Executive Summary
Last week, proposed changes to the Experience requirement for CFP certification quietly took effect, including both the elimination of the Capstone course requirement for CFP exam challengers, and more controversially a change to the definition of what constitutes “experience” for the 3-year requirement to include both direct and indirect support.
What’s significant about the new “indirect support” rule is that, by the CFP Board’s own statements, virtually any job in the entire financial services industry will now qualify as “financial planning experience”, including an employee benefits administrator, a compliance attorney, and even a journalist who simply writes about financial planning topics!
The change is even more significant given the CFP Board’s introduction of the 2-year “apprenticeship” option for the experience requirement in 2012… which means that over the past several years, the CFP experience requirement has slipped from “3 years of financial planning experience” to “2 years of financial planning experience, or 3 years of any job remotely related to the financial services industry”!
Sadly, while the CFP Board’s prior changes to the experience requirement in 2012 included a public comment period, this time the CFP Board acted unilaterally without stakeholder input, as it continues to push aggressively for growth in the number of CFP certificants. And notably, the FPA and NAPFA have remained remarkably silent about the change as well, suggesting the organizations either tacitly support cutting the experience requirement for CFP certificants, or that they have lost any ability as membership associations to hold the CFP Board accountable.
Ultimately, though, perhaps the most ironic aspect of the CFP Board’s change is the fact that it comes after 4+ years – and $40M+ in spending – on a public awareness campaign to communicate to the public that the CFP marks are the highest “gold standard” in financial planning… even as the CFP Board’s growth strategy makes it easier and easier to obtain that standard.
“Expanded” CFP Board Experience Requirement Takes Effect
Late last December, the CFP Board announced two changes to the experience requirement for CFP certification, which would take effect on/around July 1st of 2015.
Eliminating Capstone Course Requirement For Challenge Status
The first change under the new rules is that those who are eligible for “challenge status” – which means they already have a Ph.D. in business or economics, a law degree, a CPA license, or the ChFC, CLU, or CFA designations – no longer have to take the “Capstone” financial plan development course to complete the CFP educational requirement. Instead, the challenger can submit a sample financial plan to the CFP Board, which if accepted by CFP professional reviewers, will satisfy the Capstone requirement. (Of course, the advisor must still have otherwise completed the rest of the CFP educational requirement through a CFP Board Registered Program.)
Allowing Indirect Support Experience For Financial Planning
The second change under the CFP Board’s new experience rules was that while in the past the Experience requirement could only be fully satisfied by teaching financial planning, or by the personal delivery, supervision, or direct support of planning to a client, under the new rules a wide range of “indirect” support would be permitted as well.
What constitutes “indirect” support? Examples from the CFP Board’s announcement included positions such as employee benefits administration, a compliance officer, or writing about financial planning as a journalist. Ultimately, the CFP Board declared that indirect experience qualifications will be judged on a case-by-case basis by submitting details about the applicable job experience to [email protected].
A Two-Step Process Of Gutting The CFP Experience Requirement To Two Years
While the Capstone change is arguably quite reasonable (as I’ve noted in the past), as there was little sense in requiring a ChFC (or other credentialed and practicing financial planner) who’s been delivering financial plans to clients for many years to take a “financial plan development course” at this point, the change to the direct experience requirement, and introducing “indirect” support, is far more problematic.
The significance of the CFP Board’s decision to include “indirect” support as experience must be viewed in the context of its 2012 introduction of the 2-year “CFP apprenticeship” option to satisfy the experience requirement. The apprenticeship option came about after the CFP Board proposed it (along with other changes to the experience requirement) back in 2011, and was implemented despite at least some opposition during the comment period (including yours truly, who suggested that the 2-year apprenticeship experience would be too little for effective training of a financial planner).
Thus over the past 3 years, the CFP Experience requirement has gone from 3 years of experience directly related to financial planning, to only 2 years of experience directly supporting financial planning [or 3 years of indirect experience].
