NAPFA, In Saying Only CFPs Can Become Members, Snubbed The AICPA, Exposing Fractures In The Movement To Professionalize Hot

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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?  


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