More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
If the CFP Board's goal in proposing to offer CE credit itself is to improve continuing education credit, there are many strategies available. Perhaps the most important is simply to recognize that ultimately, the quality of continuing education lies not in the slides that a presenter at a planners’ conference uses, but in the presenting speaker himself.
That means that the CFP Board needs to do more to scrutinize who is delivering the CE credit in the first place. To oversee educational presentations without scrutinizing the educator is like overseeing financial planning by ignoring the financial planners and just reviewing their written financial plans; in both cases, the reality is that even good materials are useless in the hands of an untrained and inexperienced planner or educator, while the best in both categories may rely little on their written materials if at all while delivering a quality experience.
To improve CFP continuing education, then, the key step is for the CFP Board to shift from merely reviewing presentations and content, to reviewing the presenters of the information.
For instance, many state insurance departments require that the speaker have a graduate degree in the subject matter (or some comparable advanced designation or certification), or five+ years of experience before being approved as an educator. By contrast, the CFP Board has no apparent speaker requirements whatsoever. In addition, the CFP Board could require that when event organizers submit names for CFP CE credit after a presentation is delivered, the organization must also submit the evaluation results of the speaker regarding his/her topic, expertise, presentation skills, supporting materials, and whether the speaker was objective and avoided selling financial products.
Consistently low scores, or a consistently high comment rate from attendees that the speaker was selling his/her products, could result in a "three strikes and you're out" policy where persistently bad speakers or sponsoring organizations would ultimately be denied offering CE credit altogether. I suspect major financial services firms would be far more likely to oversee for themselves who they put up on the podium if there was a risk that inappropriate wholesaler sales-pitch presentations could get the organization barred from delivering CE credit!
Reviewing speakers after their sessions and gathering the results of evaluation forms could also be fed into a central "Speaker's Clearinghouse" maintained by the CFP Board, allowing conference organizers to search the database to screen presenters based on their scores, or to identify top educators to contact for their own upcoming events. This would allow the best CE providers to naturally rise to the top, the low quality to decline into obscurity, and ensure that problematic speakers who deliver sales-pitches-in-lieu-of-presentations can't just keep hopping from one organization to another delivering poor content that fails to deliver value to attendees and sours certificants on the benefits of quality continuing education.
An Unmanageable Conflict Of Interest
Given the avenues available to improve the quality of CFP continuing education by improving the oversight of speakers and the results/outcomes of presentations, it's hard to see why the CFP Board's "potential" proposal to begin offering CFP CE credit directly to certificants is an appropriate course of action. Althoughthe organization's willingness to at least broach the conversation and look before it leaps is commendable and consistent with Keller's leadership in recent years, the prospective conflict of interest for this initiative is quite significant. After all, continuing education sponsors operate at the sole discretion of the CFP Board, which has the unilateral right to approve, control, or revoke the sponsor's status, and approve or deny any/every presentation the sponsor submits.
In other words, the CFP Board functions as the sole regulator for its CE sponsors. Will the CFP Board really be able to consistently review, consider, and approve or deny "outside" presentations in the same objective manner as its own "inside" presentations? That's kind of like the SEC announcing that it's going to roll out its own direct-to-consumer RIA to provide ongoing investment advice to the public, and "promising" that it will oversee and maintain compliance for its internal RIA in the same manner as everyone else. Does anyone really think the SEC's audit of its own RIA will consistently remain the same as its external audits?
It's hard to see how a path like this won't eventually stray from the ideal, whether for the SEC or the CFP Board. And of course, if the CFP Board is going to oversee its own content, speakers, and results, then it will have to roll out a feedback program anyway... in which case, it may as well do so for all CE providers!
In addition, the reality is that the conflict of interest goes far deeper than just the oversight of content and CE credit. The CFP Board charges hard dollars to outside CE sponsors to maintain their status as a CE provider, and applies further charges to each and every hour of CE credit the organization wants to approve. This represents a cost to "outside" CE sponsors—not to mention the time, hassle and stress that event organizers must deal with to complete the process—that the CFP Board would not have to bear for its "internal" CE offering. Put another way, not only would the CFP Board be competing with those its oversees, but there's a remarkably uneven financial playing field for the competition.
The conflict gets even worse when it comes time to market a CFP CE offering, which every one of the current 1,250 CE sponsors must do by spending real dollars on advertising or other marketing strategies. In fact, if a CE sponsor wants to send a mailing to CFP certificants, it must pay the CFP Board thousands of dollars for the "privilege" of just doing one printed postcard mailing to those who might need CE credit!
By contrast, a CE program offered directly by the CFP Board faces no such costs; it already owns the mailing list for all CFP certificants, since it is the organizationthat issues their certification. It would therefore face zero costs to send out as many solicitations for its own programs as it wishes, even while it requires significant charges for any/every other CE sponsor to do the same.
How long would it be before the CFP Board started steering people away from its 1,250 CE sponsors and including its own CE offerings when it sends out reminders that a certificant’s renewal is due soon and he/she still needs a few more CE credits, exacerbating the conflict of interest even further?
While CFP Board CEO Kevin Keller was on record at NAPFA being dismissive of these conflicts, stating that "everybody has conflicts" advisors don't appear to be so sanguine; an impromptu poll of the audience at FPA Retreat regarding the CFP Board's proposal yielded 99% of advisors opposing, with the hand of only one, lone individual supporting the idea. As good advisors know, when the playing field is uneven and rife with conflicts, it creates an environment where the good providers struggle to gain market share, while the bad providers continue to abuse the system. That scenario is not exactly an appealing educational ecosystem for the future of financial planning. It would mean that if the CFP Board goes into competition with its CE sponsors that the Board could wind up being the only CE provider in the future!
(Disclosure: Kitces.com offers CFP CE credit for its publication The Kitces Report and is a registered Continuing Education Sponsor with the CFP Board. In addition, Michael Kitces is a regular speaker at numerous continuing education events organized by other third-party Continuing Education Sponsors registered with the CFP Board and offering CFP CE credit.)