The increase in class work on how to prepare and present financial plans is intended to bridge theory and practice
The Certified Financial Planner Board of Standards Inc. is raising the education requirement for planners and advisers seeking 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 218 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 its business update webinar last week, noting that the requirement is meant to bridge theory with practice.
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 is not likely to take effect for CFP certificate candidates until early 2012, said Kevin Keller, chief executive of the CFP Board.
Separately, Mr. Keller said that 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.
“There's been an unfortunate increase in the number of interim suspensions over the past year,” he said, “and our caseload is going up as well.”
While 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 has dropped in recent disciplinary hearings. “That shows we work hard to ensure that our process is fair,” Mr. Keller said.
He noted as well that the board's enforcement unit plans to begin issuing private-letter rulings in coming months to give certificants more clarity about how their practices intersect with the group's ethical standards. The organization has been increasing 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 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 certificate, which is now 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 planning standard groups that enforces its code of ethics.”
In an interview, he 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. The disciplinary committee, in an effort to strengthen its reputation, recently added two public representatives to its population of certificate holders.
Last week, 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 he had misrepresented the value of a brokerage account his brother was using as collateral for a loan.
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 by inflating the value of the brother's Wedbush account in 2003 and 2004, which was used as collateral for a loan from Acorn.
The CFP Board said it continues to investigate Mr. Safdie for possible permanent revocation of the CFP designation.
Separately, Mr. Keller said he expects the Senate Banking Committee to issue a financial-reform package within days that is unlikely to contain a fiduciary standard for anyone offering 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 views 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.
"We're still hopeful that a bona fide fiduciary duty for the delivery of advice will be a part of the final bill,” Mr. Keller said of the CFP Board and its coalition partners, the Financial Planning Association and the National Association of Personal Financial Advisors.
