Executive Summary
Many who have known me over the years, and my involvement in both the profession at large and the FPA in particular, were surprised by my article earlier this week criticizing the FPA for its actions and direction in recent years. However, the truth is that these realities – my involvement in the FPA, and my criticism of the organization – are not at odds. In fact, the entire purpose of my article was to recognize the challenges the FPA faces (publicly, as I’ve already voiced these concerns privately to FPA leadership in the past), to encourage a frank discussion of those challenges, and hopefully find a focused path forward, because as a long-standing FPA volunteer myself I desperately want to see the FPA succeed in achieving its founding purpose as an organization!
Nonetheless, to help further reduce the “confusion” about the perspective I was trying to bring and the points that I was trying to make – and to head off any misunderstandings and misinterpretations that might emerge – in today’s article, I highlight at a high level my own views and “beliefs” about how to advance the profession of financial planning, and why the FPA has a crucial role to play. As you will see, I sincerely hope that the FPA will survive and thrive and take on the opportunity that lies before it to continue the role it plays to shape the profession, and believe its path to success lies in “simply” embracing the purpose its prior leadership has already provided to it.
In addition, today’s article also includes a response from the FPA leadership itself to my recent criticisms, and you can read their comments in full in the second half of today’s article. Not surprisingly, the FPA leadership does not entirely agree with my assessment of all the issues, but I hope this frank discussion helps us all to have the important dialogues necessary to keep the financial planning profession moving forward. Personally, I look forward to seeing the FPA national and also chapter leadership next week, as I travel to the FPA Chapter Leadership Conference with an openness to continue the conversation in advancing this profession and association in which so many of us are involved.
My statements of belief about the financial planning profession, the CFP Board, and the FPA:
- I believe in the importance of FPA. I believe in it so much, after more than a decade of highly active volunteerism with the organization at the local and national level, that I felt it was necessary to call attention to what I believe are serious issues at the national level that threaten the long-term viability of the organization I hold so dear. Simply put, I would not write publicly about the FPA in an attempt to hold it accountable to its founding Memorandum of Intent and its Bylaws UNLESS I genuinely cared enough to see the FPA succeed – which I do. But we cannot move forward until we acknowledge the problems that are limited us.
- I believe that truly establishing financial planning as a profession requires separating – in the eyes of the public – those who are really educated and trained to do financial planning from those who are not. While there may well be some people who are capable of doing financial planning without meeting any training or certification standards, creating a bright line for the label “financial planner” is crucial for the public to distinguish the professionals from those who may not have sufficient education and experience. As we have seen from the challenges of proliferating designations, establishing a profession requires rallying around a single, core, minimum standard to be clearly and consistently recognized as a professional. And the best option we have today to advance that cause is the CFP marks, which is why the FPA needs to focus on advancing the CFP marks and CFP certificants. Notably, this viewpoint is not original at all – it is the “One Profession, One Designation” rally call that P. Kemp Fain, Jr., put forth several decades ago, and was intended to be a core tenet of the FPA when it was created.
- I believe that ultimately, the CFP Board is not the best organization to carry forth the creation of a profession on its own. The CFP Board and its CFP marks are a central part of building the profession, but as a 501(c)(3) charity that under law must be organized primarily to benefit the public (and not necessarily the building of a profession for its CFP certificant stakeholders), it cannot carry the torch alone, and in fact has a long series of missteps of its own over the years. Having an independent, outside organization – like the FPA – to serve as a check-and-balance to the CFP Board, and keep it accountable, is crucial for the long-term health of our emerging profession. However, that also means it falls upon us, the members of FPA, to hold the FPA leadership accountable.
- I believe that because of the power that the CFP Board actually wields, the FPA must establish itself as an advocacy organization that can counterbalance the power of the CFP Board and influence its path (as the FPA has done at various key junctures in the past) to ensure that the CFP Board’s steps in building itself and protecting the public also serve to advance the establishment of the profession itself. If the FPA loses its ability to influence the CFP Board, then the CFP Board alone will dictate the shape that the financial planning profession takes, which is dangerous when the core mission of the CFP Board is not actually to build a profession in the first place! In fact, the role that the FPA can play as a counterbalance to the CFP Board, and sometimes as an advocate to push it forward, is the primary reason the FPA should exist (as a separate entity from the CFP Board).
- I do NOT believe it is best for the membership association (FPA) and the credentialing body (the CFP Board) to merge or become one. But if FPA will not take up the mantle of driving forth Kemp Fain’s vision of “One Profession, One [Minimum] Designation” and build around the CFP certificants that form the core of that vision, some other organization will do so, because there are simply too many CFP certificants to not have a professional membership organization of their own. And I fear that organization to step into the void may actually be the CFP Board itself – or some offshoot it creates – which may not be as effective at holding the CFP Board accountable, and which risks losing the decades of work that has been put into building the FPA and its predecessors.
