More On Legal & Compliancefrom The Advisor's Professional Library
- Using Solicitors to Attract Clients Rule 206(4)-3 under the Investment Advisors Act establishes requirements governing cash payments to solicitors. The rule permits payment of cash referral fees to individuals and companies recommending clients to an RIA, but requires four conditions are first satisfied.
- 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.
In the previous post in this series on the CFP Board’s proposal to offer continuing education itself, we closed with an exploration of how doing so would open the board to a serious conflict of interest. In the end, such a hopeless stream of conflicts raises an even more fundamental question . Given the obvious concerns expressed by planners who werer presented with this idea at the FPA Retreat and the NAPFA national conference, why is the CFP Board pursuing this path in the first place?
After all, it seems somewhat absurd that the CFP Board has been attempting to ramp up its own lobbying efforts in recent years regarding a fiduciary duty and eliminating conflicts of interest, and has also been arguing hard against having FINRA oversee RIAs in large part because of their conflicted regulatory history.. So why would the Board feel it's appropriate, as Board CEO Kevin Keller said, to be dismissive of the problems inherent in conflicts of interest to suit its own proposals?
Offering CFP CE credit directly to certificants would represent a significant threat to the value proposition and ultimately the membership base of the FPA and NAPFA. Implementing the proposal would also have the effect of making Financial Planning Coalition meetings a lot more uncomfortable and far less productive. That would be a drawback right now, given the potential progress from the Department of Labor's fiduciary efforts and the SEC's anticipated actions on Sections 913 and 914 of Dodd-Frank, both of which may require the Coalition to work hard, together, to address whatever proposals roll out in the coming months.
Yet perhaps, ultimately, that's the point. The CFP Board's proposal may not really be about just raising the quality of CFP CE (for which there are many alternative solutions as discussed in other writings I’ve done), but instead is about undermining the FPA and NAPFA. The ultimate goal of the CFP Board might be not just to be the grantor of the CFP certification, but also to be a membership association for CFP certificants as well.
Technically speaking, the CFP Board is a 501(c)(3) organization with a public-purpose charter, while the FPA and NAPFA are structured as 501(c)(6) membership organizations, and the path for a 501(c)(3) to become—or add—a (c)(6) organization is messy to say the least, and would take some creative legal wrangling.
Nonetheless, the reality is that a single, consolidated organization that both grants the certification and serves as the membership association is not unheard of. Many "CFP Board" entities in other countries have both sides rolled into a single organization, and even within the U.S. other respected organizations like the CFA Institute and IMCA have managed to serve as both the credentialing and de facto membership organization at the same time.
Arguably, in a world where FPA and NAPFA combined only serve about 25% of all CFP certificants, as NAPFA still has a relatively small base and the FPA's market share of CFP certificants has declined precipitously in the past decade, there is an unmet need for a focused membership association for CFP certificants, and frankly the CFP Board's CEO and Board of Directors would be remiss in their duties if they weren't at least discussing the possibility.
As I've stated many times in recent years, the FPA's long refusal to embrace CFP-centricity has been leaving the door open to a competitor (existing or new) to rise and meet the need instead, as there are simply too many CFP certificants unaffiliated to a membership association to let such a business opportunity to pass by. Arguably, FPA's recent shift to focus more directly on CFP certificants, with their renewal of the "One Profession, One Designation" tagline, is an attempt to finally rise up and meet this need, and NAPFA is continuing its growth efforts as well, but the CFP Board's apparent strategic shift means the pressure is now on both organizations to demonstrate that their changes and growth efforts aren't too little too late. Time will tell.
Nonetheless, the bottom line is that the CFP Board's proposal is not just about improving the quality of continuing education, something that absolutely does need to happen, and which I have long supported . Reading between the lines, the proposal also signals a strategic shift that the Board may be eyeing a future offering of a membership association as well, if FPA and NAPFA can't step up to fill the current void.
If the CFP Board is really serious about "just" improving the quality of CE credit, there are many paths available, including an increased focus on speakers and the evaluations of presenters and their sessions (as discussed in the second post in this series), and it can easily back away from its conflicted and poorly supported proposal and take one of these alternate routes instead in the coming months.
On the other hand, if the reality is that the CFP Board is angling for a future role as a membership association, expect to hear another version of this conflicted proposal floated in a more substantive form later this year. Once again, time will tell.
(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.)