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March 05, 2014 at 04:29 AM
Back in the early 1980s, when I started covering financial planners, they didn’t get much respect on Wall Street. In fact, brokers often referred to the old International Association of Financial Planners (the forerunner of the FPA) as “the International Association of Failed Producers.” This week I had a deja vu moment back to that time as I was reading Joan Lappin’s Feb. 28 blog on Forbes.com: “A Stockbroker Should Not Be Able to Call Himself a Portfolio Manager or Investment Advisor.” A worthwhile sentiment to be sure, and had Ms. Lappin—a CFA and former portfolio manager herself—stuck to that topic I would be singing her praises.
Instead, she took SEC Chairwoman Mary Jo White’s comment last month—“We also will intensify our consideration of the question of the role and duties of investment advisors and broker-dealers, with the goal of enhancing investor protection,” as an opportunity to launch into an advertisement for CFAs and RIAs—which she is now—and a diatribe against those nasty certified financial planners.
Here’s the passage I found most troubling, for what I hope are obvious reasons: “If you see someone is a CFA, it means they are a chartered financial analyst. The vetting process to become a CFA is three years’ worth of all-day exams, much like your CPA endures to gain the certification. You may see ads on TV for CFPs. Those folks can be certified in as few as six months with no prior investment experience. They are better than somebody with no initials after their name but rest assured their training does not include financial statement analysis, extensive training in the ethics of proper behavior and always putting your clients’ interest first or the range of material a CFA is forced to master…”
I know. Six months? Really? Her description actually makes “failed producers” sound pretty good, doesn’t it?
The last time I checked, which was about an hour ago on the CFP Board’s website (I wanted to make sure I wasn’t having a senior moment), to become a CFP one must, among other things, complete: “a college-level program of study in personal financial planning, or an accepted equivalent” and “have three years of professional experience in the financial planning process, or two years of apprenticeship experience that meets additional requirements.”
Since these two requirements can overlap (taking courses while one is working), we’re still talking about three years, not “six months.”
Now I’m not saying that the CFA course work isn’t rigorous. Or that many CFAs aren’t probably better stock pickers, I mean financial analysts, than many CFPs (there are always exceptions). But Ms. Lappin seems to have overlooked the fact that CFPs have to know more about personal finance than just portfolio management. They have to show proficiency (and get continuing education) in insurance, taxes, retirement planning, estate planning, college planning and budgeting, to name a few disciplines.