- I believe that for the FPA to succeed from here, it must (re-)embrace the purpose by which it was founded: to serve the needs of its members, establish the value of financial planning, and advance the success of the financial planning profession; to encourage those who wish to be a financial planner to obtain the CFP marks and encourage members of the public who wish to work with a financial planner to seek out a CFP certificant; and by adopting an advocacy agenda in the interests of financial planning and CFP certificants. These principles for FPA are not new – they are actually already fully contained within the FPA’s existing bylaws, which even its Board of Directors does not have the power to change on their own. But the FPA has wandered away from this founding purpose over the past decade, becoming fearful of supporting the CFP marks and in the process triggering a decline in its own power and relevance in advancing the profession itself; hopefully it will sufficiently and effectively renew the focus before it’s too late.
The FPA Leadership response letter:
We appreciate the opportunity to address the key points in Michael’s post.
The financial planning profession needs a single, respected designation and a set of standards to rally around – in the CFP® marks it has it.
The financial planning profession needs a certifying body to uphold the CFP® marks for the benefit of the public – in the CFP Board it has it.
The financial planning profession also needs a professional membership association to zealously represent the interests of, and expand the opportunities for, CFP® professionals – in FPA it has it.
For the benefit of the public, the profession, and the CFP® professional, the role of the credentialing body and the membership body are bifurcated in the U.S. Michael correctly points out that the regulatory role and membership association role is combined in some countries around the world. There are legal, strategic, and resource capacity reasons not mentioned in Michael’s post as to why this may make sense elsewhere, but not in the U.S. We prefer to follow the well-tested U.S. model in law, medicine and accounting where the role of the regulatory body and the role of the professional association are separated. We prefer to follow the wisdom of the founding leaders of the financial planning profession, who years ago and with great intentionality split these two functions into two separate organizations. They understood that a 501(c)(3) credentialing body focused on serving the public, and a 501(c)(6) professional membership association focused on serving the professional, serve two distinct yet complementary purposes. Since that time nearly 30 years ago, their reasoning has been upheld time and time again.
While there are some professions in the U.S. where the credentialing body also acts as the membership body, this melding of roles creates inherent conflicts of interests and can result in an organization making strategic decisions for economic gain alone – leading to unintended consequences where both the public and or the professional may suffer.
FPA is, has been, and will continue to be the voice for CFP® professionals. FPA enjoys a healthy collaborative relationship with the CFP Board, and each year we meet regularly both publically and privately to keep our membership concerns at the forefront of our discussions. It is also natural given our different roles that there have been numerous instances before, and since, the merger (between the IAFP and ICFP) where FPA and our predecessor organizations acted as an essential counter-balance to policy positions promoted by CFP Board.
We have mobilized our members and chapters on many issues over the years including leading the charge to dismantle the notion of having a “CFP-lite” designation, proactively lobbying the CFP Board to elevate its standard of care for CFP® professionals in 2007/2008, discouraging CFP Board’s entry in the continuing education marketplace and influencing the clarification of compensation definitions just last year. FPA will continue to be a staunch and necessary advocate on behalf of CFP® professionals in the future.
Michael points out the need for FPA to take courageous stands on behalf of CFP® professionals and also notes the decline in membership since the merger. He fails to correlate the two.
FPA’s refusal to be everything to everyone and our focus on upholding our core values and key policy positions has impacted our membership growth. FPA took an expected membership hit after we won the SEC lawsuit; there was also a drop in membership when we spun off our broker-dealer division.
Of course FPA membership at the time of the merger was at our highest, since membership rosters of the two organizations were simply combined and some fallout was expected post- merger. This is not to say that there haven’t been significant challenges and learning opportunities along the way. FPA has always been CFP® centric, but there have been different strategies used over the years to achieve membership growth. The lessons learned motivated the FPA Board of Directors to deepen our policy and business commitment to the CFP® marks in August 2012, which resulted in the following strategic directive:
To be the recognized and unquestioned professional membership resource and advocate for CFP® professionals by embracing the concept of “one profession/one designation” as our sole business directive and policy filter.
Everything that FPA now plans, develops and implements is seen through the lens of this strategic directive. While it’s only been 1 ½ years into FPA’s business planning since the strategic directive was adopted, positive progress has been made. Membership retention of CFP® professionals has increased by 5% in the past two years and CFP® membership has also started to tick upward. New programs and services are being added, including the FPA Research and Practice Institute™, Knowledge Circles and the Member Discount Program. In the last 18 months new alliances have been built with other organizations and outlets such as the Foundation for Financial Planning, Academy of Financial Services, and CNBC to name a few. Our primary focus with these programs and alliances is to support and elevate our CFP® professional members. It is our expressed desire to continue to build a financial planning profession based on the CFP® marks, serving our CFP® professional members and advocating on their behalf. Our expanding Advocacy Days on a national and a state level collectively broadcast the need for financial planners to be recognized and regulated as professionals with appropriate standards as exemplified by the CFP® marks. Our media tours and outreach emphasize FPA’s core policy position – when seeking the advice of a financial planner that planner should be a CFP® professional.
