry to learn how to position, market and sell their services, write a business plan, implement technology and supervise and manage a practice,” Gillice says.
While having strong technical competency is an important component to a successful financial planning business, Gillice is quick to note that practice management is essential to building an “enduring” practice. “The more successful advisors we have practicing, the better the public is served and the more likely the Board is to fulfill their mission,” he says. “Until we have practice management as a required component to the education requirement, accepting practice management for CE credit is a good start.”
Other planners agree that it’s long overdue and changing the overall requirement to 40 from the current 30 doesn’t dilute the CE requirements. “Being a successful planner includes helping clients to the best of our ability,” says Scott Kahan, CFP, president and wealth manager at Financial Asset Management Corp. “But we need to be successful in running our practices so that we can be there to assist our clients.
What’s more, Kahan says there’s an additional benefit to granting CE for practice management that some might be overlooking. “Many of the practice management topics for planners are transferable and will provide ideas allowing us to assist our small business clients,” he says.
For his part, Caleb Brown, MBA, CFP a partner with New Planner Recruiting thinks it’s a good idea, but favors placing – as the CFP Board has proposed – limitations on the amount that would qualify per renewal period. I think the four hours per renewal cycle that would qualify is reasonable,” Brown says. “I believe there is a lot more to being a great financial planner practitioner than solely technical knowledge and improving a business, through what others may consider ancillary topics, ultimately, I think, can enhance the client experience and quality of advice. CPAs can receive CPE for practice management so I don’t think this idea is too farfetched.”
Of two minds
Some advisors, meanwhile, are having trouble deciding whether they are for or against the CFP Board’s proposal. “I’d say I’m torn,” says Chip Workman, CFP of The Asset Advisory Group.
On one hand, Workman views CE as something that should meaningfully and directly impact my planning skills in the areas of investment management, estate planning, insurance, tax mitigation and the like. “While practice management education can be extremely valuable, it really falls into the category of helping our firm strengthen its ability to operate and serve as opposed to directly boosting my knowledge and capabilities as a CFP,” Workman says.
Like many other advisors, Workman says he has sat in some incredibly worthwhile practice management sessions that have “helped us better run our practice and, as a result, provide a better planning and service experience to our clients.” But whether those kinds of session that should qualify as continuing education as a financial planner really comes down to a case-by-case basis, he says.
Your opinion?
What do you think of the CFP Board’s proposal to grant CE for practice management? Let us know below in the comment section.
