Diverse global standards threaten CFP designation: Costello

(June 21, 2005) The Certified Financial Planner (CFP) designation faces several challenges, making it essential that planners have a strong voice of their own, according to Keith Costello, president of the Canadian Institute of Financial Planners (CIFPs).

At the organization’s annual general meeting Tuesday morning in Niagara Falls, Costello said the various “threats” planners face also offer the opportunity for them to distinguish themselves in the increasingly competitive financial services market.

“If financial planning is to be licensed, then let us define the CFP — with its rigourous proficiency requirements, ethics and practice standards — to the public as the high standard that exceeds the minimum government license,” he said.

Licensing as laid out by the former Fair Dealing Model (recently added to the CSA’s Regulatory Reform Project), is just one threat, as the CFP designation also faces increased competition for setting international standards. Costello said that while the CFP designation is growing worldwide, it faces competition from such groups as the International Standardization Organization, which is developing an ISO rating for the industry.

Such diversity of standards may not only confuse the public, but regulators as well, which often look overseas for benchmarks of client care.

Costello is critical of the Advocis recommendation that a national self-regulatory organization encompassing all of the different types of financial advisors be created. He says such a system would drive standards to the lowest common denominator.

“After the profession is defined and clarified, we also must continue to build it,” he said. “We must ensure that advice is explicit, regardless of fee-based or commission model. We must educate the public regarding the need for planning.”

Once the public recognizes the value of financial planning, they will be willing to pay for it, ensuring the livelihood of planners and attracting new blood to the profession.

CIFPs also presented its latest financials and membership count at the AGM. With about 2,100 members nationwide in its first two-and-a-half years, Costello says the group is only slightly behind its target of 1,000 members per year and that he is confident there will be 5,000 members by the CIFPs’s fifth anniversary.

“It is not easy starting up an organization,” Costello said. “No-one will come until you have something to offer, and you can’t have something until people join. Having said that, a lot of people did have faith in our vision and we persevered over the past two year.”

Costello says the membership is now large enough that the group is financially self-sufficient on a day-to-day operating basis. But CIFPs still owes $285,000 to affiliated groups, including IFIC and the Canadian Institute of Financial Planning, both of which advanced start-up funds for the CIFPs.

This debt is now being converted to a long term note which the CIFPs will pay off in annual payments over a yet-to-be announced time frame.

“In reviewing our financial statements, one does not get the entire picture,” Costello said. “Yes we have accumulated a $285,000 debt, but this was an investment in your association — building the brand, the infrastructure and exceptional programs and services.”

Aside from hosting its annual conference and offering CE credits, the group has just launched a best practices manual, offers an annual report on industry trends and is now offering a designation in alternative investments through its Chartered Alternative Investments Program (CHAIP).

CIFPs also offers errors and omissions coverage to members, provided through Employers Reinsurance Corporation.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com