As the Certified Financial Planner Board of Standards prepares to celebrate its 25th anniversary, it is trumpeting an incredible achievement: There are now 125,000 certified financial planners in 23 countries. Robert Glovsky, the chair of the board of directors of the CFP Board, sat down with Financial Planning to discuss the board’s outlook and goals for the years ahead.
Financial Planning: The CFP Board is celebrating its 25th Anniversary. What are the organization’s signature accomplishments?
Glovsky: You can start with the relationships with the colleges, universities and educational institutions. We can talk about our consumer advocacy program, our policy positions to professionalize the industry, including the fiduciary requirement that we now have; the role we play in serving the public; value of financial planning and how it has evolved over the last 25 years; the ethics and disciplinary process we’ve created; that really differentiates us from other organizations, and we enforce it. If you look at growth of profession over the last 25 years, now have over 61,000 (in the U.S.) certificants, and there are over 125,000 worldwide. U.S. is the largest of all the 23 countries … that award the CFP designation. If you want to take that back to 1973, there were 42 CFPs in the country; and even in 1995, there were 31,000. So it’s pretty much doubled in the last 15 years.
FP: What has pushed that number up so high?
RG: There have been a lot of factors. The Bureau of Labor Statistics estimates that there are about 149,000 personal financial advisors out there today. Cerulli did a study a couple of years ago that said there were 300,000 people that called themselves financial advisors and there are 61,000 that are CFPs. Part of it is the professional marketplace recognizing that the CFP designation is the gold standard, and that with our four Es—education, examination, ethics and experience—we really have brought a level of quality and competence and ethics that people strive for and want.
FP: How does the CFP Board see itself, as well as the financial advisory industry, evolving over the next three to 10 years?
RG: CFP Board has many stakeholders. Our mission is to benefit the public, and we look at focus as what is in the best interest of the public, and a couple of years ago we adopted fiduciary standard of care. We look at the public first, but we have other stakeholders—certificants, regulators and other professionals. We look at it and say: what should we be doing?
Two years ago we moved from Denver to Wash., D.C., because we thought we should have a voice in the public arena for what is in the best interest of the public. A big part of what we’ve done will continue to do is advocate. We want to be a voice to the regulators and the legislators as to what is in the best interest of the public. So we’ll weigh in on the regulation of financial planners, we’ll weigh in on the fiduciary standard of care. We will weigh in on 401(k) plans or target date funds, whatever our expertise is as a not-for-profit certifying body and help the regulators and the legislators to better understand the issue. That is one big area.
FP: Are there other areas?
RG: There are a lot. One is to raise awareness of the CFP marks, so more professionals and more consumers will demand them. The consumer media understand what we do but the public doesn’t understand it the way they need to in order to seek out the most qualified advisor and someone who puts their best interest first.
We’ve been working diligently with our education programs. We have 348 education programs at 221 institutions around the country that are offering financial planning curricula and are registered with our board. They satisfy our coursework component. This year we added a new standard in the curriculum, a financial plan development requirement. So anybody wishing to obtain the certification will have to prepare and deliver a comprehensive financial plan. We think that is a very important enhancement and goes back to what makes a CFP certification valuable.
FP: Can we talk more about what makes a CFP mark valuable. The CFP Board can have discipline certificant, but beyond that there is no federal oversight to take enforcement further. Are there plans to put more teeth and muscle behind the CFP mark?
RG: One of the things we’ve spent the last year doing is to impress upon Congress the need for an oversight board for financial planners. The oversight board would have the responsibility for creating competency standards as well as ethical standards. The competency standards would include education and examinations as well as a fiduciary standard of care. We were not successful in getting an oversight body as legislation. But we were successful in having the GAO do a study on the gaps in regulation of financial planners and report back to the Senate Banking Committee, the Senate Special Committee on Aging and the House Financial Services Committee.
If you want to contrast a CFP’s requirements with a CPA’s, you’re right, they’re very voluntary. But what we do have … they have gone to school, they’ve done a course of study. In many cases it takes people two to three years on a part-time basis to do it. They’ve sat for and passed a 10-hour two-day comprehensive exam. They have a three-year work experience requirement to fulfill, and they have a code of ethics that says they are fiduciaries who put the client’s best interest first. So we look at our standard and say that is really what people should aspire to. That is a standard that doctors, lawyers and accountants have.
What is missing is the government regulation part. And that is why we are in Washington, DC, advocating for a fidiciary standard and an oversight board.
