Several hallmarks distinguish a profession: prolonged or special training, a particular skill, a high level of education, and a formal qualification. By definition, professions are inherently separate from trades, industries, and businesses.
The financial services industry, where financial planning currently resides, includes a broad spectrum of companies and individuals who sell a variety of products, provide various services, and offer financial advice. Many planners feel that financial planning, as it relates to giving financial advice, needs to be elevated to a profession. Academia has also begun to offer undergraduate, graduate, and doctoral degrees in financial planning.
Professions such as medicine, law, and counseling require certifications from licensing boards before anyone can begin practicing. There is no such requirement for financial planners.
The closest thing is a certification which is something less than a formal qualification. It is a formal procedure by which an authorized organization assesses and verifies the qualification of an individual’s skills in accordance with established requirements or standards. Of several certifications for financial planning, the most recognized is the Certified Financial Planner (CFP®) designation from Certified Financial Planner Board of Standards, Inc.
As professional organizations grow and mature, they often tighten the requirements for membership and certification. This has been the case with major professions such as law, medicine, engineering, and mental health.
In contrast, the CFP Board recently reduced four of the qualifications to earn the CFP® certification:
1. In 2012 the Board modified its requirement for three years of financial planning experience to include a two-year apprenticeship option.
2. In 2014 the comprehensive exam was reduced from two days to one, a move seen by many CFP® practitioners as the first step to make obtaining the certification easier.
3. In June 2015 the Board eliminated the requirement for certain applicants to take a designated financial planning course before taking the CFP exam.
4. In June 2015 they broadened the definition of “financial planning experience.” Required experience previously included teaching financial planning or delivering financial plans to clients. The new definition includes what the CFP Board describes as “activities and responsibilities reflecting financial planning knowledge and competencies that indirectly support the financial planner and/or the financial planning process.”
As financial planner and writer Michael Kitces points out, under this definition “virtually any job in the entire financial services industry will now qualify as financial planning experience, including an employee benefits administrator, a compliance attorney, and even a journalist who simply writes about financial planning topics.”
The watered-down requirements are hard to comprehend if the CFP Board’s intent is for the CFP® certification to be the mark of the financial planning professional. If the goal is to help financial planning develop as a profession, the organization might tend to tighten the educational and experience requirements, not ease them. Instead, it appears that the goal of the CFP Board is to broaden the CFP® as the mark of the financial services industry.
The CFP Board has left it up to financial planners and academia to elevate financial planning to a profession. That will not happen anytime soon.
Until a formal qualification for financial planners develops, the public would do well to understand that a CFP® certification is only a mark of education. It does not guarantee that someone has financial planning experience, is competent, or has a fiduciary duty to the consumer. Potential clients still need to verify a CFP®’s qualifications the old-fashioned way: by asking a lot of questions.