More On Legal & Compliancefrom The Advisor's Professional Library
- Use and Misuse of Social Media Social media is an inexpensive and effective way to communicate with established and prospective clients. Nevertheless, when RIAs utilize social media to promote their advisory practices, they risk compliance problems for their firms.
- Recent Changes in the Regulatory Landscape 2011 marked a major shift in the regulatory environment, as the SEC adopted rules for implementing the Dodd-Frank Act. Many changes to Investment Advisers Act were authorized by Title IV of the Dodd-Frank Act.
CFPs are debating whether the CFP Board’s recent news that it would be transitioning to computer-based exams and reducing their length and duration is the Board’s way of growing the number of CFP certificants.
Advisor, blogger, Twitterphile and ThinkAdvisor contributor Michael Kitces raised this question in a recent Nerd’s Eye View blog, asking bluntly why the Certified Financial Planner Board of Standards would chop the length of the exam by 40%, from 285 exam questions to only 170, and reduce the exam from a 10-hour, day-and-a-half exam into a 6-hour, single-day exam “if the goal wasn't to at least create the perception that the exam will be easier and therefore more appealing to take.”
The CFP Board noted in announcing that it was going to computer-based exams that the shortened exams would be “equally rigorous” to the longer paper ones, and that they would “maintain the same content detailed in CFP Board’s exam blueprint, representing the requisite knowledge and abilities to deliver financial planning services to clients.”
Michele Warholic, managing director for examinations, education and talent at CFP Board, told ThinkAdvisor that the Board is “not lowering our standards” by changing the length and duration of the exam.
“If someone wouldn’t be able to pass a 10-hour exam then they won’t be able to pass a 6-hour exam," Warholic said. "The exam isn’t any easier or more difficult. It covers the same content and those who take the computer-based exam — and pass — will be just as qualified as someone who took the paper exam.”
Thanks to technology, Warholic continued, “the world of testing has changed dramatically over the last decade,” and “computers help create efficiencies in testing.”
She explained that the CFP Board’s process in determining the number of questions on an exam “is not arbitrary.” Scoring of the CFP certification exam, she said, “is based upon a variety of science-based approaches used across the professional testing industry — not just a focus on the number of questions or length of an exam.”
The Board is “confident that those who pass the CFP certification examination will be well-qualified, competent CFP professionals once they become certified, meeting the same high standards we have always had,” Warholic added.
But a number of CFPs were quick to post comments on Kitces’ blog with their thoughts about the shift. One CFP opined that “it just seems to me that asking fewer questions, by its very nature, makes for a less rigorous and comprehensive exam and serves to dilute the qualifications of CFP practitioners in the name of increasing the numbers.” As a fairly recent CFP certificant, the commenter was “not amused by this change — not because I care that others after me will have a shorter exam but I truly feel it undermines the exclusivity and accomplishment of those who did it the way it’s been since 1991.”
Kitces told ThinkAdvisor that while the transition to computer-based testing is “definitely a plus overall … and if just having more convenient computer-based testing (CBT) with more testing locations grows the CFP headcount, that’s great.”
Said Kitces: “The feedback seems to be skewing negative, though there are certainly some who are supportive of the change — notably, especially those who haven’t taken the exam yet but plan to do so and are looking forward to the shorter one-day 6-hour version!”
Yet another CFP posted this comment to Kitces’ blog: “The test is now 35% fewer questions than the Series 7 with the same amount of allotted time to complete it. It’s definitely going to be easier, but the public isn't going to care one way or the other. Most don't even know what a CFP is, much less the fact that the bar to become one has been lowered dramatically.”
One CFP believes that the wirehouses are behind the changes. “Obviously Merrill Lynch and Morgan Stanley are behind this. They know this is the direction things are going but their guys can’t pass the 10-hour version of the exam.”
Then there was this comment from a CFP who believes the change is indeed a watering down of the CFP credential. “More and more I ‘sell’ my degree in financial planning and neglect to mention the CFP,” the advisor said. “This move [to modify exams] certainly does not help the way I view the exam and designation, which in my opinion barely scratched the surface of what one needs to know as an entry level planner--watering the exam down waters down the marks. I guess the Board is looking to expand revenue.”
Check out Top 3 Issues Advisors Will Face in 2014, Part 1: Robo-Advisors by Michael Kitces on ThinkAdvisor.