The National Association of Personal Financial Advisors announced Tuesday that as of Jan. 1, NAPFA would only accept the certified financial planner (CFP) designation for people who applied to be NAPFA-registered financial advisors.
According to the nationwide organization for fee-only financial planners, NAPFA made its decision to help consumers sort through the alphabet soup of designations that may mean something to professionals in the industry but only leave the public confused.
Consumers have a hard time wading through the sea of financial designations that indicate widely varying qualifications, and the CFP is the mark that best represents financial planning professional standards, similar to a JD or a CPA, NAPFA said in its announcement. Unlike the professions of law and accounting, however, the field of financial planning does not yet have a broadly accepted definition of superior quality.
“NAPFA’s decision to support the broader recognition of a single, defining designation for the financial planning community just makes sense. Less confusion means more consumer confidence, and the CFP designation hits the mark as a strong, baseline standard,” NAPFA Chair Lauren Locker, who is herself a CFP, said in a statement.
The NAPFA board made its decision after a two-week open comment period where current members and affiliates were asked for their input, and the board reported that the responses were “overwhelmingly in favor” of supporting the CFP designation as the baseline educational standard for membership. NAPFA members who don't currently hold a CFP designation can maintain their status.
Since its founding in 1983, there have been different credentials that have qualified an advisor for membership in NAPFA. Currently, about 85% of the group's 2,400 members are CFP certificants, or CFP certificants who hold additional marks, according to Karen Nystrom, NAPFA's staff member in charge of public policy and advocacy. Until Dec. 31, the Specialized Education Requirement may be met by passing either the Certified Financial Planner exam or the post 2010 CPA/PFS exam, Nystrom said in an email.
Michael Kitces (left), a CFP and industry pundit, said Tuesday’s announcement is notable for the progress it represents among financial advisors.
“NAPFA has always been at the forefront of pushing forth standards for the profession, which they’re doing once again here,” Kitces, who is not a NAPFA member, said in a phone interview with AdvisorOne. Two months ago, he added, the Financial Planning Association (FPA) said it would focus on CFP certificate holders as the primary members to which they will deliver value.
In an October blog post on his website titled “One Profession, One [Minimum] Designation,” Kitces, who also blogs for AdvisorOne, discussed the FPA’s announcement, saying that financial planners who advocate for the CFP to be recognized as the one true designation recall the famous "One Profession, One Designation" refrain first uttered by financial planning luminary P. Kemp Fain nearly 25 years ago.
NAPFA has collaborated in the past with the CFP Board on industry issues, including the fiduciary standard. The CFP Board was itself a subject earlier this autumn, when Alan Goldfarb, chair of the CFP Board’s board of directors, resigned along with two members of the Board’s Disciplinary and Ethics Commission, after the Board “found sufficient merit” in allegations made against them of failing to meet standards of professional conduct.
CFP controversy aside, Kevin Keller, CFP Board’s CEO, said the Certified Financial Planner Board of Standards applauds NAPFA’s decision to make CFP certification a requirement of membership.
“NAPFA has been a strong strategic partner with CFP Board in advocating policies in support of competent and ethical financial planning,” Keller said in a statement. “NAPFA’s endorsement of the CFP certification as the standard for financial planning will provide consumers with a clear, strong and unified message.”
Check out these stories related to CE and designations at AdvisorOne: