The evolution of financial planning into a true profession has reached a crossroads, and the CFP® designation is square in the middle of it. In the past decade the CFP® mark has emerged as the premierdesignation in the financial planning field.  There are now more than 50,000 CFP® designees in the United States and record demand for CFP® education classes.  More than 190 colleges and universities conduct at least 300 registered programs.

Those are steps in the right direction for an industry steeped in a tradition that is long on selling financial products but short on providing clients the education, objective advice and sense of trust they need. But having won the battle, we could end up losing the war if the CFP Board does not continue to both protect the mark's integrity and keep the profession moving forward. This will require courageous action.

Jonathan Clements, the respected and widely followed Wall Street Journal columnist, caused quite a stir in the Journal of Financial Planning "10 Questions" interview with him (March 2005) in which he likened people who consult financial planners to "sheep going to the slaughter.” Clements reasoned that if someone needs advice, then by definition they are unsophisticated and don’t know whether the advice is good or not. He is so skeptical of the odds of finding a good planner, that he believes doing nothing is a better alternative!

The possibility that Clements's readers -- our potential clients -- might accept his skepticism crystallizes the public perception issue our profession faces. We must establish a standard that clients can understand and believe is reliable. The CFP® certification should be the beacon signaling clients that they are not, in fact, "sheep going to the slaughter." It’s not quite there yet.

Financial planning's evolution as a profession presents both opportunity and peril.  Standardization is a must – the financial planning field is already confusing enough to the consumer. Disclosure and placing clients’ best interests first (acting as a fiduciary) must be standardized for all CFP® practitioners.

Bob Veres, publisher of Inside Information writes:
“For many years now I have referred, in writing and my speeches, to the financial planning 'profession.' we can be a true profession until and unless there is no sales agenda attached to the practitioner, and (this is important) until the public can tell who does and who does not have a sales agenda when it seeks advice.  Does the CFP offer this assurance?  No.  Does compensation?  You’re getting closer, but there are too many people on the commission side who don’t let conflicts affect them for this to be a totally helpful screen. Does it matter who employs the advisor?  I think this gets closer still, but there are still too many real planners in the wirehouse world, and too many salespeople in the independent world, for consumers to hang a hat on this one.

Ideally, I would like to see a profession evolve standards of compensation, fiduciary standards, and a designation that not only represents educational achievements, but also guarantees that the holder will put clients interests first and avoid conflicts of interest in specified ways.  If the CFP stood for that, then I think I could call financial planning a profession without feeling a tug at my conscience. And consumers would have three letters instead of a long explanation to rely on when seeking out a real advisor.  Unfortunately, I think it would take a real battle, perhaps an outright war, to get there.

Elements are already in place for what is needed to strengthen the CFP® mark, making it the standard in the financial planning field. But two major steps need to be taken.

Consider first whether all CFP® designees should be fiduciaries.  As Jonathan Clements states, this should be a no-brainer and “It’s ridiculous that we are even having this argument.”  If you look at any other profession whose clients depend on informed, objective advice and expertise -- such as attorneys, doctors, CPAs -- they are all fiduciaries.  How would you feel if your doctor worked for a drug company, and his or her primary legal obligation was to that drug company, not you?  But the only mention the word “fiduciary” in the CFP Board Code of Ethics and Professional Responsibility is in Rule 103(e), under the Principle of  Integrity, and in that context it deals with the custody of client’s assets.  Currently "fiduciary" is not even defined in the terminology section of CFP Board Code of Ethics booklet.  Registered Investment Advisers do of course have a fiduciary obligation when working with clients, and this should also be the case with all CFP® designees.  The 7 Principles of the Code of Ethics apply to all CFP® designees and candidates, however certain Rules may not. The Code of Ethics states, “Due to the nature of a CFP Board designee’s particular field of endeavor, certain rules may not be applicable to that CFP Board designee’s activities.  For example, a CFP Board designee who is engaged solely in the sale of securities as a registered representative is not subject to the written disclosure requirements of Rule 402 (which is applicable to CFP Board designees engaged in personal financial planning) although he or she may have disclosure responsibilities under Rule 401.”

Rule 402 is a well-written, comprehensive rule regarding written disclosure. I would argue that the public believes that any CFP® designee they deal with operates under the same ethics requirements, which they do not.  In its own way, the CFP Board is helping the “Merrill Lynch Rule” disclosure “sidestep” by allowing certain CFP® designees who work for broker\ dealers who are not Registered Investment Advisers to be exempt from certain disclosure requirements found in the CFP Board’s Code of Ethics. The reason for the flexibility in CFP Board Code of Ethics Rule 402 is to allow those who may primarily sell products such as securities and life insurance to become CFP® designees and use the mark.  The primary responsibility of these representatives and agents is to their firm, not their clients.  And because of the increased liability and disclosure concerns, these firms are not going to make changes unless they have to.

This is where the battle needs to be won, and it needs to come from within.  I have led CFP® education courses for five years, teaching students from numerous banks, brokerage firms, and financial organizations.  Those who make the commitment to obtaining the designation are generally highly motivated and sincere individuals who want to do the best for their clients.  I believe most have no issue with being a fiduciary; they already view themselves as one.  My hope has always been, and still is, that the growing ranks of CFP® designees will change the professional culture from within.  We can expedite this process by making the Code of Ethics uniform for all CFP® practitioners, and requiring that all CFP practitioners be fiduciaries. The question is, are we up to the challenge of becoming a true profession with a true professional designation?

Reprinted with permission by the Financial Planning Association, Journal of Financial Planning, March 2006, James J. Pasztor, Jr., “Future of the CFP Designation, Profession Standard or Just Another Marketing Tool?”,

For more information on the Financial Planning Association, please visit "www.fpanet.org" or call 1-800-322-4237.

Return to top of page or Homepage