'Category-killer' is in the eviable position of controlling a mark that many advisors think is essential

April 14, 2011 — 1:14 PM UTC by Elizabeth MacBride


Elizabeth’s note: The CFP Board is unveiling is unveiling its public awareness campaign today (Thursday, April 14). It’s one of the largest campaigns of its kind, aimed at explaining the value of the certification to the public. Some in the industry see the campaign’s potential for having a broader impact, if it helps people ask tough questions of ethically conflicted advisors. I’ll be watching the unveiling early this afternoon and will (have now written) write a story (See: In a world of Schwab and Merrill, can the CFP Board use $36 million of ads to make planning sexy? ) about the content of the ads this afternoon. In the meantime, we are reposting the story from last fall that gives some insight into the CFP Board’s reasoning.

Some clear winners emerged from last year’s Dodd-Frank financial reform legislation. One collective winner: state regulators, who will oversee all RIAs with assets of $100 million or less. See: Deadline for state registration may have shifted; SEC’s Robert Plaze offers clarity.

Another, less-recognized winner is the CFP Board of Standards, which today announced that it is launching a $36 million initiative to educate consumers and raise the profile of the CFP mark. In part to pay for the campaign, it is increasing fees on its certificants to $325 a year, compared with $360 every two years. The increase goes into effect in July.

The public awareness campaign is only one element of the organization’s move to take an increasingly prominent role in the profession – one that some observers say may end with the CFP Board as the self-regulatory organization for financial planners. CEO Kevin Keller says that is not where in the organization’s plans lie.

“We would want to play an influential role,” he said. “We do not want to be that regulator. Our role is setting standards, and our role is most appropriate as it is.”

Whatever the future holds, CFP’s prospects are clearly on the rise. The organization came out of the recession and the legislative upheaval that followed it with new political stature and a business model that looks immune to downturns.

Even as revenues and assets under management were dropping, advisors saw enough value in the CFP mark to pony up the $360 every two years. the CFP Board’s membership grew from 54,000 four years ago to 62,000 today.

“They won the branding contest” among the alphabet soup of certifications, says Timothy Welsh, president of Nexus Strategy LLC of Larkspur, Calif. “It’s a category killer.”

That victory puts the organization in the enviable position of controlling a mark that many advisors feel it’s essential to have.

After years of public missteps from the early 2000s, during which the executive chair seemed to be endlessly revolving, observers says the CFP Board’s Keller, has brought a sense of stability and energy to the organization.

He took the job in May 2007 with a mandate from the board of directors to build up the organization and move it from Denver, Colo., to Washington, D.C. At the time, he was the seventh person in less than seven years to occupy the seat.

Fast growth

Under Keller, the organization has grown from four to a staff of more than 70, with about a dozen in the enforcement division. At any given time, about 400 certificants are under investigation. The vast majority result in no action, but every year the CFP Board “names and shames” a handful of people who don’t live up to its standards.

The CFP Board also built a public policy division under Marilyn Mohrman-Gillis and emerged onto the lobbying scene as a member of the Financial Planning Coalition.

The group has turned into the deep pockets among the financial planning organizations.

The organization has an annual budget of about $14 million, reserves of $28 million and a very nice office on K Street, the heart of Washington’s lobbying district. The organization’s board Friday approved a fee increase of $12 a month, which would amount to a revenue increase of $9 million a year for the organization.

The CFP Board has some critics, including the prominent advisor Ric Edelman, who publicly quit the Financial Planning Association when that group endorsed the CFP mark as a sign of quality. Edelman doesn’t hold a CFP, though many of the planners who work for him do.

“I do not believe the board, despite its name, properly sets the right standards for our profession,” he says. “It is little more than a self-serving entity operating under the guise of serving the public interest. The interests it actually serves are merely those of itself and its members.”

The CFP is a nonprofit that is supposed to serve the public’s best interest – and indeed faces limits on the lobbying it can do as a non-profit, versus a membership organization.

Keller’s tenure, though considerably smoother than those of several of his predecessors, (one of whom came under fire for proposing a lottery to fund the retirement system) has not been unmarked by controversy. Under the direction of the board of directors, he shifted the organization’s ethics commission, which decides whether to bring charges against a CFP holder, more under his control. That resulted in a majority of the commission resigning. The controversy made it into the Wall Street Journal.

Turning point

The CFP Board’s decision to take a hard stand on the fiduciary standard in 2008 is paying off now. The CFP Board added the requirement that CFP holders “at all times place the interest of the client ahead of his or her own” to its code of ethics.

The group lost some holders of the mark, including those who worked for State Farm Insurance. Keller said the CFP Board still has a task force that stays in contact with State Farm, as it tries to come to a resolution that would allow the company to give its insurance brokers the go-ahead to put the mark back on their business cards.

It is also not uncommon to hear questions about how realistic it is for brokers who hold a CFP but whose organization only holds them to a suitability standard to abide by a fiduciary standard. About 48% of the groups’ certificants work for 50 large companies, according to spokesman Dan Drummond.

But “I fail to see any downside for the profession and the public,” said Dan Moisand, principal of Central, Fla.-based Moisand Fitzpatrick Tamayo. “There are practical reason that might make it confusing and complicated for (brokers and insurance agents). But, so what?”

A former chairman of the FPA, he gives the CFP Board credit for sticking to its guns on the question of the fiduciary standard.

In retrospect, that move, though controversial at the time, proved fortuitious on the business front, too. The fiduciary standard unexpectedly became a fairly prominent part of the financial reform debate. Now that it seems fairly likely the SEC will impose some form of fiduciary standard on brokers, more Wall Street firms are reimbursing their advisors for CFP training to prepare.

The new ad campaign is likely to increase the CFP board’s clout still further. Aimed at a core segment of the mass affluent, its goal is to deliver the message that a certified financial planner professional focuses on comprehensive planning that’s in your best interest. Two keys to the message: the focus on planning vs. selling and the focus on ethics, including the client-first standard.

Campaign first, from reserves

The idea is to fund the campaign first, from reserves, before putting new money into the project.

According to the CFP Board, 94% of certificants said greater public awareness was needed.

Moisand, for one, says he is lukewarm on the idea, because he thinks it’s unlikely a campaign would be “highly impactful.” But he gives the CFP Board’s leadership kudos for the way they’ve presented it to certificants.

“I see more openness and transparency,” he said.

Article was updated at noon EST on Friday, Nov. 12, to report that the CFP Board of Standards board approved the public awareness campaign.

Mentioned in this article:

Financial Planning Association
Top Executive: Lauren S. Schadle, CAE, Executive Director and CEO

Nexus Strategy
Consulting Firm
Top Executive: Timothy D. Welsh

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