Executive Summary
It was August 24th. I had just awakened early in the morning in Sydney, my final day there after serving as a keynote speaker for the Australia Portfolio Construction Forum, and I was looking through my morning email – which was actually the prior afternoon’s August 23rd email at home in Washington DC, given the 14-hour time zone difference. Earlier in the week, I had caught the surprise announcement from the FPA that CEO Marv Tuttle was stepping down, to be succeeded by then-current FPA COO and Associate Executive Director Lauren Schadle, and read with interest Schadle’s comments that FPA would be stepping up its focus on those financial planners who are serious enough about their craft to seek out the CFP certification.
What caught my eye that morning, however, was an unexpected response to Schadle’s comments from American College President and CEO Dr. Larry Barton. The College, through which I have proudly earned 6 professional designations, including the CFP itself, is one into which I had invested a lot of time, money, and effort, both during my studies, and in the years thereafter as I have continued to promote its advanced educational programs and even recently taken part in providing content for their latest RICP designation.
Yet after reading Barton’s response, I felt for the first time a true embarrassment in being an alumni of the American College of Financial Services, and shame in being a holder of what was once its defining credential, the CLU designation.
Unfortunately, it’s difficult to pinpoint to one part of Dr. Barton’s statement in particular that was the problem, as the entire press release contained a sad array of mischaracterizations and misrepresentations. There was the bizarre part where Barton equated the CFP certification with being a fee-only planner, despite the fact that neither the FPA, nor the CFP Board itself, require in any way that CFP certificants practice on a fee-only basis. The only requirement is that such individuals act in a fiduciary manner, and I would hope that even Dr. Barton can agree that if someone happens to be compensated with a commission for selling a financial services product, where the client buying the product did so based on the advice of the seller, that it should still be a product that was actually in the client’s best interests in the first place?
The American College of Financial Services Educational Monopoly? CFP Vs The ChFC And CLU Designations
I suppose the breaking point for me was probably Dr. Barton’s declaration that a “designation monopoly” was “clearly not in consumers’ best interests” and that consumers should have a choice of designations that include the College’s own CLU and ChFC. Never mind the fact that in truth, the American College of Financial Services is the sole, “monopolistic” provider of CLU and ChFC education for decades - as the American College's own materials note, it has been the sole organization to award the CLU designation since 1927 (and the ChFC since 1982) - while the CFP certification is actually provided by over 340 registered certificate, undergraduate, graduate, and doctoral programs at 200+ institutions across the country, a tremendous growth since the CFP Board was spun off into its own certifying body to eliminate the CFP educational monopoly in 1985 and provide better oversight, administration, and enforcement of the credential. The added bit of irony to the whole situation: the CFP was called a monopoly, despite the fact that it is actually one of the most successful programs that the American College itself provides, as one of those 200+ institutions, possibly even outpacing the enrollment in the College’s own monopolistic designations!
But the even more disturbing point underlying Dr. Barton’s statement is the apparent implication that it is anti-consumer to have a clear minimum standard like the CFP for professional competency so that consumers understand who actually has the training, education, and experience to give advice, versus who is merely licensed to sell a product. Yes, it is true that having a minimum professional standard does represent a barrier to entry, yet the reality is that in fact such barriers to entry are the hallmark and defining characteristic of true consumer-centric professions!Thus the origins of P. Kemp Fain's famous 1987 paper and 1988 speech, "one profession, one designation" - or as I'd frame it, at least "one profession, one [minimum] designation"! Requiring minimum standards for professionals is not monopolistic; it is the very essence of consumer protectionism!
By comparison, does Dr. Barton believe it is “anti-consumer” for states to require that someone actually get a medical degree as a recognized, uniform minimum standard, before being allowed to slice a patient open and operate, and that instead states should encourage “the process of [surgery] to be used as broadly as possible, regardless of the [education] a [doctor] may choose to pursue?” for the sake of allowing more consumers to get access to “doctors” (a term I use in quotes here, as it’s not even clear how to define who is a doctor when there’s no clear minimum standard!)? And is it really a “monopoly clearly not in consumers’ best interests” to require prospective surgeons to choose from one of the mere "monopolistic" 138 different medical educational institutions accredited in the US? Just as the absurdity becomes self-evident with the analogy for doctors, so too is it absurd in the case of financial planners to suggest that minimum competency standards are somehow anti-consumer, or that a certified educational program taunt openly amongst a few hundred educational institutions is somehow a monopoly.