At the same time, we need to acknowledge that FPA and the financial planning profession are facing some challenges. Over the past decade, and since the great recession, voluntary professional association membership growth has suffered in all industries. The membership penetration rates of practitioners in standard-bearing voluntary national professional associations like the ABA and AMA is in the 25% to 35% range. That’s why FPA has been very resource-focused over the past two years with an eye on elevating the value proposition for CFP® professional members. We are very proud of what CFP® professionals receive in return for their investment in FPA on a national and local level.
It is inappropriate to use membership growth as the only valid measure of success. Growth can be a valid business goal but it is not in and of itself a principal value guiding the direction of our organization. FPA is powered by thousands of committed and engaged professional volunteer leaders and members who have made significant contributions to building the financial planning profession and who care deeply about its success. Suggesting that FPA is not viable because we don’t have a certain percentage of CFP® professionals as members misses the point that FPA is a voluntary association where professionals choose to participate to shape and advance FPA and the profession. The level of engagement demonstrated by FPA leaders and members alike gives us confidence that FPA is here to stay and will continue to grow in strength for years to come.
The larger issue the profession needs to address is the slowing growth in the CFP® professional population with fewer new professionals choosing the CFP® career path. That’s why we applauded CFP Board’s Career Center effort and why we will be working hand-in-hand with CFP Board through our student chapters and FPA’s Student and New Professional Program to increase the number of students coming into the profession. No one organization can do this alone and FPA intends to do our part by building on our network of 30 student chapters and connecting them to our practitioner chapters. New CFP® professionals need a professional community too and we are making it known that FPA is here for them.
Finally, FPA is not just one legal entity. We are a constellation of 95 legally organized chapters and councils with 1,000+ rotating volunteer leaders coast to coast. While it may be complex to integrate 95 entities, it is what gives FPA our power and uniqueness. The working relationship between FPA and our chapters has never been stronger or more unified. For example, seven concurrent task forces under the moniker of “One FPA”, and comprised of chapter and national leaders, have been working together since June to build a unified strategic, branding, and operational presence within FPA. In the coming months we will clarify and implement the work of the task forces to align our efforts like never before – all of it centered on the strategic directive.
Perhaps the purpose of Michael’s post was to ensure that FPA is zealously focused on the CFP® professional and the CFP® marks. On that point, we are on the same page. FPA is in an excellent organizational position and will continue to be the unequivocal professional membership association for CFP® professionals now and in the years ahead.
Janet Stanzak, CFP®
2014 FPA President
Lauren Schadle, CAE
FPA Executive Director/CEO
Imagine how many public companies would be better served by not having group think within their Board of Directors and actually having differing viewpoints for the greater good of the company and shareholders. I am glad that Michael’s viewpoint is taken with positive intent – an intent to strengthen the profession.
Thanks JC, for reading the comments in the context they were intended! 🙂
Michael, Janet and Lauren,
Thank you for this high quality, open, and constructive dialog.
Jeff
Keep pushing, Michael. We need to help lead the FPA to that goal for the good of the profession. We need more folks with your zeal. See you in Denver.
The FPA of Florida appreciates your opinions regarding the Financial Planning Association, and we would like clear the rumors you referenced in your prior article. As a body of the nine local FPA chapters serving members within our state, FPA of Florida supports the licensure of financial planners. Furthermore, we support the actions of the Financial Planning Coalition in bringing this important issue to the forefront as recently as last week with the release of a case statement showing consumer harm from the lack of regulation. As a policy position supported by FPA and the Coalition, we support the recognition and regulation (licensure) of financial planners and believe the best way to achieve success toward this goal is by working with FPA, and by extension the Coalition.
Chris Draughon, CFP®
Director of Advocacy
FPA of Florida
Chris,
Thank you so much for your comments!
I continue to be upbeat about the potential in the long run for state regulation of financial planning, and am also intrigued by the model that FPA of Florida is “testing out” in banding together to push advocacy at the state level.
Please understand that my only concern, in the context of the article and comments here, is the extent to which FPA at the national level can marshall its chapters, in a coordinated manner, towards a common goal, consistent with the timing and implement of its (national) Coalition partners.
– Michael
Michael:
Generally, I could not agree more. Your comments are precisely what is needed at this time. Let’s hope they engender a much needed reassessment.
