Journal of Financial Planning; May 2014
Catherine M. Seeber, CFP®, is a principal and senior financial adviser at Wescott Financial Advisory Group with offices in Philadelphia, Pennsylvania, Boca Raton and Miami, Florida, and San Francisco, California.
One of Apple’s most famous ad campaigns, “There’s an app for that,” led to dozens of jokes and parodies. Whether you love or hate Apple, the company leaves fans gaga whenever it reveals a new gadget, app, or feature, making for excellent comedy. Those in search of a financial planner, no worries, “There’s a designation for that.”
By clouding the universe with an overabundance of certifications, we are making it more difficult to compare ourselves with other distinguished professionals, such as a J.D., CPA, or M.D. Why? Is it because financial planning is still in its infancy and we are still trying to figure out what we want to be when we grow up?
There are varying degrees of discrepancies and parallels among the many financial credentials when you examine the origins and history of their educational requirements, regulation, and membership organizations; and I don’t profess to be an expert in all of those distinguishing factors. What is troublesome is the vast array of certification options for financial advisers in comparison to other professions.
Over the next decade, more households will come to rely on the advice of a financial adviser. Who will they choose and why? We need to do a better job of gaining the respect and recognition of the consumer and media, and it’s not by way of tacking on additional letters after our names.
Distinguishing Factors
How are we different from a lawyer who specializes in bankruptcy, for example? As of 2012, the U.S. Bureau of Labor Statistics estimated there were approximately 759,800 practicing lawyers in the United States, compared to 223,400 personal financial advisers. There are several types of lawyers, and each discipline focuses on one specific field of law. It is possible to find attorneys who practice in several areas, but most prefer to concentrate on one.
The bureau classifies an adviser as one who gives financial advice to people by helping them with their investments, taxes, and insurance decisions. In comparison, financial analysts (253,000 in 2012, according to the bureau) provide guidance to businesses and individuals making investment decisions. They assess the performance of stocks, bonds, and other types of investments. The bureau states that although financial analysts and financial advisers gather information, analyze investments, and make investment recommendations, their job duties differ because of the types of services they provide.
The same holds true for a trial attorney versus an estate attorney, a tax accountant versus an auditor, and a pediatrician versus a cardiologist. What should we do, then, for the financial services industry?
We need to embrace, and the consumer needs to recognize, the CFP certification as the premier mark and consider the other designations as specialties and/or defining a niche. I would further argue that confusion and skepticism would decline if the consumer analyzed the process it takes to obtain the certification and the rigorous competency and ethical standards required to maintain the mark, compared to some other financial designations.
Not So Different from Other Professions
CPAs seem to have their own share of struggles, even after celebrating their 125th anniversary in 2012. Certified Public Accountant (CPA) is the statutory title of qualified accountants in the U.S. who have passed the Uniform CPA Examination and have earned the right through other additional state education and experience requirements to be considered “certified;” technically not considered a “designation.
Similar to the financial planning world, accountants have many specialties to consider—financial accountants, management accountants, government accountants, tax accountants, forensic accountants, and internal auditors, to name a few. As with the accountant, the kind of financial planner you will most likely be will depend on your interests, talents, temperament, and how much post-training you are willing to pursue.
We are also not so different from the medical profession. Generalists commonly consult specialists when confronted with situations unclear to them. Are financial planners able and willing to realize their limitations and share in each other’s advice appropriately?
Generalists and Specialists
We must embrace the fact that embodied within each of these professions are generalists and specialists. A specialist has an expertise in a certain field, such as a doctor who specializes in attention deficit hyperactivity disorder (ADHD). He or she has a tremendous amount of knowledge and education in that one area. A generalist has a broad range of knowledge and education in several areas, such as general practitioners and orthopedists (who specialize in muscular and skeletal issues). The general practitioner could be considered the CFP professional, and the orthopedist the Certified Divorce Financial Analyst®.
The “general practitioner” financial planner (sometimes referred to as a wealth adviser, life planner, financial adviser, etc., which further exasperates the issue; no one knows what to call themselves that is uniformly recognized by the consumer) has the more broad-ranging responsibility of planning your financial future, such as your retirement, insurance protection, and child’s education. Asset managers concentrate on overseeing your investments. There are far more financial planners than pure asset managers.
So why are there only a total of 69,440 CFP certificants as of February 2014? What designation, then, do the remaining 406,960 hold, if there are 223,400 personal financial advisers and 253,000 financial analysts?
As with most other professions, lawyers are segmented into specific disciplines that dictate their career paths. This is far from what the financial industry is doing. Some financial planning credentials, sorry to say, have been developed more for marketing a niche than an illustration of rigorous study.
For example, the accredited asset management specialist (AAMS) and chartered mutual fund counselor (CMFC) designations can certainly aid advisers in the investment selection and management process (and will also likely sound impressive to clients and prospects). However, the academic curriculum required for either certification barely scratches the surface of the material covered by either the CFA or the CFP curricula. The new wave of credentials that continue to evolve has compromised the validity of the CFP mark by requiring far less academic coursework and training than what is demanded by older, more established designations.
So why do we continue to add the string of letters to our names? Is it to validate our vast knowledge? A clear distinction exists between advancing your knowledge with specialties and using designations that have been created chiefly as “marketing” designations—for example, credentials that are geared toward advising senior citizens. These certifications aid in training advisers how to effectively market certain kinds of financial products and services to senior citizens. Therefore, a substantial portion of the training is geared toward exploring the mindset of the target market, and how that can be used to suggest they follow the newly credentialed adviser’s recommendations.
In no way am I suggesting that financial professionals who earn designations with less stringent requirements are dishonest or incompetent; it just means they have not received the same level of training and experience as others who have earned one or more of the older designations. Even the less-stringent designations can help advisers to better assist their clients, if only in specific capacities.
In terms of marketing, however, the uneducated public will have difficulty discerning between the services that a Certified Senior Advisor and a Certified Financial PlannerTM certificant are able to provide for them. This, of course, has fostered some resentment from advisers who have earned the certifications that are more difficult to obtain. Some are seeking legislation that would either restrict the influx of new designations or clearly label them as being lesser in scope.
The financial planning profession continues to evolve. This is especially true given the demand for an increase in financial service regulation. To date, it is still unclear what changes we can expect. However, if anything in the financial planning profession is certain, it is that we will continue to seek new and relevant ways to help others reach their life’s goals and objectives. We all must recognize a good planner has attributes far beyond credentialing.
Arguably, we have single-handedly built our own empire of alphabet excess. If we remain in this trajectory and refuse to stand behind one single designation—the CFP mark as the minimum standard for financial planning—we will continue to confuse ourselves, the public, and our stake in the future of financial planning: the next generation of advisers.