Financial planners could see their job titles become legally protected if a new move by an industry trade group pays off.
The Financial Planning Association (FPA), a membership organization and trade group for Certified Financial Planners, announced
Patrick Mahoney, the CEO and board secretary of the FPA, said the association undertook this effort because it believes financial planning "is a noble profession worthy of recognition and legal protection.
"The financial planning profession is just as noble as your local doctor, your local attorney, your local accountant, but their titles are protected," Mahoney said. "Financial planners don't have that protection. They don't have that niche that they deserve. And this is a way of protecting that title and the way to build out the profession and give the financial planning career a noble purpose to which young people can aspire to, and older folks can rely upon to make good financial decisions."
CFP certified financial planner Carolyn McClanahan, who works at the Jacksonville, Florida-based firm Life Planning Partners and has been in the industry for over 20 years, believes the FPA's announcement is "overdue." She has had personal experience with financial service providers presenting themselves as financial planners without providing complete planning services.
"I actually came into the profession because my husband and I tried to find a financial planner and all these people said they did financial planning, but when you actually got in there, it was only about investments or selling products and they weren't delivering true financial planning," McClanahan said. "And unfortunately a lot of these big firms, especially the large broker-dealers and stuff, portray themselves as being financial planners, when what they do is either non-existent or rudimentary and not real financial planning."
Right now, there are no defined minimum standards for who can call themselves a financial planner, though the CFP certification has increasingly been seen as the gold standard in the industry. The FPA is aiming for planners to qualify for the title based on minimum competency and ethical standards.
"Today, anybody can call themselves a financial planner, whether or not they provide financial planning services to their clients," Mahoney said. "So title protection enables consumers to identify and engage with a qualified financial planner without creating any unnecessary regulatory burden for those who meet the standards."
Some, like McClanahan, think the CFP Board should set the accepted standards for the industry.
"To me, the CFP board actually lays out what is financial planning, and the financial planning addresses all the goal setting, the budgeting, cash flow analysis, tax planning, estate planning, insurance planning," McClanahan said. "If you aren't doing a holistic look at everything that involves money and asset protection and budgeting and cash flow projections and all that in a client's life, then you're not doing real financial planning."
Just under 80% of FPA members supported the move for title protection, according to the organization's announcement. Moving forward, Mahoney said the organization will focus on connecting with others to discuss what the standards for planners should be.
"Our solution will be legislative," Mahoney said. "But we're a good ways away from doing anything like that. Right now, over the next few months, is building these alliances of like minds and similar vested interests in financial planning as a profession and having these discussions about what these standards ought to be, and then we'll move to implementation."
Even if the FPA doesn't succeed, McClanahan hopes this move "opens up the eyes of those who aren't doing real financial planning and maybe helps push them along to deliver that true service to clients.
"The people who are not delivering true financial planning and calling themselves financial planners, I'm hoping they see the writing on the wall and that what people really need and what they want is comprehensive financial planning," McClanahan said.
