Financial Dashboard Online Vault
Financial Alternatives

Financial Alternatives News and Insights

Integrated Wealth Management

What is the value of the CFP® mark and why is it important?

An article in yesterday’s Wall Street Journal calls into question the value of the CFP® certification and other credentials through the eyes of investment advisors and wealth managers. Since the Certified Financial Planner Board of Standards has stepped up enforcement of its rules over the past year, it’s easy to find critics in the advisor community. In short, they were catching advisors claiming to work on a "fee-only" basis who were actually receiving commissions and fees.

No Substitute for Experience

In the article, some advisors said their work experience trumps professional certifications and continuing-education. Professional education and experience actually work hand-in-hand. A solid foundation in core principles helps professionals connect theory with reality for the benefit of their clients.

The framers of the CFP® mark recognized this many years ago – that is why they require certificate holders to have at least 3 years of relevant work experience. Plus, they must complete 30 hours of continuing education every 2 years.

An Essential Credential

Later in the article, a consultant remarks that certifications are not essential. A well-respected certification can be a critical differentiator. It also can help prospective clients identify those who are capable of meeting their needs. You wouldn’t hire a plumber when you have car trouble – and you might second guess tax planning advice from an insurance broker unless they had a designation like the CFP®. Certificants are educated and tested on a wide range of topics including:

  • General Principles of Financial Planning
  • Insurance Planning
  • Investment Planning
  • Income Tax Planning
  • Retirement Planning
  • Estate Planning
  • Interpersonal Communication
  • Professional Conduct and Fiduciary Responsibility

Standards of Conduct and Ethics

If every advisor is providing a different service, how can you compare them and hold them accountable to their work? Today, anybody can hold themselves out as a wealth manager or financial planner without any kind of credential required.

While I don’t think there is any substitute for strong regulation by the SEC and other government organizations, the CFP Board has gone further than many other organizations in setting high standards, working hard to be transparent, and keeping certificate holders accountable. In 2008 for example, the board replaced a lower standard of 'reasonable and professional judgment' with a fiduciary standard - and it is this higher, fiduciary standard that our firm was founded on.