Sunday, October 04, 2009

Bifurcated Designations or Grandfathering at Its Worst

The public is often confused by the alphabet soup of financial designations and in an attempt by the CFP Board of Standards to show differentiation they have instead highlighted what may be major shortcoming.

People like to look at credentials and think that everyone who has them has satisfied the same requirements. All too often that is not the case, and now in the financial field we are seeing the effects of grandfathering at work.

Grandfathering is the term used when the rules of the game change mid-stream and those who have met certain requirements are exempted from the new requirements.

What has brought this to mind is the recent newsletter issued by the CFP Board of Standards, in which they attempt to explain the differences in the CFP® mark and the ChFC® designation. It is in the message from the CEO.Both are used by professionals in the financial planning, investment and insurance world as well as in the legal and academic arenas.

Kevin Keller, CEO of the CFPBOS refers to the fact that the CFPBOS requires the passing of a comprehensive examination as a litmus test to demonstrate professional competency. The test does not have a traditional passing grade requirement. Instead, if I understand it correctly, certain questions within each category must be answered correctly in order to demonstrate mastering the material. Historically 5 out of every 8 candidates who take the test for the first time have passed it.

He then refers to Michael Shaw, who is an attorney and the Managing Director of their Professional Review and Legal Departments and earned his ChFC from the American College and is still listed as a ChFC in good standing despite the fact that he has not provided financial services since 1990. It appeared that Mr. Keller was dismayed that the American College continued to show Mr. Shaw as a member in good standing considering that he no longer is involved in providing financial services. However, Mr. Shaw still refers to his ChFC designation and in fact in a press release issued by the CFP Board they referred to Mr. Shaw as having both the CLU and ChFC designations.

In 1989 the American College, the academic organization that awards a number of financial designations changed the requirements of continuing education for the ChFC designation. People who had enrolled in a program prior to 1989 would not be covered by the new rules which are 30 hours of continuing education each two-year period.

The American College confirmed that Mr. Shaw is grandfathered. Each organization's CE requirements are somewhat similar.

The CFP Board did not always require a comprehensive exam. In fact it was introduced in 1991, and yet all those who were awarded the CFP® designation prior to the exam requirement are not referred to in any different matter. These people did not demonstrate the professional competency that those who took the test did. There are no asterisks next to their name although perhaps there should be since they did not take and pass the exam.

The issue here is not to decide who is right or wrong or to discuss the merits of any designation or organization but rather to point out to the public that on face value you do not really know what requirements a person authorized to use the designations has met. In the first two instances older advisers may have had to achieve less in order to use the same titles. Conversely, the newer planners who may have the least experience are the ones who have met all the current requirements.

I wouldn’t mind arbitrating a meeting between the CFPBOS and American College in order to clarify the underlying issue. My decree would be those that are grandfathered from CE requirements must meet the new standard and those that did not pass the CFP comprehensive exam have one year in which to do so. That way the public will know that the holders of each respective designation have met the same requirements and have the same ongoing obligations.

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Anonymous said...

Some good points and some nitpicking. What is the big deal if an organization lies about requirements; it happens every day!

Ron Pearson said...

Morris, Ron Pearson here ( I get the impression you believe those who completed their CFP education before 1991 (like me) took no exam. That's not the case. I took a (I believe) three hour exam after each of the six courses I took. I usually doubled up because I took two courses at once in self study. So, I think I had 18 hours of exams on the CFP courses to complete my exam requirement. When they changed it to a single exam, they just combined all six exams into one; they didn't just start giving exams! Does that change your concern?

Morris Armstrong ChFC, EA said...

Hi Ron
Thank you for your input. I was aware that after each module that an exam was taken and passed, similar to the process designations awarded by the American College and most other organizations. I think that many people have been told that it is the comprehensive exam which differentiated the ChFC from the CFP. I am sure that the cyberworld is filled with discussions on that matter. Bob Goss, a name I am sure that you remember felt that way as do many holders.

The issue is if as a grantor you are saying that the grantees have achieved something then it should be correct. If only some have achieved it then that should be noted.

As I said both the American College and the CFPBOS should amend their grandfathering decisionss, IMHO.

It is not about having studied and being tested on more recent material, rather everyone meeting the same criteria.