Planner progress

(February, 2006) Much of the industry has embraced the CFP designation, but there’s still room for improvement.

The Financial Planners Standards Council (FPSC) has come a long way from being known as “just two people and a fax machine.” The organization recently celebrated its 10th anniversary and with that milestone, FPSC president Donald Johnston has decided it’s time to move on to other endeavours — retirement.

Johnston should be proud of his role in helping to establish a unified standard in financial planning. Ten years ago, it was no easy feat gathering nine organizations together (representing the various industry pillars) to rally behind a new designation, the certified financial planner (CFP), a mark used in 18 countries worldwide.

There were some hiccups along the way. For example, some in the industry questioned the grandfathering of 4,500 people into the CFP system. Then, just shy of the FPSC’s third birthday, the Institute of Canadian Bankers and the Canadian Securities Institute, partners since its inception, abruptly left the FPSC, citing irreconcilable differences concerning process and governance.

Over the years, Johnston was always vocal about wanting the regulators to make the CFP a requirement for practicing financial planning. It didn’t happen, and by his own admission he was “naive in thinking it would happen so quickly. It takes a lot longer to gain the confidence of the regulators.”

These events could be seen as setbacks but Johnston decided to trudge ahead and concentrate on building professionalism, and educating the public about the CFP and its six-step process. Then a funny thing happened. Many advisors began to see value in the CFP, and started studying the course and writing the exam.

Currently, there are more than 16,000 CFPs. Today, the CFP by far is the most recognized financial designation among the industry and consumers. In fact, Canada has more CFPs per capita than any other country that offers the designation. There are only 50,000 CFPs in the United States, for example, despite a population of well over 300 million.

The FPSC continues to up the professional ante. Last year, it launched the Financial Planning Practice Standards. While CFPs already abide by a code of ethics, the practice standards specifically spell out the responsibilities of CFPs, making it mandatory for them to include a letter of engagement and disclosure documents to clients.

While Johnston leaves an organization much bigger than two people and a fax machine, the FPSC still has a ways to go. With the exception of Quebec, financial planning is still not regulated in Canada. The concept of financial planning may be better understood by consumers than it was 10 years ago, but there are still advisors who like using the term “financial planner” more than actually practicing it.

This does not serve the public well. In that vein, Johnston has some words of advice for whoever succeeds him as president. “He or she must understand that you don’t [succeed] by wishing, you get there by having all the right stuff in place. That means understanding what the standards must be, putting the standards in place, having the industry accept the standards, having the public understand them and having the respect of the regulators.” A tall order but hopefully achievable well within the next 10 years.

Deanne Gage is editor of Advisor’s Edge, deanne.gage@advisor.rogers.com