Who Certifies a CFP?
It’s considered to be the gold standard of financial services certifications, this designation is granted by the Certified Financial Planner Board of Standards. It’s a chicken and an egg kind of thing. The certification came sometime in the 70s and the Board to essentially administer and regulate the program was started as a non-profit in 1985. I suppose it’s kind of like the Pentagon being asked to audit itself. “We have investigated ourselves and found no evidence of wrongdoing.” It’s actually not that bad but I don’t think it’s that great either.
Before going further I need to mention that there are several CFPs for whom I have a lot of respect. Mentors of mine, current colleagues, and even regular followers of my work have inspired and challenged me to be better. Lots of these guys have continued to verify my research or offer new perspectives that help me refine what I share and I am truly grateful for their contributions. But I don’t give the CFP designation credit for that. It’s because they are good people with decades of ethical experience in this business. It didn’t take some initials to make them good at what they do.
Consumers have been advised at times to only seek advice from a CFP because apparently those are the only people who know what you should do. You best believe there’s money behind it and someone is getting paid out. With more than 100,000 CFPs nationwide and an annual fee of $455, there’s tens of millions of dollars available every year for this non-profit to do whatever type of work they do. I’m sure they send emails and administer continuing education for their certified professionals but I’ve never witnessed them doing advocacy work in the industry or taking responsibility for the recommendations made by their certified professionals.
I will admit it’s a good education if you get through the coursework but after nearly 22 years in the business, I got it all the hard way. Book learning does not come anywhere close to real world experience. It’s the combination of the two that is extremely important. It’s the same as the continuing education I just did. Sure I learned about rules, technical definitions, and regulatory changes but it did nothing to help me analyze products and strategies. What was critical to my development was not available anywhere and I had to go find or create it myself. There was no one available to teach me so when it comes to more formal education, I respectfully decline.
This would not be news or anything I feel important enough to share if I hadn’t seen several cases of CFPs displaying abject incompetence in retirement planning. Again, there are really good people with the CFP designation but there are a lot of idiots as well. It’s not the certification that makes us good at what we do, it’s the experience and personal dedication to a work ethic that sets us apart. I can only speak for myself when I say that getting to this point in my career required a substantial amount of sacrifice and I’ll bet that several others have also. Paying some organization to bless me as trustworthy seems ridiculous.
The Fiduciary Standard gets kicked around a lot. It’s says that an advisor must act in the consumer’s best interest. I think that’s garbage because no other person besides you can truly know what’s in your best interest. Guys that use it just like to assume that their opinions won’t be questioned. The only true Fiduciary is you, so you better start educating yourself!
The best example I have is in a newsletter I wrote almost six years ago and let me tell you, it has aged very well. It was a $1M portfolio with a $60K annual income goal. The plan was put into place in 2016 when rates were really low and the CFP recommended ⅓ of the money going to cash and the rest of it going to annuities. None of it yielded much at the time so there was no room for growth in a portfolio and plan that really needed it. Can you imagine the lost opportunity if you had nothing in the market since 2016? Maybe the CFP Board revoked his certification but they might be too busy golfing somewhere and I don’t think they get into regulatory stuff.
As luck would have it, I put a plan in place for Bob and Lynn at about the same time in 2016. A portfolio and goals that were nearly identical. We put about 40% of their money in an annuity, only replacing bonds in the portfolio and left the extra in the market. The annuity would allow them to access cash in the early years of retirement regardless of how the market performed. They retired a few years later and market performance was solid, they had just as much money in the market, plus the annuity that did just fine. They bought another annuity that gives them consistent income. I don’t know exactly what they have now but my guess is two and half times what they started with, along with some guaranteed income and a safe pile of cash for life’s emergencies.
I didn’t figure out how to do that by taking a multiple choice test, just like that same test isn’t to blame for the other advisor’s recommendation. Its about the competence of the person, not the certification. However valuable it might seem, the CFP designation certifies an educational element but says nothing for competence. The good ones I know are not good because they took a test, they are good because of their work ethic and years of experience. Go ahead and seek the advice from a CFP but take it with a grain of salt. It might not be a bad idea to get a second opinion.
Merry Christmas!
Bryan
Watch Episode 163: Who Certifies a CFP?
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Last Updated on December 13, 2024 by Bryan Anderson
