The U.S. Chamber of Commerce, the National Association of Realtors and, until recently, the National Football League all have something that the body overseeing the financial planning standard wants.
It's the ability afforded by their tax-exempt status to make direct appeals to potential recruits about the benefits of working as, say, a real estate agent. Officials at the Certified Financial Planner Board of Standards, which sets the criteria determining who can hold themselves as certified planners, say the group's status as a 501(c)(3) nonprofit prevents it from doing the same. So now they're seeking to change things.
CFP officials filed paperwork on Jan. 23 to set up a 501(c)(6), another type of tax-exempt group recognized under IRS code, along with its existing 501(c)3. Unlike the "3" type of nonprofit — which exists specifically to benefit the public — the "6" version will be for the benefit of current and potential certificate holders.
CFP Board Chair Daniel Moisand said that having the new designation will make all the difference when CFP officials are out touting the good salaries, accommodating hours and other benefits of planning careers.
"We have to hit the gas on the front-end marketing and tout the benefits of this career for would-be practitioners," Moisand said.
Nonprofits set up in the "3" form, such as the Red Cross, are better known compared with their "6" cousins. But the latter also include big names, such as the Better Business Bureau and the Securities Investor Protection Corp., or SIPC, the brokerage industry's special fund for compensating investors if their money is lost by a failed brokerage.
Moisand said the CFP Board has been cautioned by lawyers to go easy in its marketing to future planners. Its long-time status as a 501(c)(3) — a designation often held by religious, charitable, scientific, literary and educational groups — means that under IRS rules, it has largely had to confine its messaging to how its work benefits the public.
By contrast, having a "6" entity should make it easier to advertise the benefits of a planning career without running afoul of tax rules governing nonprofits. Money that goes to a 501(c)(3) is considered a charitable donation and can be deducted. By contrast, donations to a 501(c)(6) are deemed business expenses for tax purposes.
"With this change, CFP Board can communicate more directly about the value the public receives from hiring a CFP professional," the board said in an official statement. "A stronger financial planning workforce will benefit everyone in the profession. And greater awareness of financial planning careers will help establish financial planning as a recognized and respected profession."
The board is seeking to increase the number of certified planners in the U.S. from roughly 95,000 now to 150,000 by 2030. Even with the new affiliated entity, hitting that goal may be difficult. But without it, it might have proved impossible, Moisand said. The organization plans to spend $15 million on an ad campaign to encourage people who are looking for financial advice to turn first to a CFP professional.
To be sure, planners holding CPF credentials make up only a portion of all financial planners. Of the more than 600,000 professionals registered with the Financial Industry Regulatory Authority, which oversees brokers, only about 30% are certified by the CFP Board. Some brokers hold themselves out as a financial planner or advisors but lack the CFP credential, considered the gold standard in the industry.
The need for more financial planners is well documented. A study by Charles Schwab lastJuly found the industry needs 70,000 new advisors in the next five years just to keep up with the increasing number of people who are seeking advice on everything from buying a house to retiring. A separate report by research firm Cerulli Associates warned that
Ron Rhoades, the director of the personal financial planning program at Western Kentucky University, said the Board is far from the only organization to make industry recruitment a priority. He said the program he oversees now graduates about 30 students a year. All of them end up with multiple job offers from good firms.
Last month, university officials decided they want to double those graduation figures, through programs like summer "planning" camps for high school students.
But the industry faces lingering misconceptions.
"There's a negative perception of Wall Street," Rhoades said. "There's a perception that financial advisors just sell insurance and mutual funds when, of course, the industry has evolved so much lately and more than half of it is fee-based now."
Julie Genjac, the vice president and managing director of applied insights at the investment firm Hartford Funds and a corporate coach who regularly gives talks on the benefits of planning careers, agreed that too many young peoplethink of planners as people who put on suits and go to work in high-rise office buildings in big cities.
Another misunderstanding is that planning is only for math whizzes or masters of the stock market. Genjac said too little emphasis is placed on the fact that a planner's main job is to help other people, in this case, with their financial lives
"It's really not unlike being a doctor or a nurse in that you're connecting with human beings, listening to them and helping them solve their problems," Genjac said.
Both Genjac and Rhoades agreed that the CFP Board's formation of a 501(c)(6) entity will help recruitment efforts.
The change could also give the CFP Board greater leeway to lobby lawmakers on its priorities.
"We'll be asked to sign on to more stuff since we'll be capable of doing that," Moisand said. "So we'll have to have some filters in place."
Both organizations will be under CFP Board CEO Kevin Keller and will report to the same board of directors. Moisand said the change will not result in an increase in fees or tightening of certification standards.