Michael,
Thank you for your article. I’ve been expressing many of the same concerns, but you do it so much more eloquently. I agree that we need two separate entities for checks and balances, and I hope they can find a way to work together without trying to undermine each other. Sometimes I feel like I’m watching children bicker over a toy. We are professionals and need organizations that represent us in a manner befitting that as the public defines us by that persona. Thanks again for all you’re doing to advance our profession.
Nice post Michael. I too am conflicted about FPA and yet feel like it’s been an extremely important community for me. Since there are more CFPs over 70 than over age 30, I’m hoping that FPA starts to realize how financially imperative it is that they invest in the NexGen community by actually allocating money towards NexGen and promoting this group within FPA and beyond. If they choose not to take some bold steps soon, I don’t know how long I’ll remain a member of FPA even though I’ve been incredibly active and involved over the last 5 years. I imagine that the organization will start to die off with its members unless something is done to engage Gen X & Y.
Michael,
Spot on!!! This is a great conversation.
Regrettably, neither myself, nor my partner, John Enright, have the CFP designation. We don’t have the designation for one simple reason…we believe there should only be one designation that is granted to advisors that are practicing comprehensive financial planning. Having said that after reading your post, we are more inclined than ever before to become CFPs and band with you to help make the industry as a whole even better.
Our goal when we started the 7 Figure Advisor program was, and still is, to influence the industry that we love in a positive way. We believe that the consumer is better cared for when it’s their goals and their objectives that advisors are planning for and not utilizing planning as a means to sell product.
My favorite question to help illustrate the need to have one designation is this:
If at random, 10 CFPs from different B/Ds, RIAa and geographic areas of the country were selected to create a comprehensive financial plan for the exact same family…same goals and objectives, same financial data and any question that was asked by the advisors were answered the same way by this family. How many different financial plans would be created? From our research and conversations with advisors coast to coast, we believe the answer is as many as 10 different plans would be created. WHY?
If in fact, it is the families goals and objectives that are the driving force of the planning process then how is it possible to have so many different final plans? Is it possible that the definition of the financial planning process laid out by the FPA and CFP Board is too loose?
http://fpa.com.au/what-could-a-financial-planner-do-for-me/how-the-financial-planning-process-works
I am certain that most every advisor utilizes a planning process that follows a process just like this…I see it posted on their websites and their brochures. Is it possible that the definition needs to be more specific? Should there be a series of questions, processes and checklists that are always utilized to ensure that each family has the same unique experience when they are dealing with a CFP, regardless of net-worth, geographic location or what company the advisor is affiliated?
Think of it this way…if every pilot that flew a 747 used a different set of preflight and landing checklists or no checklists at all..they just did everything from memory…how many of us would want to fly today? Or what if, after they took off they never referred to the flight plan or the dashboard of instruments, they would have no idea whether they were going to land in the right place or not?
As professional financial advisors shouldn’t we be mandated to create a dashboard of key performance indicators for our clients to help them know whether or not they are on track to have the plan we created come to fruition? Based on what I have seen in coaching advisors, I would say less than 10% ever pull out the original financial plan and compare the progress versus that which was projected in the plan each and every year.
I’ll close with this…My father, Martin Palumbos, began his career with Connecticut General Life Insurance Company over 40 years ago…the motto that he loved back then was:
Serve First and Let the Pay Take Care of Itself.
We believe that should be the motto for all financial advisors today…for those reading this…I am certain that I am preaching to the choir so please understand this is not directed at you. I’m hopeful that this will help to spur further discussion and add fuel to the fire in an effort to help elevate the industry that we all care so much about.
All the best.
Michael Palumbos
co-founder 7 Figure Advisor
Sorry, this is not true.
FPA is, has been, and will continue to be the voice for CFP® professionals.
Love the FPA, but it’s not attracting a majority of CFP’s so this statement is unfortunately just not true. I wish one of their goals was to have a huge % of CFP’s be members of the FPA.
Great discussion. I share some of your sentiment. My perspective comes from a local FPA volunteer and CFP Board volunteer. I see two entirely different entities with different scope and purpose.
The FPA positioned itself as the heart of financial planning, and the heart has all sorts of arteries and pathways. Some medical and dental organizations have two levels of membership, one for doctors and one for affiliate members (vendors, hospitals, device companies). Perhaps that model would be useful in a FPA setting.
I agree with you that compensation is at the root of this discussion. NAPFA has clear cut definitions and an understanding of expectations between practicing and nonpracticing members. While I’m not convinced we should all be fee-only my hat is off to NAPFA for consistent messaging and ethical standards. Both the FPA and CFP Board struggle through banding together groups that carry conflict. And that conflict does hurt growth.
Personally I don’t see your message as the least bit hypocritical. You are speaking out on an issue from a place of experience and passion. Keep up the good work.