Investor Advocates Worry About NAPFA’s CFP Move
The National Association of Personal Financial Advisors (NAPFA) is making
big changes to its member rules. This month, the association, which previously
accepted members with a variety of different credentials, announced that
it will recognize only the Certified Financial Planner (CFP) credential
as of Jan. 1. Current NAPFA members who do not hold the CFP credential
will be grandfathered in and can keep their membership. New members, however,
will be required to possess the CFP credential, no matter how many other
credentials or designations they may hold.
This move raises some concerns for investor protection advocates, who feel
the CFP, while one of the industry’s more credible designations,
doesn’t hold its grantees to a high enough standard of conduct.
Kevin Keller, chief executive of the
Certified Financial Planner Board of Standards Inc., insists that CFP holders must always hold to a
fiduciary standard of care when doing financial planning. Right now, however, there are currently
more than 67,000 Certified Financial Planners in the United States, according
to InvestmentNews, and the credential can be earned by a variety of industry
professionals, including registered representatives and financial advisors
who sell insurance.
Each of these professionals may be subject to a different set of standards,
and the variety of financial professionals who hold the credential means
that some CFP holders hold to a lower standard of care (i.e. the "suitability
standard") for much of their activities.
Critics of the CFP credential say this difference in ethical standards
is a problem for investors and clients who expect any financial planner
to work in their best interests.
This difference in standards, like the often-misunderstooddifference between brokers and investment advisors, could be remedied by a universal fiduciary standard like the one recommended
by the SEC in Jan. 2011. Progress on such a standard, however, appears
to have stalled.
In the meantime, investors can protect themselves by making sure they understand
which ethical standard requirement their financial professional upholds,
and verifying the board requirements of any credential that professional
holds. (To learn
whether you should trust your advisor’s credentials or professional
designations, read this article.)
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