Over the Top

There's one big problem with being on top, and the organization that administers the Certified Financial Planner designation is in the process of learning all about it. For years now, the CFP, issued by the Certified Financial Planner Board of Standards, has been the gold standard of brokerage industry designations. Created in 1972 as a way to identify experienced, ethical advisors with extensive

There's one big problem with being on top, and the organization that administers the Certified Financial Planner designation is in the process of learning all about it.

For years now, the CFP, issued by the Certified Financial Planner Board of Standards, has been the gold standard of brokerage industry designations. Created in 1972 as a way to identify experienced, ethical advisors with extensive knowledge in multiple areas of financial planning, the CFP is now widely recognized as a way to identify top-shelf inhabitants of the financial planning community.

But in recent years, the certification has lost some luster. Some of this is the inevitable consequence of increased competition from other designations, but many of the organization's wounds have been self-inflicted. For instance, the debate to offer a watered-down version of its flagship designation — known as “CFP Lite” to those dismissive of it in the industry — muddied the CFP's image in the eyes of advisors.

The CFP Board now is in midst of a search for a new top executive, proceeding at a pace that says it knows it is at a crossroads, observers say. Indeed, with the organization's prestige on the line, the person chosen will, to a large extent, decide whether the CFP continues to occupy its accustomed spot at the front of the designation alphabet.

A House Divided

Mention the CFP Board to a group of advisors, and you'll get a wide variety of opinions and disagreements. The divisiveness can be traced back to 1999, when the Board introduced the aforementioned CFP Lite. Officially called the Associate CFP, the designation was conceived as a way to standardize industry training by reaching more advisors.

The Associate CFP was specifically aimed at wirehouse brokers and required only a four-hour exam on 25 topics, versus the 10-hour exam on 106 topics required for a full-fledged CFP. (There are now over 40,000 CFP designates.)

Problem was, the board failed to fully vet the idea with its membership, and many CFP holders reacted violently to the prospect of having their designation watered down by being associated with a lightweight designation that could be confused with their own.

Thus was the Associate CFP withdrawn only a few months after its proposal but the rancor and distrust from the episode lingered.

Seven months later, in 2000, the CFP Board received another blow to its credibility when CEO Robert Goss resigned. In many circles, Goss was viewed as responsible for making the CFP designation reputable and credible, and his departure brought about a restructuring in the organization. During this time, the board decreased in size and opened its deliberations to the public as acts of goodwill.

After a year of searching, the board hired Louis Garday, an investment banker and real estate executive with limited experience in the world of nonprofits. His tenure, too, was notable for a controversy, this one involving a partnership with the Financial Planning Association. The deal called for members of the FPA's practitioner division to earn their CFP designation by 2010. Some considered this an endorsement by the FPA of the CFP certification over similar designations.

The action raised eyes among CFP certificants, and similar agreements Garday had hoped to develop with the National Association of Personal Financial Advisors and the Society of Financial Services Professionals were defeated.

Long Memories

True, these episodes are ancient history by some measures, but interviews with CFP-carrying advisors made one thing clear: They remember.

“After everything that happened with the CFP Lite fiasco, all the CEOs they had…I just lost faith in what the designation had become,” says Mike Kaselnak, a former CFP certificant in Rochester, Minn. “To this day I believe the CFP Board has become a marketing machine.”

In light of such strong opinions, it makes sense that the board is choosing its next leader carefully.

“There's no real timeline for the selection process,” said Lance Ritchlin, media coordinator for the CFP Board. “We're more concerned about getting it right.”

According to Ritchlin, the board is working with an executive search firm and has narrowed the field of applicants to a few candidates.

One of the first issues that will confront the new CEO involves terminology. According to brochures and literature from the CFP Board, there is a difference between advisors who hold a CFP designation and CFP certificants who actually practice financial planning. The distinction has caused some confusion in the industry.

