Is that an eye chart or a business card? It's a fair question to ask many financial advisors. Faced with a full hand of acronyms to describe their various certifications and designations, brokers are showing them off — in e-mails, resumes, nameplates, and, yes, business cards. The displays are meant to impress, but increasingly they just confuse. For this reason, the notion of a universal designation — akin to the CPA in the accounting profession — is gaining momentum.
The movement got a helping hand in November when the Financial Planning Association, seizing an opportunity to force the issue, voted to differentiate between its members who hold a CFP designation and those who do not. “We felt that we needed a single mark of competency for financial planners,” says FPA president David Yeske. “If you had to pick one, it would be the CFP.” Currently 18,000 of the FPA's 29,000 members hold CFPs.
As part of the FPA edict, members who have CFPs are labeled “financial planning members,” and those who don't are simply “members.” The latter label disqualifies a member from various FPA activities, including working in the “financial planning division.”
That has angered some who hold other designations. Fairfax, Va.-based Ric Edelman, founder of Edelman Financial Services, a member of Royal Alliance and author of various financial planning books, resigned from the FPA in January in protest. Edelman holds many designations — CFS, RFC, CMFC, CRC — but the CFP isn't one of them.
“[The FPA] seems to be saying that if you're not a CFP, you're not a financial planner,” Edelman says. “To argue that one designation covers all that financial planners do trivializes the whole business.”
The timing of the FPA policy coincides with an approving nod to CFP from major brokerage firms and wirehouses. Merrill Lynch, Morgan Stanley and A.G. Edwards, among others, have augmented their training curriculum to include the information required to pass the CFP exam. Adding momentum to the CFP acceptance is the promotional efforts from the CFP Board of Standards.
But for all this, CFP holds only a slim numerical advantage over the second-place designation, ChFC (Chartered Financial Consultant). About 40,000 brokers and planners currently hold CFPs, while 37,000 are ChFCs. Because of an overlap in course curriculum, a financial adviser with a ChFC can automatically sit for the CFP. One point of difference between the two: ChFC coursework includes a little more insurance topics.
Edelman concedes that in an ideal world, one designation would cover everything. But in the absence of such a super designation, he remains unconvinced that CFP should be crowned the chosen one. “It's presumptuous to try to choose one, any one,” he says.
Others are echoing Edelman's sentiments. The industry sees the need for a straightforward way to communicate whether a planner is qualified. But, “I can't see it ever truly happening,” says Richard Joiner, a partner at Ernst & Young.
Joiner holds a variety of classifications, including the CFP, and says each one “means something a little different. To me, I think it's good to get as many [classifications] as possible, if only because it shows a commitment to education.”
“But a designation is only one thing you use to evaluate a planner,” Joiner added.