The Certified Financial Planner Board of Standards Inc. is raising the education requirements for planners and financial advisers who seek to take the group's certification examination.
Candidates will have to take a three-credit course, equivalent to 45 hours of class work, on how to prepare and present financial plans, before they can qualify to take the board's 10-hour exam. The CFP Board authorizes 221 colleges and continuing-education programs to prepare people for the exam.
“Students will have to develop and present a financial plan,” Charles A. Moran, chairman-elect of the CFP Board, said. The requirement is not retroactive for current CFP certificants.
The CFP Board, which has been discussing the requirement since 2005, said it will give registered programs “adequate time to develop and implement the new courses,” Mr. Moran said. The new requirement isn't likely to take effect for CFP certificate candidates until early 2012, said Kevin Keller, chief executive of the CFP Board.
The group's disciplinary and ethics boards have been operating at heightened levels of activity due to problematic behavior by CFP certificants arising, in part, from the market problems of 2008 and 2009, he said. “There's been an unfortunate increase in the number of interim suspensions over the past year, and our caseload is going up as well,” Mr. Keller said.
Although temporary revocations of the right to use the CFP mark are increasing, the number of full-time dismissals of certificants and notifications to regulatory authorities have dropped in recent disciplinary hearings.
Mr. Keller said that the board's enforcement unit plans to begin issuing private-letter rulings to give certificants more clarity about how their practices intersect with the group's ethical standards. The board has increased its outreach to insurance companies, mutual fund companies and other financial services firms, whose push of proprietary products and services sometimes comes in conflict with the obligations of employees or affiliated contractors who hold the CFP designation.
The CFP Board expects its first opinion to deal with conflicts between an insurance agent's fiduciary duty to his company and his CFP-mandated responsibilities to clients.
The efforts are aimed at balancing the group's campaign to promote its certification as the highest standard for financial planners, with its goal of popularizing the mark, which is held by about 61,000 individuals.
“It's always unfortunate when financial planners make decisions that merit discipline, but it's important for the public to see that our disciplinary proceedings have teeth,” Mr. Keller said. “The CFP Board is the only one of more than 100 financial services standard groups that enforces its code of ethics.”
In an interview, Mr. Keller said that referrals to the CFP's disciplinary committees come from clients of planners, other professionals, background checks the board conducts on certificants and regulatory agencies.Composed of certificate holders, the disciplinary committee recently added two public representatives.
This month, the CFP Board announced an interim suspension of Max J. Safdie, a Mill Valley, Calif., adviser who notified the board that he had been suspended by the Financial Industry Regulatory Authority Inc. Finra said that he had misrepresented the value of a brokerage account.
Mr. Safdie, then a broker at Wedbush Morgan Securities, and his brother were sued in 2006 by Acorn
Capital Group LLC for allegedly defrauding it of more than $2 million in 2003 and 2004 by inflating the value of the brother's Wedbush accounteral, which was used as collateral for a loan from Acorn.
The CFP Board said that it continues to investigate Mr. Safdie for possible permanent revocation of the CFP designation.
Separately, Mr. Keller said that he expects the Senate Banking Committee to issue a financial-reform package that is unlikely to contain a fiduciary standard for anyone who offers financial advice to retail investors.
Instead, it is likely to call for a study of how to regulate advice givers, something that the CFP Board and its partners in the Financial Planning Coalition — the Financial Planning Association and the National Association of Personal Financial Advisors — view as a weak alternative to adoption of a fiduciary standard. Securities brokers who give advice are now exempt from the fiduciary standard.
The House of Representatives has adopted a bill with strengthened fiduciary standards, meaning that Congress would have to reconcile bills in conference if the Senate version passed with substantial differences.
E-mail Jed Horowitz at [email protected].
