Practice Management

Practice management should be continuing-education requirement

Feb 26, 2012 @ 12:01 am

By Timothy D. Welsh

Several recent industry studies have found that financial advisers spend anywhere from 50% to 70% of their time actively managing and attempting to build their practices, leaving precious little time to work with clients.

Further, with a more complex operating environment, volatile markets, increasing costs and a more fearsome regulatory situation, many advisers are reporting declining profitability and an uncertain outlook for long-term viability.

So why is it, then, that the Certified Financial Planner Board of Standards Inc. continues to resist the industry movement for allowing continuing-education credits for practice management content?

According to the CFP Board's official documents on policies, renewal requirements and CE standards, “CE credit is not accepted in the following situations in which the subject content pertains to public accounting, computer hardware and software, marketing, practice management, sales, specific company or product presentations, or any other topic not included in CFP Board's list of accepted topics.”

Although some of these topics clearly don't make sense for continuing education, technology and practice management most certainly do. Otherwise, what good is having an advanced certification that allows a practitioner to deliver financial planning advice if the vehicle in which it is delivered is inefficient on a good day and not sustainable on a bad one?


Historically, the financial planning business model has focused on providing a high level of personal service in developing financial plans and helping investors meet their goals, in exchange for an asset management fee.

This was all well and good during the bull markets of the 1990s and the most recent decade — the period during which the bulk of the increase in CFP certificants occurred. As a result of the “hidden subsidy” provided by booming markets, advisers lacked discipline in building efficient businesses — relying on manual processes and investing insufficiently in technology.

However, during today's more challenging times, this approach is no longer sustainable.

Advisers need to learn about the latest technologies, business pro-cesses and practice management methods in order to streamline their practices and build a scalable infrastructure for growth.

Advisers should be encouraged and offered incentives to seek out this knowledge so they can better serve more investors, build their practices and help the next generation of advisers to join them and expand the profession.

However, take a look at any industry conference that is running concurrent sessions, one with CE credits and one without. Although the indexed-annuity session that qualifies for CE credit is standing-room- only, the tech session on how customer relationship management systems and document management software can create valuable capacity to better serve clients is virtually empty.

When asked about this dichotomy, advisers always say that because their time is extremely limited “when it comes to professional development, if it doesn't qualify for continuing education, then I won't attend.”

As a way to start the reform, the CFP Board should change its “job analysis” review.

Certifying bodies conduct periodic studies to see what tasks are important within a profession, and identify the knowledge and skills required to perform that job at a minimally competent level. These topics become the body of knowledge that ultimately informs CE requirements.

Missing from the CFP job analysis are the underlying factors required to be able to provide service to clients. Key aspects of being able to do an adviser's job clearly are the infrastructure and foundation that is required to have a practice in the first place.

These questions include: What does it take for the adviser to be able to acquire clients? What business setting do they need to create to have that engagement? What tools and technology does the practitioner need to assemble and maintain to deliver that advice? What does it take to hire, train and supervise staff in that process?

If these questions were added, then it would be very clear that practice management content is just as important as the core curriculum set of the financial planning process.

The CFP Board could follow the lead of other organizations for advisers. The Investment Management Consultants Association, for example, has concluded that practice management subject matter merits CE credit in connection with its well-respected and rigorous certified investment management analyst and certified private wealth adviser certifications.

According to Sean Walters, IMCA's executive director, its certification commission concluded that it is important for advisers to maintain an environment conducive to providing quality investment advice and wealth management services.

“As a result, we recently revised our CE requirements and [now] permit certain practice management content when related to investment or wealth management,” he said.


During the many debates about this topic, CFP Board leaders have said that having a rigorous CE requirement is necessary in order to protect the integrity of their mark.

No argument there.

What the industry is asking is not that practice management cover the entire CE requirement but rather that at least a portion of the total be allowed, say, six to eight hours of the required 30 every two years.

Thus, when facing the dilemma of whether to learn about yet another use of life insurance, advisers can invest that time into learning how to design a compensation plan to attract and retain top talent, design a succession plan to ensure that clients are cared for when the owner retires, or learn about the next killer tech app that will free them up to have the time to provide advice to their clients.

Timothy D. Welsh, a certified financial planner, is president and founder of Nexus Strategy LLC, a consulting firm to the wealth management industry.


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