The board defines CFP certificants as “individuals who have met the CFP Board's education, examination and experience requirements, have agreed to adhere to high standards of ethical conduct, and who complete the CFP Board's biennial certification requirements.”

A CFP practitioner, on the other hand, is “a financial professional authorized to use the CFP certification marks who has identified himself or herself to the CFP Board as being actively engaged in providing financial planning services.”

Why separate CFP certificants into two groups? According to Ritchlin, the goal is to differentiate working financial planners from those who received the designation, but do not provide financial services.

“Consider someone, such as a human resources professional in the financial services industry,” he explains. “That person may get a CFP certification to help their career, but they don't actually have clients.”

Ritchlin insists the confusion exists because of misuse of the CFP term.

“The thing to consider is that trademark law comes into play,” he notes. “The term CFP should always be used as an adjective, so saying someone is ‘a CFP’ is incorrect. Instead, they need to identify themselves as a CFP certificant, or, if they have clients, a practitioner.”

Contentious Objector

One of the initial objectors to the distinction was Paul League, a CFP certificant who believed the term strove to create an elite group of CFP professionals — something Ritchlin vehemently denies.

“That's ludicrous,” he says, noting that Gary Diffendaffer, interim CEO, and four other members of the board are nonpracticing certificants. “It would make no sense for these individuals to try and create such a separation, especially one that would alienate themselves.”

In order to counter the problems he sees with the CFP Board, League has co-founded the International Association of Qualified Financial Planners (IAQFP), which seeks to create a unified designation for the financial professional field.

For all this commotion, many advisors and CFP certificants believe the fallout over the use of the term is a matter of splitting hairs, yet the board's explanation still raises one question: How is it that the CFP Board certifies the use of each term?

“The only way we know if someone is practicing financial planning is if they self-report,” admits Ritchlin. “It's like identifying your ethnicity in a survey — it's completely voluntary.”

This and other controversies have convinced some advisors to give up their CFP certifications. Kaselnak, who runs Piece of Pie Marketing in Rochester, Minn., shed his CFP in 2002 when the board questioned the content of some marketing material he sent to some prospective senior clients.

“They said I sent a misleading letter that tried to steal clients away from other advisors,” Kaselnak says. “What I was saying was, ‘If your advisor doesn't understand how senior investors differ from other investors, you should consider getting a new financial planner.’”

At issue was the way Kaselnak used the CFP designation in his letter. After a complaint from the board in June of that year, he was scheduled to meet about it with three board members. Instead, he chose to relinquish his designation.

Norman Strom, an advisor with Hunt & Strom Financial in Bloomington, Minn., also chose not to renew his CFP, after 20 years of carrying the certification.

“I got disillusioned with the CFP Board in a couple of different ways,” Strom says. “One was the CFP Lite problem, but more than that, I just felt like the designation was slowly being cheapened.”

Strom says poor management and miscommunication were the CFP Board's largest problems.

“When I didn't renew my certification, all I got was a billing notice,” he says. “When an organization like that doesn't even bother to see why you're leaving, that says a lot.”

In tangible terms, the CFP Board is weathering this criticism well. The number of certificants has risen steadily to about 45,000, and retention rates have likewise improved, from 91.8 percent in 1998 to 93.4 percent last year. Further, the CFP Board says that fewer than half of those who relinquish their certifications do so out of dissatisfaction.

Still, given both the rising competition and the issues raised by disgruntled certificants, the incoming CEO will be greeted with some tough challenges.

The degree to which this is a negative “depends on who the individual is,” offers Greg Titus, president of Acadient.

Titus' company provides online certification programs for the financial services industry, including the CFP, the ChFC (Chartered Financial Consultant), CRPF (Certificate for Retirement Plans Fundamentals) and CMFS (Certified Mutual Fund Specialist).

“Other organizations look at the CFP as the leading designation,” he notes, “and certainly a strong leader would only help the CFP Board continue its efforts.”

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