From the December 2006 issue of Investment Advisor • Subscribe!

December 1, 2006

Hope It Wasn't Something I Said

The CFP Board's chance to rethink its role in the planning profession

Columnists work in a rather bizarre environment. We periodically cast out our thoughts onto pages and the Internet and the airwaves in the hope that they might add to--even stimulate--the current conversation. Yet the impact of any particular column is small at best, and if noticeable at all, usually occurs long after the writing, and almost always in some unforeseen way.

So it's more than a little unsettling to raise questions about the actions of a leader in our little niche (in my September 2006 column), only to see them resign before the letters to the editor are done coming in. I'm not suggesting that anything I wrote caused Sarah Teslik to resign as CEO of the Certified Financial Planner Board of Standards. Far more weighty voices than mine were critical of her testimony before Congress and the Board's proposed changes to its ethical standards, both before and after my column hit the presses. But with the Board's traditional stonewall, party-line PR approach firmly in evidence, the financial planning community is left to speculate about such an abrupt departure at the top of what passes for its official regulatory body.

Somebody should suggest to whomever the Board turns for its PR advice that simply repeating a favorably spun sound bite (which politicians and governments employ to great effect) only works if the mantra you're chanting is at least plausible. The explanation that Apache Corp.--where Teslik has landed--had been trying to recruit her "for many years" doesn't tell us why she's accepting their overtures now rather than two years ago, when she took the Board position instead, does it?

Nor does the notion that in her two-year stint, she "accomplished what she set out to do," when that list comprises: 1) firing most of the staff and replacing them with what's rumored to be a small cadre of former cronies who have no experience with or affinity towards financial planning; 2) coming off like a loony in front of the United States Senate (and the follow up Nightline interview in primetime) by suggesting the widespread challenges of personal finance might be overcome through drugs and gambling; and 3) overseeing the proposal of new ethical standards that include allowing CFPs to choose their own level of client responsibility--which inexplicably resemble the ill-fated "CFP Lite" proposal--and which was met with a predictably similar grassroots outcry by CFPs across the country.

Not exactly a litany of deeds anybody would want on their resume. In fact, it's not a stretch to wonder if Teslik's leaving resulted from one or a combination of these "accomplishments." Chances are the real truth will be added to the long list of mysteries that fall into the black hole of the CFP Board. Which leaves us with only one question about the whole affair to which the prospects of getting an answer seem good: What will the Board do now?

Next Steps

The current party-line answer is that they've retained Don Tharpe as the interim CEO, who (we hear in an almost reverential tone) is a man of great experience in running associations. As if turning over a newly hired, inexperienced, skeleton staff to a guy with no knowledge or experience of financial planning is supposed to make CFPs feel warm and fuzzy. Given the Board's historic penchant for handling tough situations, that doesn't sound like a recipe for disaster, does it?

But that's only the short-term strategy (assuming the Board survives it). The bigger issue is what the Board will do for a long-term solution. I suppose the chances are they'll just end up hiring Don Tharpe, because once he's in the job, keeping him will be easier and cheaper than finding, attracting, and relocating someone with experience, stature, and passion for financial planning. But in the hope that the Board gets into one of its quirky moods and decides to look for someone who might actually help lead the profession of financial planning to attain the next level, here are a few modest suggestions (in addition to hiring back some staff who know what they are doing).

First, forget about hiring a CEO, at least until the Board has answered some fundamental questions about what it is and where it's going. If the Board truly has a competent administrator, and rehires people who know their business to point him in the right direction, there's no hurry to find a permanent replacement.

The problems faced by the CFP Board are far greater than who's running the show. They stem from outdated or poorly conceived strategies, not from a failure to execute. Even Jack Welsh himself (credited with building stodgy GE into a world-class conglomerate) couldn't help the Board until they better align their goals with the new realities of the advisory world. The emergence of a financial advisory profession--led by independent financial planners--is forcing everyone involved, from regulators to associations to planners themselves, to choose a side. Moreover, the Board's traditional strategy (or perhaps, non-strategy) of remaining "neutral" on the issue of professionalism is no longer viable.

The CFP credential was chosen by default by the planning profession: a professional needs a credential, and there wasn't any other reasonable alternative. But a credential is only one part of what it takes to make a profession. As today's professional planners are well aware, their competitive edge in helping the public sort out its finances includes their education, their knowledge, their compensation, their duty to their clients, and their independence, in addition to a professional credential. Perhaps the most important edge is making sure the public is well aware of where they stand--and where other types of "advisors" stand--on each of these issues.

A Clean, Well Lighted Place

To remain the purveyor of the credential of professional financial advisors, the CFP Board has to decide where it stands on each of these issues as well. No longer can the Board require CFPs to "put their clients' interests first," but allow them to be employees of firms that have no such duty (or even a conflicting duty; to shareholders, for instance). Or remain mute on the issue of compensation. Or sidestep the issue of independence.

If the Board can align its standards with those of profession, then despite its crucial missteps of late, the CFP might be able to hang on as the professional advisory credential. If they can't or won't (for some convoluted group-think rationalization), then the CFP will continue to lose traction, either becoming one of a number of acceptable credentials, or more likely, simply being replaced by a new credential with true professional standards. Point is, either a CFP "certificant" is a professional advisor or he isn't. If not, then having that credential is of no value to professional advisors who are trying to differentiate themselves from all the "non-professionals" in today's financial services industry.

Perhaps in the old days, before it was clear how this movement toward professionalism was going to work out, it might have been considered prudent for the Board to not take sides, and focus on credentialing everyone it could. It is ironic, however, that an organization that puts so much emphasis on its stated mission to protect the public can somehow delude itself into believing that promoting a profession of financial advice was not in the public's best interest; indeed, was not the first priority in assuring public protection.

It's time for the Board to reassert that mission, and affirm that the public can only be protected by truly professional financial advisors. Then the Board should come up with a set of standards that demonstrate that CFPs are in fact just such professionals. To do this, the Board needs to take a step back, and start to think about itself in a new way: To give up its current "What's-good-for-the-Board-is-good-for-everybody" thinking, and replace it with a broader view of where the Board fits into the advisory profession as a whole. That is, the Board needs to make a classic paradigm shift from a world view with itself at the center, to how it can best help the profession of financial planning.

It won't be easy: and it may not even be possible. But only after the Board wrestles with its own vision can it start to wrestle with finding someone to make it happen. To have any chance at all with professional advice and the public's best interest, the Board has to give up any notion that someone from outside the profession can do this for them. I'm not saying the CEO has to have a CFP, although that probably would be best. But the permanent head of the Board certainly has to have lengthy experience in the profession, knowledge of both the current players and their history, and most importantly, a passion for the profession of financial advice. Of course, that's what everyone thought about Sarah Teslik. But coming from too far outside, she would have been just too good to be true. Guess what? She was. This time, perhaps the Board will get its own house in order first, and only then hire someone who shares its vision, and has a genuine chance of achieving it.

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