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The Vindication of History: Harold Evensky and CFP Lite

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In assessing the long-term legacy of major figures in the advisory world, nobody has a better lens than Bob Clark, a former editor of Investment Advisor, a longtime columnist for the magazine and a regular blogger on ThinkAdvisor. I asked Bob to write a blog about Harold Evensky, the subject of the February 2013 Investment Advisor cover story.—Jamie Green

A former stockbroker, Harold Evensky became a financial planner in 1986, and in the intervening 28 years founded one of the profession’s pre-eminent fee-only firms (now called Evensky & Katz), served on the board of the IAFP (now the FPA), was chairman of the CFP Board, and through his books—including “Wealth Management,” published in 1996—and other writings and speeches, coined the name and defined the parameters of what today has become known as “wealth management.” In his spare time, together with his wife and partner, financial planner Deena Katz, Harold has worked to build the financial planning program at Texas Tech University to national prominence.   

Many veteran financial planners and observers of the profession also recall Harold as the leading advocate of the CFP Board’s “CFP Lite” program back in 1999. Concerned at the time over competition from brokerage firms, the Board, led by Evensky, announced a new “Associate CFP” designation, designed for brokers who were already doing financial planning for their clients. Compared to the 10-hour exam on 106 topics that full CFPs had to take (though the Board’s new electronic exam differs from the traditional test), Associate CFPs would only have to pass a four-hour exam on 25 topics. What’s more, the education programs for the CFP Lite exam were to be administered in-house at brokerage firms.

Faced with a backlash of opposition from rank-and-file CFPs, including 350 formal complaints, the Board withdrew the proposal for “further consideration,” later that same year. 

At the time, the concern of CFP Lite’s many critics—including this writer—was that brokers would use their “watered-down” Associate CFP designations to successfully compete with “real” certified financial planners for clients, who wouldn’t make the fine distinction of the differences.

Yet history is always the final arbiter, and with the benefit of 15 years worth of hindsight, I wonder if Harold—who has never wavered in his defense of the Associate CFP program—wasn’t right after all. 

I come to this conclusion after watching the CFP Board spend the past decade and a half wrestling with the conflicts of CFP brokers, culminating in shooting itself in both feet over the definition of “fee-only” last year.

The Board’s current difficulties stem from a seemingly new initiative aimed at boosting its regulatory bona fides by cracking down on CFPs who “misused” the term “fee-only,” based on its somewhat nebulous rules. The result was the forced resignations of the Board’s own chairman and two other board members, along with over-the-top sanctions of Jay and Kim Camarda and other CFPs—meanwhile looking the other way as hundreds of wirehouse brokers listed themselves as “fee-only” on the Board’s client referral site. 

To my mind, the Board’s current self-inflicted damage is the result of its current attempt to shoehorn the newly popular “fiduciary duty to clients” into its CFP ethical standards, while ignoring its longstanding failure to address the issue of how registered reps, who are legally obligated to “represent” their BDs, can also be CFPs, with an obligation to represent the best interests of their clients. The result are seemingly conflicted standards, a blind eye toward the realities of broker-client relationships and the schizophrenic application of its rules. 

This lens of hindsight puts Evensky’s CFP Lite proposal in a new perspective. Rather than denying brokers a new means of competing with professional CFPs, the result has been to give brokers the best of both worlds. They can become full CFPs, but due to the Board’s curious “two-hat” notion they only have to live up to its standards when they are actually doing financial planning. That means they are free to doff that cap when convenient, removing their obligation to act in that same client’s interest when implementing their financial plan.

An Alternate Reality 

How would things have been different under CFP Lite? Simple: brokers could have been given the lesser planning designation in recognition of both their lower education requirement and their inability to fulfill the fiduciary standard required of fee-only, RIA CFPs.

So rather than being befuddled by the current “two-hat” charade, clients could be easily made aware (again, by a CFP Board disclosure requirement), that Associate CFPs don’t have a fiduciary duty to put their interests first. 

This is exactly how other professions handle the issue of associates who do not meet their higher professional standards: They differentiate emergency medical techs and nurse practitioners from doctors; enrolled agents and bookkeepers from CPAs; paralegals from lawyers. These associates don’t diminish the related professions, because no one confuses these titles. In fact, the clear differences serve to enhance the stature of those professions.

If handled right, the CFP Lite designation could have had the same effect on the financial planning profession: highlighting the differences between CFPs and Associates, thereby raising the stature of professional CFPs. It’s been a long time coming, but history has shown that Mr. Evensky was probably right.