CFP Board Responds to The Wall Street Journal

Certified Financial Planner Board of Standards, Inc. released this response to The Wall Street Journal’s recent article about the enforcement of its certification.

We appreciate The Wall Street Journal’s detailed analysis. We are addressing the issues raised in the article and will continue to look for ways to improve.

CFP Board’s mission is to benefit the public by granting and upholding the CFP® certification, which we currently grant to nearly 85,000 CFP® professionals in the United States. Our CFP® professionals have met rigorous competency standards including college-level education, a comprehensive examination, and practical experience in providing financial planning to clients. To become certified, they must pass a background check and agree to comply with CFP Board’s standards for ethics and continuing competency.

Our ethical standards and their enforcement processes give value and meaning to CFP® certification, making it the preeminent financial services certification for advisors, their firms, and the public.

The existing CFP Board standards as well as the forthcoming Code of Ethics and Standards of Conduct (effective October 1, 2019) serve as a foundation for CFP® certification. Effective with the new Code and Standards, CFP® professionals commit to providing fiduciary-level financial advice to clients. This raises the bar not only for CFP® certification but also for financial planning and financial advice. Most importantly, it provides the public with the confidence that their CFP® professional is trained, tested and committed to doing what’s right for them.

The Wall Street Journal’s article evaluating CFP Board’s disclosure and enforcement standards, among other things, compares CFP Board to a self-regulatory organization. While the article raises important issues, it overlooks critical differences between CFP Board and regulatory organizations.

1. CFP Board Continuously Improves Our Processes for the Benefit of the Public

We are continually looking to improve our processes in support of our mission to benefit the public. Our new Code and Standards, along with our new Procedural Rules to be released shortly, will address some of the areas The Wall Street Journal article noted as a cause for concern.

We now review BrokerCheck or IAPD when a CFP® professional renews his or her certification. We have also made adjustments to the “Verify” section of LetsMakeaPlan.org so that the site now points consumers to BrokerCheck and IAPD for more information. We will continue to evaluate what, if any, additional information should be included on the site.

2. CFP Board Will No Longer Rely on Self-Disclosure

CFP Board, in the past, relied on CFP® professionals to fully disclose disciplinary matters and other conduct that may be a violation of our standards. Moreover, CFP® professionals may be disciplined for making false or misleading statements to CFP Board. CFP® certificants and candidates for CFP® certification are required to disclose all bankruptcies to CFP Board.  CFP Board has expanded the scope of its background checks of CFP® professionals to include a review of BrokerCheck or IAPD during the certification renewal process.

3. CFP Board Vets Candidates for Certification

Someone seeking to become certified is vetted based on their ethics and competency in financial planning.

CFP Board’s competency standards are rigorous education, experience, and exam requirements. Candidates must earn at least 18 college-level credit hours of specific financial planning coursework at a regionally accredited institution or equivalent, hold a bachelor’s degree or higher, and complete thousands of hours of relevant experience. They must also pass the CFP® certification examination, for which most candidates take two-plus years to prepare; only 61.5% of those who sat for the most recent exam passed.

When it comes to ethics, we start with a background check. CFP Board has conducted an average of 6,900 background checks of individuals each year for the past three years. As part of this, CFP Board checks BrokerCheck or the Investment Adviser Public Disclosure Database (IAPD). We also conduct a background check for criminal matters, civil litigation, liens and judgments, and bankruptcies.

In the past, CFP Board has relied heavily on self-disclosure, complaints from either clients or other CFP® professionals, and news scans. Every two years, CFP® professionals are required to make disclosures when renewing their certification. Effective immediately, we are reviewing BrokerCheck and IADP for existing CFP® professionals. We continue to monitor and follow up on regulatory actions by the federal government and self-regulatory agencies if CFP® professionals are named.

4. CFP Board Is Different Than a Government Agency or Self-Regulatory Organization (SRO)

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA offers regulatory oversight over all securities firms and their registered representatives that do business with the public. FINRA has approximately 3,400 employees and more than 20 offices nationwide.  FINRA’s 2019 budget is more than $1 billion. FINRA has the authority to obtain documents and information from anyone under its jurisdiction, including member firms and the individuals who work as registered representatives of the firms. FINRA also has access to customer information.

In contrast, CFP Board is a private 501(c)(3) certifying and standards-setting organization that administers the CERTIFIED FINANCIAL PLANNER^TM certification program.  CFP Board has approximately 70 employees and one office.  CFP Board’s operating budget, exclusive of funding for its Public Awareness Campaign, is approximately $30 million. CFP Board does not have subpoena power or the authority to obtain documents and information from financial services firms. CFP Board’s authority is solely over the CFP® professional, and CFP Board generally does not have access to customer information.

CFP Board, as a private certifying body, has an enforcement program and benefits the public by investigating complaints, determining whether the individual under investigation has violated its certification standards, and in some circumstances, imposing public discipline.

With limited resources and authority, CFP Board has publicly posted disciplinary matters and taken enforcement actions against more than a thousand CFP® professionals in its 30-plus year history. Among nearly 200 financial services certifications and designations FINRA has identified in the United States, we are not aware of any other certification or designation that has the same level of enforcement efforts.

There is a fundamental difference between our approach and that of FINRA, to which we are directly compared to by The Wall Street Journal. While FINRA discloses allegations on BrokerCheck, CFP Board does not impose discipline based on allegations. We intend for our process to be both fair to CFP® professionals and credible to the public. We only publicize discipline where our Disciplinary and Ethics Commission (DEC) – composed of CFP® professionals and members of the public – finds public discipline is warranted. BrokerCheck includes allegations that have not led to a finding of wrongdoing.

5. CFP Board’s Bankruptcy Disclosure Process Differs from FINRA

In 2012, CFP Board established a Bankruptcy Disclosure Procedure for CFP® professionals who have filed for bankruptcy within the previous five years, and who are not otherwise under investigation by CFP Board for any other conduct (“bankruptcy-only cases”). Under the Procedure, CFP Board verifies the bankruptcy filing by checking publicly available court records, then notes the bankruptcy filing on the CFP® professional’s public profile for 10 years. CFP Board also periodically issues a news release identifying these CFP® professionals. CFP Board’s policy is to publish the bankruptcies that are disclosed pursuant to that process. Multiple bankruptcies are adjudicated and handled by the Disciplinary and Ethics Commission.