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Point/Counterpoint: Is the standard for CFP certification at the right level?

By Paul Rabenowitz, CFP, South Africa and Lovaii Navlakhi, CFP, India

Paul Rabenowitz, CFP, South Africa, says, “No, it should be higher!”

The FPSB website describes CFP professionals as ‘elite’ and ‘world-class’, but is this really the case?

A core factor in all research regarding what a profession is articulates a ‘body of knowledge’ as an important, if not vital component, and the testing of competence in this knowledge through examinations. The curriculum required for CFP certification is nothing if not very broad, from investments to tax to laws of succession.

To practice in any one of these fields as a specialist requires years of both education, training and experience.

How then can a CFP professional be regarded as elite or world-class when the curriculum requires a broad understanding and application of so many fields that is the multi-disciplinary field of financial planning?

At best the CFP designation is of a generalist nature, providing candidates with an overview of every aspect that relates to the financial planning components. It neither focuses on the development of legal theories through the common-law, nor does it provide the in-depth technical focus to allow candidates to manage a client’s portfolio or the tools to develop intricate cash flow strategies for clients.

So are CFP professionals experts in personal finance? In most, if not all fields, to be regarded as an expert one must have an educational level of at least a master’s degree. In most countries the CFP designation is benchmarked against an honour’s degree. Can we then say that a successful CFP professional possesses the full skills, abilities and knowledge to make them an expert? In this authors opinion it cannot. The standard for CFP certification should be much higher to reflect the complexity in regulatory, legal, economic and mathematical arenas that make up the current body of knowledge.

Compared to a typical insurance salesman, CFP certification certainly can be regarded as elite, but it falls far short when compared to the in-depth knowledge requirements of other professions.

Lovaii Navlakhi, CFP, India, says, “There is room for improvement.”:

Early on in my career, I often debated whether financial planning was an art or a science. There is a body of knowledge and understanding of finance on which this profession is based – and that’s the science; but the icing on the cake is how well you understand people and their relationship with money. So, it does seem obvious to the experienced planner, that financial planning is more an art than a science.

However, it is also a reality that your expertise of dealing with people and situations will come to no avail if you do not understand finance. The science is thus the bedrock on which this profession is based.

The examinations that are given to obtain the coveted CFP mark level the playing field and set a minimum common denominator for all planners, be it experienced or new. While we lament that there is a significant gap of knowledge between planners (that is bound to remain), we can be sure that the certification ensures everyone has that same minimum knowledge level. No CFP professional will question the role of inflation or life expectancy in retirement planning, though the numbers or assumptions may vary. Hence, our certification must aim for the basic bare minimum that all financial planners must adhere to.

So the limited point I am making here is that knowledge is what the certification covers; not skills and abilities. Skills and abilities can be developed through an internship program with an experienced financial planner and from planners sharing their experiences to progress the financial planning profession.

Don’t get me wrong. I certainly think there is room to enhance the certification standard. Every planner has a home country bias. However, true financial planning in my opinion encompasses asset allocation across country, currency and asset class (financial vs. physical) before touching the basic equity vs. fixed income level. If the certification standard can include understanding major economies, growth potential and currency movements, we would have moved one notch higher.


See Financial Planet’s Poll Results: Is the standard for CFP Certification at the right level?

3 comments to Point/Counterpoint: Is the standard for CFP certification at the right level?

  • Narendra N Kondajji

    The Board should have a strategy to provide desirable level of acceptance and financial viability to the profession. In our times, the exam was neither tough nor easy. It was more about the in-consistency. Should it be of high gate keeping kind (a la CFA) or match supply and demand (a la CA)? Honestly, I think, at present supply is more than the demand in our profession in India; and I fervently hope I am wrong in this.

    I will also be very happy to see more interaction between academia (does it exist in case of personal finance?) and financial planning practitioners in India.

    Earning CE points is also fairly an easy task and in the interest of the profession, it should be made a bit more stringent and diverse.

    I tend to agree with Paul that the curriculum at present is more of generalist variety. The Board should look at bringing in the next levels of specialization. Areas such as retirement planning, problems of increasing life expectancy, aging society are burning issues of the time and there is enough scope for specialization, both in certification and practice. Investment planning, like Lovaii’s suggestion also can be another area of specialization. There has to be also a big time orientation towards soft skills. At present, soft-skills are either self-learned or obtained from dubious sources.

  • In my opinion Financial planning changes in every aspect from person to person. It need more deep analysis of the person, his need, his goals, wants, savings apetite and capacities, risk taking apetite and capacities and many more factors. So CFP cariculum should give a person the basics of all the aspects and than a CFP certificants should sharpen their skill on experience and continues education. So I feel that the present standards fpr passing the CFP is o.k but continues education should be looked more seriously.

  • Having been a financial and businesspartner with John Bell Keeble, the father of Financial Planning, there are several timely observations to make.
    1. The present standard is not a professional standard in the sense that it actually facilitates fiduciary standing as its focus is on needs based considerations like educationand retirement not how skillful or adept the planner is in a professional capacity acting as a prudent expert.

    2. In order for professional standing to be achieved and fiduciary standing actualized, the CFP Standards Board must advance an expertt authenticated prudent investment process based on objective, non-negotiable fiduciary criteria statute, case law and regulatory opinion letters.

    3. Best practices or how well one acts in a fiduciary capacity is a different consideration that will determine skill.

    4. Most planning software is cmprised of a series of disjointed calculators with no overarching prudent process that would foster a fiduciary construct in which advisors can work that simplifies (by process) expert fiduciary status and makes its scalable.

    5. The planning trade associations are fearful of a high standard as it may exclude a large portion of itsmembership which works against professional standing.

    6. Individual advisors need access to the necessary expert enabling resources, yet there is no large scale institutionalized support for fiduciary standing.

    7. Is the CFP Standards Board willing to take on professional standing when it will certainly leave the majority of CFPs short of professional standing?
    Ideally, it would be a great accomplishment, but would be at odds with the FPA.


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