FP: What will be in the GAO report?
RG: Once the Senate passes bill, the President will sign it and then the GAO will start the study. We don’t know what it will find. Certainly we want to meet with them and be a strong resource for them.
FP: Financial Planners have a lot of pressing questions for the CFP Board. We’d like to ask them as part of this interview, so you have a chance to respond publicly to the complaints we hear privately. First, the organization is an SRO that has to balance public expectations and industry interests, but how does the organization see itself?
RG: We are a standard-setting body. We are not a membership group like FPA and NAPFA. It is up to us to set the highest possible standards we can, because what we really want to do in the end is benefit the public. If we’re doing our job well, we’re upholding standards that the public can rely on and feel comfortable with. If you look at our standard, we’re benefiting the public by granting CFP certification and upholding it as a recognized standard of excellence.
That’s why we are advocates. How do we impress upon the regulators that the CFP mark is the gold standard, the highest standard of excellence and it does benefit the public? From our standards competency and excellence that the industry as a whole should adopt, such as a fiduciary standard of care.
FP: Some advisors take issue with the group’s stance on the fiduciary standard, specifically saying that the organization is overzealous in standing up for it. They say, instead, that you should protect advisors. How do you address that concern?
RG: We feel that anybody who delivers advice to the client should have a fiduciary standard of care. It’s in our code of ethics that CFP certificants sign and accept and it is what the public deserves. It is no different than an attorney, accountant or doctor working with their client or patient. The depth of knowledge that we as professionals have, versus what the client has, is very vast. The relationship is similar to a doctor or lawyer’s relationship with a client. It goes back to a standard where the client’s best interest comes first and foremost. If some people want to label it as overzealous, then I say guilty as charged.
We see it as a fundamental core principal of the CFP designation, that financial planning is delivered with a fiduciary standard of care.
FP: Our July cover story suggested that there is a gap between how clear advisors think they are being with clients, and how transparent their customers feel they are being. Is that an issue?
RG: We don’t see transparency as a big problem with CFP certificants on the disciplinary side. Another way of looking at it, and some of the comments we hear periodically, is that the CFP board wants everybody to do financial planning on a fee-only basis. That is not true. The majority of certificants earn some of their compensation by commissions. What we have said, and this is clear in the code of ethics is we are business model, revenue and compensation neutral. People have to disclose conflicts and if sometimes there is a difference around conflicts. A lot of the issues arise around compensation. If people disclose how they are getting paid it doesn’t mean that they can’t use proprietary products or commission-based products, it says they have to disclose that. Then the consumer in most cases will say thank you for being so honest with me. What should I do? I would add that the more transparent you are with a client, the better a practice it is.
Financial planners who are truly under a fiduciary standard of care are by and large doing a good job. The problem is with the financial planners who are not under a fiduciary standard of care, and as such, they don’t have to be as transparent. That is a problem.
FP: There are also concerns that the leadership of CFP Board spends too much time having important discussions behind closed doors. What steps are you taking to increase transparency? Do you believe that that is necessary?
RG: I think it is always incumbent on us to be transparent and to be out in front. Over the last years we’ve two done moe than 20 “certificant connection” meetings, where we go with Kevin Keller, the CEO, and meet with certificants. We talk to them about what we’re doing; we listen to them about what we ought to be doing. We’re very clear about that. There are newsletters we send out on a regular basis as to what we are doing. Board minutes are posted for people to read and see, so I think we are transparent. I also think the CFP Board is a different organization, a different place than it was 5, 10, 15 years ago, when people might have made these comments. Kevin Keller has been with us about three years. We are in a new place; we have a different staff. It is a different organization.
Annual reports and compensation are posted on Website and there are links and it is public information. Everything is public and accessible to anybody who wants it can have it sent out to them. There is nothing about our finances we are hiding.
FP: How does the CFP Board respond to independent advisors’ perception that it cozies up with brokerage firms too much?
RG: I think again that ‘cozy’ is a charged word. Do we talk to brokerage firms? Absolutely. Do we talk to insurance companies? Absolutely. Do we talk to fee-only advisors? Absolutely. We are business-model neutral, and we are compensation-neutral. We recognize that there are different business models out there. So we do want to talk to the large brokerage firms, banks, financial services companies and the independent financial advisors. We talk to them and engage in dialogue with all of them. More than 50% of certificants identify themselves as working for a large company.