And as the CFP Board noted in its own press release, it appears that virtually any job in the broad financial services industry will count as experience now! As mentioned earlier, jobs including employee benefits administrator or compliance attorney will now count towards the experience requirement, despite having no direct relationship to financial planning aside from being part of the broader industry. Even a journalist who simply writes about the financial planning topics now qualifies! (Nothing against journalists; it’s just that we wouldn’t accept a doctor whose only experience was writing about the medical industry in a newspaper or magazine, and it’s not an appropriate way to satisfy experience as a professional financial planner, either!)
In other words, rather than continuing to bolster the quality of the CFP marks as financial planning grows, the CFP Board’s two-step progression of cutting the direct experience requirement by 1/3rd in 2012, and then allowing any experience connected to the industry to qualify, has effectively gutted the experience requirement for the CFP marks.
Is The CFP Board Lacking Accountability – No Stakeholder Input, And FPA And NAPFA Silence?
Perhaps most concerning about the CFP Board’s latest change to the experience requirement is that it appears to have been done with no input from CFP certificant stakeholders.
While the introduction of the two-year apprenticeship option was part of the 2011 proposals to the experience requirement – which included a public comment period for stakeholders – the idea that the three-year experience requirement would subsequently be gutted to include any form of indirect experience across the entire financial services industry was not. And it’s hard to imagine that CFP stakeholders would have accepted the apprenticeship option knowing that it was such a stepping stone to cutting the experience requirement overall. (And in point of fact, we don’t even know how widely the apprenticeship option was supported in the first place, as some including yours truly opposed it at the time, and despite the fact it was a “Public Comment” period the CFP Board never actually released the comments to the public!)
In fact, given the significance of the rule change, it’s hard to understand why the CFP Board would not honor its own historical precedents of putting such significant proposals out to stakeholders for comment… unless the CFP Board already anticipated the change wouldn’t be supported and didn’t want to invite the criticism. It’s also notable that even the CFP Board’s announcement of the proposal was released in a manner that would minimize its visibility and make it harder to mount objections – delivered as a press release on December 30th, during the notoriously slow news cycle between Christmas Day and New Year’s Day, when hardly any reporters were around to cover it, and few CFP stakeholders were around to read it!
Of course, in situations where the CFP Board stampedes forward on a questionable change to the rules, we would hope that the advocacy efforts of our membership organizations – the FPA and NAPFA – would still speak on behalf of CFP stakeholders and the financial planning profession to object to such a change. Yet despite repeated inquiries to the leadership of both organizations from yours truly, both the FPA and NAPFA has remained completely silent on the CFP Board’s changes to the experience requirement – ostensibly an expression of tacit support for the CFP Board’s new experience requirement, even though the FPA and NAPFA did nothing to poll their own membership to confirm their desire to support such a controversial change! Or alternatively, perhaps the sad reality is simply that FPA and NAPFA have lost such power with the CFP Board that they can no longer fill the crucial role of holding the CFP Board accountable in the first place?
On the “plus” side, the change to the experience requirement should help the CFP Board to continue to grow the ranks of CFP certificants, as its Board of Directors has increasingly emphasized the importance of growth in recent years. Yet at the same time, it’s more than a little ironic that the CFP Board has spent the past 4 years – and over $40M of CFP certificant dues – funding a public awareness campaign to hold out the CFP marks as the “gold standard” in financial planning, even as it dramatically diminishes the strength of the experience requirement necessary to earn the marks in the first place.
All of which raises the fundamental question: Is the CFP Board’s ambitious growth efforts coming at too much of a potential cost to the integrity of the marks?
So what do you think? Was the CFP Board’s expansion of the experience requirement to allow any indirect financial services industry experience to qualify a good thing for the sake of growing the marks? Was it an appropriate change to enact without a public comment period? Should the FPA and/or NAPFA have taken a position on the issue on behalf of their members? Is the CFP Board lacking in accountability? Share your thoughts in the comments below!
