For CFPs To Be Regarded And Regulated As Professionals, Financial Planning Coalition Must Build Bridges, Not Walls; CFP Alignment With CFAs, CPAs, CPWAs Is In Consumers’ Best Interest

Tuesday, December 18, 2012 13:32
For CFPs To Be Regarded And Regulated As Professionals, Financial Planning Coalition Must Build Bridges, Not Walls; CFP Alignment With CFAs, CPAs, CPWAs Is In Consumers’ Best Interest

Tags: CFA | CFP Board | CPAs | fiduciaries | fiduciary standard | IMCA | NAPFA | profession | RIAs


It is provincial, unrealistic and not in the best of interest of consumers to view the CFP designation as superior to all other professional designations, and NAPFA’s full-embrace of the CFP last week was counterproductive.
Sorry, my friends, but if you want to help advance the profession, then do you really expect people to believe CFPs are superior to CFAs, CPA/PFSs or CIMAs, or CPWAs. The curriculum of all these designations equip a professional with skills to manage wealth in a professional manner.

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It was a mistake for NAPFA, which has always set a high standard for excellence in the advisory profession, to declare that it would no longer accept anyone but CFPs as members.
In a story last week, I said the net effect of the change in NAPFA’s membership requirement is to no longer accept the CPA/PFSs as members unless they challenged the CFP exam. I was wrong. It’s bigger than that.
NAPFA has long required members hold a CFP or challenge the CFP exam to qualify as NAPFA-Registered Financial Advisors. Thus, CFAs, CPAs, CPWAs, CIMAs, ChFCs, CLUs, and Ph.Ds in business or economics as well as licensed attorneys and others must challenge the CFP exam to become CFPs to gain NAPFA membership. But is such a policy in the best interest of consumers?
If NAPFA were solely concerned creating a brand that’s differentiated, it would justify making CFP certification a condition of membership. But NAPFA’s concern has always been serving a consumer’s best interest.
Not only is it narrow-minded to think that only CFPs are qualified to be wealth managers, it narrows the market of those qualified to advise on wealth matters, and not in a way that benefits consumers.
NAPFA Registered Advisors are already differentiated by their fiduciary pledge and fee-only status. Those are crucial differentiators that benefit consumers. Adding the CFP requirement is counterproductive.
To gain credibility with the public as a profession, CFPs must be aligned with similar designations, not at odds with them. CPA/PFSs are already considered professionals because they were CPAs before they were financial planners. If you accept that CPAs are professionals, why not embrace their status and join with them?
CFAs are another obvious choice for inclusion in any group promoting professionalism among private wealth advisors, financial planners, and investment advisors. CFA Institute is global, and half of its 100,00 Charterholders are in the U.S. CFA Institute administers the Global Investment Performance Standards (GIPS), a recognized standard-setting body for measuring investment advisor performance. The CFA curriculum provides a comprehensive framework for investment decision making. The three-level CFA exam tests proficiency in ethical and professional standards, fixed-income and equity analysis, alternative and derivative investments, economics, financial reporting standards, portfolio management, and wealth planning. And CFA Institute’s fastest growing membership segment is its private wealth advice section.
This past weekend, while writing a story honoring Sheryl Rowling for her contribution to RIA practice management for designing a more affordable rebalancing tool optimized for tax efficiency, it occurred to me that Rowling is a CPA/PFS designee. Why would a professional membership association for financial advisors erect barriers to her becoming a member?
If you would like to see investment fiduciaries regulated separately and recognized as a profession, a way to make that happen is for CFPs to align with CPAs, CFAs, CIMAs, CPWAs, and others — not exclude them.  For CFPs to be regarded as professionals, the NAPFA and Financial Planning Coalition should build bridges, not walls, between CPA/PFSs, CFAs, other credible professional designations. That will best serve the public and the profession.


Comments (2)

Honestly, the CFP designation is like graduating high school. The CPA and CFA professions are at a much higher level. Just my humble opinion, but I thought the CFP test was a joke, and the curriculum was not much more than 100 level courses. Anyone care to disagree?
vguettlein , December 18, 2012
CPAs are not always fiduciaries.

Generally, a certified public accountant is not a fiduciary unless the party is justified in expecting the accountant to act in his or her interest – i.e., unless trust and confidence has been reposed by the client in the CPA, to act in the client’s best interests, in situations where it is reasonable to assume such trust has been accepted.

An accountant employed to audit the financial statements of a client is required to be independent of the client and, therefore, is not a fiduciary of the client. The independence of an auditor is fundamentally inconsistent with status as a fiduciary.

The provision of personal financial, investment or tax advice may result in a fiduciary relationship. However, an accountant is not a fiduciary where he or she merely acts as a sales person for an investment or accountant for the seller, with the purchaser not relying upon the accountant for investment advice.

I have personally seen the consequences - sale of high-priced (high-commission), tax-inefficient products which may meet the lower suitability standard but which dismally fail the fiduciary standdard of due care. Sadly, such actions by CPA/PFS - while not existing among all of them - occur far too often.

Of course, providing investment advice on an ERISA account to either a plan sponsor or a plan participant triggers fiduciary status. And serving as a guardian (or conservator), personal representative (executor) or trustee also invokes fiduciary status.

For a general statement of the rule as to when fiduciary status attaches, see

I am not a CPA/PFS, and hence cannot opine on the strength of the CFP exam vis-a-vis the CPA/PFS exam However, given the subtantial amount of tax knowledge required of personal financial planners, I would suspect that CPA/PFS designees possess a large step forward in obtaining the knowledge required to provide comprehensive financial planning advice. I further suspect that it would not be difficult for a knowledgeable CPA to challenge and pass the CFP exam, if they indeed "know their stuff."

Yet, I must note that not all CPA/PFS practice as fiduciaries. I have seen many who are engaged in product sales. I find this disturbing, given the high degree of trust reposed in CPAs, generally, by their clients. When CPAs were authorized to expand into the provision of investment services, some two or more decades ago, for a reason I do not know fiduciary status was not mandated for such CPAs. In my view, this has diminished the power of the CPA/PFS designation. I hope the AICPA/PFS section will address this in due course, given the recent increased awareness of the need for fiduciary status, and the inability of disclosures to protect in significant ways the interests of individual consumers of financial products and services.

I further encourage the CFP Board and the AICPA / PFS section to confer as to whether a path might be open to CPA/PFS designees to obtain CFP certification, other than challenging the entire exam. Similar discussions could be held by the CFP Board with the CFA Institute and the IMCA.

I support NAPFA's decision, in uniting around a common certification/designation for financial planners. The CFP certification has become the most widely recognized certification/designation - in the minds of consumers. And the CFP exam establishes, in a reasonable way, a baseline level of knowledge for entry into this emerging profession. I don't believe that NAPFA's endorsement lowers the NAPFA-Registered Financial Advisor designation, as NAPFA membership still requires strict adherence to its fiduciary oath and requires, further still, practice as a fee-only advisor.

I hope that CFP Board's Standards of Professional Conduct will require a more comprehensive embrace of the fiduciary standard of conduct for all CFP's who hold themselves out as such and who provide any form of investment or financial advice to clients. As our understanding of fiduciary duties and their importance has evolved over the past several years, so must the CFP Board's Standards of Professional Conduct. Otherwise, the CFP mark will not likely advance to the prestigious position, in the eyes of the media and the consuming public, of which it is capable. I hope that NAPFA's endorsement of the CFP mark provides impetus for the Board of Directors of the CFP Board to significantly tighten its Standards of Professional Conduct.
RonRhoades , December 18, 2012

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