The Roots Of The CLU Designation
Perhaps the worst irony of the situation is that the American College of Financial Services itself was founded by Solomon Huebner, a pioneer recognized as "the father of insurance education" who originated the concept of "human life value" to determine the proper amount of life insurance someone should have, and a man who was committed to establishing a professional minimum standard in his own field of insurance. It was Huebner who created the CLU designation nearly a century ago, decades before the CFP certification was even a vague concept, and helped to craft around it an educational curriculum that would help to separate in the eyes of the public who had met a recognizable standard for minimum competency to be deemed a true life insurance professional. Sadly, the American College was not terribly successful in promoting visibility of the CLU to the public – perhaps because of its insistence on maintaining it as a 100-year proprietary, monopolistic program! – and thus Huebner’s dream of a minimum standard remained only a voluntary certification and not a licensing requirement. In point of fact, this is a rather a sad conclusion to Huebner's vision, given today’s world of senior financial abuse through the improper sale of insurance products, where a stronger minimum competency standard for life insurance salespeople might again go a long way in protecting consumers.
As someone who started in the financial services industry as a life insurance agent, I’m thrilled to have been taught early on the importance of having the knowledge and seeking to be a true professional; within 2 years of getting my insurance license, I had begun my coursework for the CFP certification with the American College, specifically with the intention of using it as a stepping stone to earning the CLU, and becoming part of a proud tradition of people who voluntarily sought out a higher standard for their own professionalism to better serve their clients.
Along the way, I ultimately found the path of comprehensive financial planning to be more personally rewarding than remaining solely with a life insurance focus, and I began to shift my career accordingly. Nonetheless, the value of advanced certification to obtain a better base of specialized knowledge to serve my clients well remained instilled within me, in the tradition of the American College and Huebner’s roots; so much so, that ultimately I obtained every advanced certification that the American College had to offer at the time, “rounding out” my CLU education with the ChFC, the RHU, the REBC, the CASL, and earning the first of my graduate degrees, in financial services. I found all of the American College's programs to be helpful, educational, and valuable in building upon the base of knowledge I had obtained with the CFP certification. They were, essentially, post-CFP specializations, and a refreshing dose of serious education in an industry plagued by bogus designations.
CFP Certification As A Starting Point
In point of fact, I actually view the function that the American College plays as representative of the long-term future of the financial planning profession; the CFP certification is a starting point, but as a minimum standard it is only the starting point, and specialized designations like what the American College offers are the future growth of professional education in a world where “post-CFP” education will become increasingly relevant and necessary for both consumer protection and practitioner success. And the American College itself has the opportunity to once again become a real leader in raising professional standards, and honoring the roots that Solomon Huebner planted for the organization. At least, as long as the College gets back to focusing on providing advanced specialization educational programs for advisors who have met a minimum educational standard like the CFP certification, and stops throwing monopoly rocks from the confines of its own glass house that embarrass both the organization and those who were [once] proud to hold the designations it grants.
In the meantime, I know I still hope for a world where consumers can finally have a clear understanding of who really has at least the appropriate minimum education, training, and experience to actually be an advisor, with a clear standard like the CFP certification as a guidepost. And if some of those advisors can once again proudly state that they have gone through one of the American College’s advanced educational programs to become a specialist in the area in which they practice as well, on top of the CFP certification… all the better.
Michael,
As usual, an excellent post. As a securities attorney and a CFP(r) professional, I am disheartened to see too many instances where the CFP(r) designation has simply become a marketing tool. Successful advisors know that adopting a truly consumer-centric practice is one of the best ways to true success. Unless and until a meaningful minimum standard for holding oneself out as a “financial planner” or “investment advisor” is required, e.g., a uniform fiduciary standard and earning the CFP(r) designation, the problems currently plaguing the wealth management will continue.
Take care.
Jim,
Indeed, it’s unfortunate to see those scenarios where the CFP has become only a marketing tool. Not that people shouldn’t be proud and build their businesses on the base of their expertise – but if they’re going to hold out as planners, they should actually DO planning in my opinion.
Which means the next step that still looms is for the CFP Board to continue making improvements to the actual enforcement of the CFP certification’s practice standards as well.
– Michael
Michael,
I am 75 years old, a CLU & ChFC. I am on my second part of the RICP studies. Many times during the instruction videos the discussion centered on the complexity of the retirement income planning process. Wide ranging approaches to solving a client’s problem were presented by you and others.
The CFP board apparently does have an objective of having CFP being the only recognized financial planning designation. I believe we and the public would be better served by encouraging a more collaborative approach. There is certainly room for CFP, ChFC and others. Lets be more open to new approaches and let the public decide.
Michael:
You’re writing about an important question that many others have not focused on, as you so often do. Kudos for that.
I don’t know enough about the issue to have a firm opinion. I certainly agree that it would be a good thing if there were professional standards in this field that consumers could look to as evidence that the person speaking is not just out to make a buck.
However, my experience writing about investing tells me that the great unspoken reality is that our knowledge remains at the primitive stage today. So I question whether anyone in this field can fairly claim to offer “professional” or “expert” services.
