The National Association of Personal Financial Advisors' decision last week to accept only CFPs as new members was aimed at Washington lawmakers and regulators just as much as consumers and providers of investment advice.
The message to the market was that the certified financial planner mark is the pre-eminent credential in the alphabet soup of about 150 designations. NAPFA simultaneously was building the case to policymakers that financial planning is a unique profession that deserves special regulatory attention.
“We have to get the powers that be in D.C. to recognize there are different requirements for those that are financial salespeople and those that are fiduciary-based advisers,” said John Ritter, NAPFA's public-policy chairman and co-owner of Ritter Daniher Financial Advisory LLC.
The change in membership rules itself was modest.
Since 2010, NAPFA has required that new members be CFPs. But it also was willing to accept certified public accountants with a personal financial specialist designation.
As of Jan. 1, the CFP mark will be the coin of the NAPFA realm.
In making this move, NAPFA sharpened its brand, which ultimately could help it attract more members and make it a bigger player in the Financial Planning Coalition, a lobbying group that includes NAPFA, the Certified Financial Planner Board of Standards Inc. and the Financial Planning Association.
The coalition is gearing up to lobby the new Congress next year.
“As these groups become more and more similar, there is the hope we can continue to have a stronger and stronger voice, not only in D.C. on regulations but also in trying to craft this profession and come up with a consistent definition of fiduciary, financial planning and financial planner,” Mr. Ritter said.
NAPFA's move on the CFP requirement wasn't aimed at increasing membership, he said.
NAPFA has 2,447 members, about 90% of whom hold a CFP mark, up from 1,519 in 2007. NAPFA has 2,447 members, about 90% of whom hold a CFP mark, up from 1,519 in 2007. The group is restricted to fee-only planners.
NO "BIG TENT'
“We're not trying to be the big-tent organization,” Mr. Ritter said.
Maybe so. But an increase in members may be what it gets.
“It wants to be the beacon for financial planners,” said Michael Kitces, a partner at Pinnacle Advisory Group Inc. and publisher of the Nerd's Eye View blog. “I would view [CFP-only] as a growth opportunity. Having clarity of mission and purpose is rarely bad for an organization,” Mr. Kitces said.
In addition, NAPFA is setting itself apart from the FPA, which doesn't require a CFP designation for entry. The group has 23,360 members, about 67% of whom hold the CFP mark.
“NAPFA is one-upping the FPA in its focus on the CFP,” Mr. Kitces said.
The FPA includes members who work with financial planners such as tax attorneys and estate planners.
“We have non-CFPs who are members of the organization, and that will always be,” FPA chief executive Lauren Schadle said.
With its decision last week, NAPFA strengthened its collaboration with the CFP Board in the midst of the coalition's effort to promote a uniform fiduciary-duty rule at the Securities and Exchange Commission and to push for legislation that would maintain investment adviser oversight at the SEC.
“They've been a great strategic partner for us,” said CFP Board chief executive Kevin Keller. “NAPFA's recognition of the CFP certificate goes a long way toward helping the public recognize and identify competent and ethical financial planners.”
For some investment advisers, however, the partnership looks more like a nefarious cabal.
The American College of Financial Services criticized NAPFA for supporting a “monopoly” on credentials that is a “disservice to consumers and the profession.”
It pointed out that the chartered financial consultant designation, for instance, has more educational requirements than the CFP.
The International Association of Qualified Financial Planners offers an alternative to the CFP-only world. The group grants the QFP designation to financial advisers who possess one of five credentials: the CFP, ChFC, PFS, a master's degree in financial services or a master's with a concentration in financial planning.
About 100,000 advisers are registered at the organization's website.
“This has been an ongoing turf war,” said Paul League, co-founder of the association and principal of League Financial & Insurance Services.
“From an ethical point of view, it's unconscionable that the CFP Board ... would effectively box out equivalently designated people from their exclusive club,” he said. “The public needs more access to qualified financial planners, not less.”
William Ryan Jr., owner of WFR Financial Planning & Insurance, holds a ChFC and said that he doesn't want to be treated like a second-class citizen, noting that his credential was the CFP's predecessor.
“You are excluding people who have years of experience with clients and who care enough about the profession to attain these designations,” Mr. Ryan said.
Ed Kohlhepp Jr., vice president of Kohlhepp Investment Advisors Ltd., said he doesn't mind the $12 monthly increase in CFP fees to fund the initiative.
“They've been doing a good job with this PR effort to build awareness of what the CFP is,” he said.
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