More On Legal & Compliancefrom The Advisor's Professional Library
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
Kevin Keller must be doing something right. He just celebrated his fifth year as CEO of the Certified Financial Planner (CFP) Board of Standards. When he took over, he was the seventh person in less than seven years to hold that position.
Maybe his staying power has something to do with the fact that he helped transfer the CFP Board from Denver to Washington five years ago this November. As he told me in a late July interview, the CFP Board “had no public policy infrastructure” until it moved its headquarters to Washington.
It’s been a crucial time for the CFP Board, as part of the Financial Planning Coalition, to be able to sit alongside other advisor trade groups before Congress to help fight against, for instance, House Financial Services Committee Chairman Spencer Bachus’ bill calling for a self-regulatory organization (SRO) for advisors—which looks to be on hold at least for the rest of this year—and to fight to make sure that a fiduciary standard for brokers sees the light of day (which has yet to happen). Commissioners at the Securities and Exchange Commission (SEC) are “still pretty tight-lipped” about when a fiduciary duty rule may emerge, Keller says.
The three groups that comprise the Coalition—the CFP Board, the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA)—“barely even spoke” before striking their accord, Keller says. But now, the CFP Board not only has a seat at the public policy table, Keller says, “but a loud, clear voice.”
The Coalition agrees with Chairman Bachus, R-Ala., that there is “really a serious problem” with the fact that, on average, an advisor is examined only once every 11 years, and Keller believes Bachus “did the right thing by shining the spotlight on the need for more advisor examinations.” Still, Keller says, “we’re pleased that he’s taking a step back, though, to look at more solutions to the problem.”
However, Bachus’ fight to have an SRO oversee advisors continues. He took to the op-ed page of The Wall Street Journal in early August to implore the investing public and “all interested parties” to join the debate concerning how to boost advisor exams. “I see no way to deter bad actors and to protect American investors without increased oversight,” Bachus wrote. “Who conducts those examinations and how is still open for debate, and I urge all interested parties, especially the investing public, to join this debate.” Bachus went on to write that “the risk of another [Bernie] Madoff scandal ought to be a sobering thought not only for Congress and the investing public, but for the investment adviser industry as well. It is in their best interest that we work together to reach consensus.”
Of course, the Coalition still believes that providing the SEC with the resources it needs “is the best solution to the [exam] problem,” Keller says. But finding a way to ensure advisors face more exam scrutiny—either through an SRO or via user fees paid to the SEC—will be a “long-term issue that we will have to deal with,” Keller says.
So why was there such a high turnover rate among CFP Board CEOs before he took the helm? Keller readily admits that there “was a great lack of trust between the other financial planning organizations, the certificant community and the organization, so I think that contributed to some of the turnover.”
Joining the Coalition has certainly helped boost that trust factor, but Keller says that during his time as CEO, he’s “worked very hard” himself, as well as with the board of directors, “to get a positive balance in the ‘trust bank’—that is, increasing the transparency around what we do, increasing the dialogue” in various forums the CFP Board holds throughout the year.
Since taking over as CEO, the number of CFP certificants has jumped from about 54,000 to almost 67,000 today—a 22% boost. Part of that boost has come from the Board’s $40 million public awareness campaign, which was launched last April. “We’re seeing awareness increasing,” Keller says, “and we have a third-party independent research firm that is tracking our brand. We’ve seen some preliminary results, but raising awareness is a long-term initiative.” While “we’re pleased with where we are currently,” Keller says, “the Board has committed to initially a four-year plan and has agreed at the end of two years—which would be next July—they will take a formal look at [the campaign] and make adjustments.”
One of the priorities that the Board set in July for the next five years is to continue to increase public awareness about the CFP designation, Keller says. “Without the public recognition of the value of financial planning, there really isn’t a future for the emerging profession of financial planning.”
Another five-year priority for the Board and the Coalition is to ensure financial planners are regulated—an effort that lost steam last January when the Government Accountability Office (GAO) told Congress that an additional layer of regulation specific to financial planners does not appear to be warranted. But Keller says the CFP Board still wants “to see those who call themselves financial planners be regulated.”
While there are nearly 67,000 CFPs, Keller says it “isn’t nearly enough to serve the public broadly.” But he points out that the CFP Board isn’t looking for “growth at any cost,” but “growth while we maintain our high standards.” Of the 150 credentials out there, CFP Board is “one of the very few that has an active enforcement process.”
Indeed, recently released research that the CFP Board conducted with the Aite Group bears out the merits of earning a CFP. The research found that advisors who carry the CFP designation not only add value to their firms, are more productive and provide a higher level of client satisfaction, but they also provide a boost to revenues.
And more colleges and universities—100 to be exact—offer an undergraduate degree in financial planning. “Now an 18-year-old student can earn a financial planning degree that will allow them to sit for CFP certification,” Keller says.