We all wish the reality were otherwise. My personal sense, for what it is worth, is that we are not yet where we need to be.
Anyway, thanks for the good article.
Rob
Michael,
What a well written and thought provoking piece. Thank you! Having just been awarded the ChFC from The American College (I received my CFP training elsewhere), I was left feeling awkward about my feelings toward the college. The CLU was the next designation on my list.
I hope that they can reframe their message to better reflect the principles upon which they were founded – their president apparently has lost his way. Your post provides bread crumbs for them to follow to get back on a good path.
All the best, Debbie
Hi Michael,
I am a CFP and an MBA in FInance. I can tell you that the educational requirements of the CFP are not 1% of the MBA. I find the CFP pretty useless. Multiple choice questions with double negatives, memorization of numbers that change in a year, calculation of Alternative Minimum Income Tax by hand, are all useless things I have learned to pass the test and then never use again.
In my professional practice, I draw mainly on the MBA and real world work experience at major financial institutions.
Are we there yet? We haven’t even left the dock.
LOTS of multiple questions with double negatives that are there to trick test takers…I get the impression they want the takers to fail so they can charge them again and again…friends that have gone through Kaplan and College of financial planning were amazed at how poorly the questions are worded.
Having worked with John Bell Keeble, the father of Financial Planning, as a business partner and former President of FSC Advisory, the genesis of the CFP had a much more humble origins of encourageing the general population to save and invest to achieve life goals of funding their children’s education, retirement, etc. than it was to become a professional standard. At the time, the middle class was just beginning to grow after WWII and a terrible depression. For the first time there was excess earnings available for investment and the standard of living in the US was greatly improving.
John Dutton at the same time was advancing investing counseling as an alternative to planning which was more focused on portfolio construction.
Planning eclipsed Counseling for several reasons (which are stories in themselves)but eventually planning subsumed counseling as a more complete thought and it is the hope of many that planning will become a professional standard which actually incorporates fiduciary standing.
We will get there as long as we understand we are not there yet with the processes, technology, work flow management, conflict of interest management which can in fact be held to objective, non-negotiable fiduciary criteria of statute, case law and regulatory opinion letters with the competitive marketplace for advice always pressing the outer limites of best practices.
The CFP and the CLU are no panacea, there is still alot of work to do, much of it comming from institutions which bring scale to process and technology which elevates professional standing. It all started with planning, but it will end with expert fiduciary standing, with planning making an important contribution.
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*Magnificent!*
The CFP has become a very convoluted problem that you only begin to scratch the surface of. The main problem with the CFP is that it is not a good start, in fact it is barely a start. The Chfc which you obtained is the good starting point since it takes into account all aspects of financial planning.
The main problem the financial planning community faces is the Board of Financial Planning trying to force itself upon us and become the advisors FINRA. Which is odd since advisors (IAR) are already regulated by FINRA.. The CFP has been hoisted upon the public as the defacto certification that the public should look for. Yet as is pointed out by yourself and many of the comments, CFP is not and should not be seen as a “standard of excellence” or even competency.
Good advisors will always seek out continued education and certification as part of their practice. As far as I can see the American College is the one place to go for much of that journey. Regardless of the fighting between organizations we should all go where the knowledge base is and use it to our fullest capability. We must not let the distractions of organizational fighting and jockeying for regulatory positioning make us feel ashamed of the designations we have earned.
Does the CHFC education include course work about the offsets of Social Security as it relates to public pensions? The WEP and the GPO offsets definitely apply to my husband local government pension, and were missed by our CHFC who did our financial analysis to help with a decision about his retirement. I am trying to get this information from the American College now, and it is like pulling teeth. I realize you are in Australia and perhaps do not deal with Social Security, so my question my be moot. Thank you.
I am trying to take the next step to become a financial planner. I am already licensed in L&H, P&C and mastered those lines. I am now searching for the next designation I would like to achieve. I really think CEBC or REMC, would be better to start with, then go back for my CLU or CFP. But as you mentioned their are so many designations that overlap and it’s impossible to figure out which one is better. If anyone could tell me which is better from certified to registered for employee benefit consultant, along with if it is a good career to take on.
I would appreciate anyone’s advice on what you think is the next best designation to aim for, to get to my end goal. I have no problem working my way up the chain of positions. My end goal is to become a financial consultant, to help people plan and save for retirement, as well as, protect their income from unexpected events in life.
I have taken the last two yrs off to get my degree, now I need to focus on education to pass state Board exams. I am not currently trying with a company so I am restricted on being able to take my series exams, until I get sponsorship:(
Again I would appreciate any advice, one can provide, on what they think is the best method and route to take. Thank you for your time and help, in this confusing serach.