Clark At Large

Advisor Morris Armstrong recently took the CFP Board to task on his “Financial Planning for You” blog over the issue of “grandfathering.” A ChFC himself, Morris was responding to a recent letter by Board CEO  Kevin Keller favorably comparing the CFP with the ChFC, in part because of extensive grandfathering over the years by the American College.

Now, as you may know, I haven’t been a particularly big fan of the CFP Board over the years, for reasons too numerous to go into here. But, perhaps surprisingly, grandfathering isn’t one of them. Which gives me the inclination, perhaps also surprisingly, to stand up for the Board on this one issue.

Morris, on the other hand, seems to feel that the American College’s grandfathering escapades over the years (and they’ve been many) are child’s play compared to the CFP Board’s sin of “grandfathering” existing CFPs when it instituted its formal exam in the early ‘90s. He seems to imply that telling the world CFPs have passed a rigorous exam when all of them haven’t is tantamount to a fraud on financial consumers.

Let’s take a deep breath here, and think this thing through. In general, grandfathering is probably an unfortunate practice; but it’s also very practical solution to the thorny issue of upgrading professional standards. Virtually all professions do it. Certainly, state bar exams and CPA exams have changed over the years; I’m guessing there’s probably a section on electronic copyright now which wasn’t on the Bar exams in the ’60s. Did they go back and make all the old lawyers retake the Bar? No, it just not pracatical.

But the more important point here is that all professional certification is taken on faith by the public. They don’t know how to tell if a lawyer, or CPA, or financial planner is qualified to work with the public: What education, or experience, or testing is the minimum. That’s why we put together boards of those professionals to come up with standards. And if a “test” is required, the public has no idea if it’s a mind bender or a cakewalk.

So the notion that any given CFP may or may not have passed is somehow misleading strikes me as silly. What a financial consumer knows is that the CFP Board has determined that each CFP as the knowledge and the skills and the ethics to practice as a professional in the best interest of the public. Which is the same trust they put in state Bars or CPA boards. To my mind, the more relevant question is whether professional financial planners truly believe that in its zeal for market share—and currently to become the financial planning regulator—the CFP Board has adopted high enough standards to truly protect the public. If there’s any fraud here, that’s where to look for it.

After 25 years as a financial journalist, I’ve received more than a few “responses” to my writing, such as the one recently posted on Investmentadvisor.com by the Financial Planning Coalition about my September Column: “The Dog That Didn’t Bark.”(http://www.investmentadvisor.com/Issues/2009/October%202009/Pages/The-Dog-That-Didnt-Bark.aspx)  Yet, I still must confess to being somewhat at loss when such responses start out critically, but then to confirm the very points with which they seemed to disagree so vehemently.

The Coalition’s response is a perfect example. It starts out stating that my column: “…provides an inaccurate and misleading review of the Financial Planning Coalition’s goals for reregulation of the financial services industry. As a result, the column is a dog that’s barking up the wrong tree.”

Yet, in addition to that nice turn of phrase with the “wrong tree” line, somewhat puzzlingly, the Coalition’s response goes on to emphasize the main points of my column. The first is that while announcing it’s “support” for a “fiduciary standard” for advisors (as has FINRA and SIFMA), it has taken no further steps spell out what might be entailed in such a duty nor to oppose the securities industry’s myriad and seductively misleading attempts to affect a vastly watered down version of the fiduciary standard in pending legislation and/or regulation. Combined with it’s implied acceptance of the CFP Board’s version of fiduciary duty—which includes the same advisors wearing multiple (fiduciary and non-fiduciary) hats and product lists limited by employers—in my mind, and that of many others, the Coalition’s position is pretty hard to distinguish from FINRA and SIFMA.

So, instead of joining the fiduciary fray—other than to say: “Oh, we’re for it”—the Coalition spends the majority of its efforts (and the content of it’s response) on attempts to shift the debate to the regulation of financial planning: “A bona fide fiduciary duty is a key component of the Coalition’s proposal for a national oversight board for financial planners… …Such criticism overlooks the unique role the Coalition plays – representing the leading financial planning organizations uniquely positioned to address consumer protection issues as they relate to the financial planning profession.”

Then, in what maybe the quintessential definition of character, the Coalition spells out its strategy for working within “the reality of today’s financial services regulation,” once again worthy of FINRA: “The [regulatory] gap is most glaring when it involves the delivery of broad-based financial advice—or financial planning—to the public. It is this gap we want to eliminate.”

Let’s get this straight: There are about 1,000,000 registered reps and insurance agents in the US, most of whom are salespeople who want their clients to think they are “advisors,” we have our first legitimate chance to fix this “confusion,” the securities industry is aligned behind a non-solution, and the “most glaring” problem we have is financial planning?? When they update Webster’s, they’ll undoubtedly put of picture of the Financial Planning Coalition under “group think.”